What Are the Four Venture Investing Mindsets?

Martin Casado names four mindsets people bring to venture and private-market tech investing: a traditional finance mindset, productive investors, frontier investing, and speculative investors. A decade and hundreds of deals showed that investors in the same discussion were not communicating well.

The traditional finance mindset treats the market a business is entering, and its finances, as the correct proxy for the health of the whole company. Software-as-a-service metrics and the size of the market stand in for the business. Growth investors use it, and more early-stage Series A investors do too, which is a little discordant so early. Productive investors believe they are buying a productive asset. The asset creates value, the value creates a market, and the business has to catch up to the value. Diligence asks about the technical approach, the adjacent markets, how fast the asset is likely to evolve, how close it is to capturing value, and whether the team can build it. Frontier investing is the romantic, idealized venture capital of the 1960s and 1970s. Founders know better than investors, they have seen something the investor has not, and the investor does not second-guess them. The pattern looks like a talent network. Chris Dixon invested in nootropics, Soylent, Oculus, Coinbase, and crypto, science-fiction tropes from the 1970s and 1980s, without overthinking any of them. Frontier investing is the strong form of productive investing. The last mindset is speculative investors, and it is always surprising how prevalent they are.