Non-Consensus Venture Capital Bets Yield 3-5x Higher Returns in Early-Stage Investing

New York, NY – Eric Jorgenson, a prominent author and investor known for chronicling the philosophies of tech luminaries Naval Ravikant and Balaji Srinivasan, recently articulated a compelling argument for contrarian thinking in venture capital. In a tweet, Jorgenson asserted that it is "reasonable and desirable for all VCs to identify as and aspire to be non-consensus," emphasizing that an optimal early-stage investing ecosystem thrives on a "BROAD set of INDEPENDENT thinkers." This perspective challenges conventional wisdom, suggesting that the pursuit of unique, often overlooked opportunities is paramount for outsized success.

"Yes. Unironically. It's reasonable and desirable for all VCs to identify as and aspire to be non-consensus. There are infinite instances of being 'non-consensus' That label would be all they have in common. Optimal early stage investing ecosystem is a BROAD set of INDEPENDENT thinkers."

The concept of non-consensus investing posits that the most significant returns in venture capital stem from investments that initially face widespread skepticism or are not obvious to the majority. Research from institutions like Cambridge Associates and Correlation Ventures supports this, indicating that non-consensus investments can generate 3-5 times higher returns compared to consensus deals. Approximately 40% of top-performing venture investments were initially considered "contrarian" or "unlikely to succeed."

This approach is particularly critical in early-stage venture capital, where returns often follow a power law distribution, meaning a small number of "superstar" investments account for the bulk of a fund's profits. As highlighted in a Harvard Business School working paper, "Catching Outliers: Committee Voting and the Limits of Consensus when Financing Innovation," major VC firms frequently employ a "champions voting rule" for seed and early-stage deals. This rule allows a single partner to champion an investment, even if others are not bullish, specifically to "catch outliers" that may appear flawed on many dimensions but possess overpowering strengths.

Conversely, a consensus-driven investment strategy, while seemingly safer, tends to lead to "mush in the middle" projects—companies with no significant flaws but also no exceptional strengths. Such investments rarely deliver the transformative returns necessary for a successful venture fund. The paper further notes that requiring too much consensus risks missing these best investments, as partners might focus on perceived weaknesses rather than unique potential.

Firms like Unpopular Ventures embody this philosophy, actively seeking out unconventional ideas and backing founders who challenge the status quo. Their investment strategy prioritizes high-risk, high-reward opportunities that traditional VCs might overlook, aiming for transformative rather than incremental gains. This underscores Jorgenson's call for a diverse landscape of independent thinkers who are willing to defy popular opinion and identify value where others see only risk. The emphasis on independent thought and the willingness to pursue non-obvious opportunities are increasingly seen as foundational to navigating the dynamic and often unpredictable world of early-stage technology investments.