Episode summary
Incentives, Not Intuition: How VC Really Works
How I Invest With David Weisburd
· · Hosts: David Weisburd · Guests: Brian O’Malley
Summary
Brian O’Malley argues that consumer investing is still one of venture’s biggest opportunities because these startups solve everyday needs for millions of Americans, often with less capital than people assume. He says the best consumer companies are usually unlocked by a catalyst such as new technology, a business-model shift, or a cultural or regulatory change, and that many of them create durable recurring use cases rather than fad-like demand.
A major theme is that consumer and AI products work best when they close a real-world gap: the delta between what users already have and what a new product can do. Brian says AI is moving out of its “toy phase,” but trust remains the bottleneck, especially for high-stakes use cases. He favors human-in-the-loop models that let AI do 95% of the work while a person handles the final 5%, especially in health, travel, and services where errors are expensive and users still want empathy.
He also spends much of the conversation on incentives inside venture capital. Brian argues that firm strategy, compensation, and promotion systems shape behavior as much as investment skill does, and that large platforms can lose focus as they scale. Tactile Ventures, his new fund, is built to stay early, show up more prepared, and give founders the one thing large firms struggle to provide: time and concentrated attention.
Key takeaways
- Brian O’Malley says consumer startups succeed when they solve everyday needs and get unlocked by a new technology, business model, or cultural shift.
- He argues AI is leaving the “toy phase,” but adoption still depends on trust, especially for offline or high-stakes actions.
- Brian thinks human-in-the-loop products can be superior because they preserve trust while letting AI automate 95% of the work.
- He says venture incentives differ by firm, seniority, and even competitor behavior, so strategy must come before compensation design.
- Tactile Ventures is built to win by being earlier, more prepared, and more time-intensive than larger multi-stage firms.
Notable quotes
“the startups that we're investing are ultimately solving everyday needs for millions of Americans”
“I think people have misnomers about these businesses. is there's a general assumption that to play in the consumer space these businesses are fads or that they're capital intensive”
“we're we're starting to uh move out of that. So much changing so quickly”
“at the end of the day it takes a couple things for AI to really move out of this toy phase”
How the episode opens
So you spent a decade at battery where you were general partner then you spent five years at Excel as a partner and then seven years at 4Runner. So you've been really investing in and around consumer for two decades. What lessons have you learned about consumer tech and how to invest in the space?
These markets are just so much bigger than they are in other categories. So the the biggest thing is that uh the startups that we're investing are ultimately solving everyday needs for millions of Americans. And so there's usually some catalyst that creates this opportunity.
It might be some underlying foundational new technology. It might be some change in the business model. Sometimes it's even cultural or regulatory that opens up the opportunities.
Um but I think people have misnomers about these businesses. is there's a general assumption that to play in the consumer space these businesses are fads or that they're capital intensive and when you're solving people's everyday needs the ultimately uh create a recurring use case that drives real long-term value and if you look back to a company like Google as an early example they raised their series A of $25 million was a very large A for the time but they never really raised another round after that until they were already profitable if you look at a company in my portfolio IO named Fora um which is one of the first AI powered services companies to reach a billion dollars in transactional volume. Uh they recently raised a series C from Thrive, but they hadn't even touched the series B dollars yet.
So I think there's this general understanding from the whole ZERP era that these companies are capital intensive and that they're ultimately more product driven versus technology driven.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- consumer tech decline
- vc incentives
- ai real-world applications
- human-in-the-loop trust
- early-stage venture investing
Companies and tickers mentioned
- Tactile Ventures
- Accel
- Forerunner Ventures
- Battery Ventures
- AlphaSense
Watch the episode
Watch “Incentives, Not Intuition: How VC Really Works” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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How I Invest With David Weisburd, this episode and its artwork belong to David Weisburd. Octagon is not affiliated with the show; this page is an independent summary.
