Episode summary
Midas List VC: Why Most VCs Miss the Biggest Companies
How I Invest With David Weisburd
· · 42 min · Hosts: David Weisburd · Guests: Niko Bonatsos
Summary
Niko Bonatsos argues that the biggest venture profits are made before a category is named, when only the earliest founders and first investors can capture the upside. He points to vibe coding as an example, saying Cursor, Anthropic, Lovable, and Replit had already created most of the value before the term existed. He also says seed capital often arrives too late, after a decacorn or major exit has already validated the space.
He draws a sharp line between venture styles: most VCs, in his view, are incentivized to follow markups, while his firm wants to be the “best first money” investor in freak founders. For Niko, a freak is a learning animal whose rate of learning and progress is far above average, even if the initial idea is wrong. He says timing is hard, 70% of the time he is wrong, and the real edge is being right on rare founders and markets that can compound for years.
The episode also covers how AI is changing company formation by making startups more capital-efficient, pushing some teams from pre-seed to series B-like progress much faster. Niko says consumer, fintech, and crypto are undervalued, gaming is underowned, and investors are overhyping AI and American dynamism. He closes by stressing relationship-building, cold emailing, and long-term thinking as durable advantages in venture.
Key takeaways
- Niko Bonatsos says the best venture returns are often captured before a category has a name, when early founders and investors already own most of the upside.
- He believes AI is making startups dramatically more capital-efficient, so first-money investors can own more of the outcome with less capital.
- He defines a “freak” founder as someone whose rate of learning is exceptional and who can make in a day the progress most founders make in a week.
- Niko says consumer, fintech, and crypto are undervalued today, while broad AI and “American dynamism” are overhyped.
- He argues venture is a relationship business and says long-term trust, not short-term transactions, compounds into fundraising and deal access.
Notable quotes
“50% of the profits are made in a vertical before it even has a name”
“Most VCs, it's hard to be a an original thinker and somebody who wants to make a decision on the back of your own conviction as the original one”
“we are maniacs who work founder hours and we're in the business of investing in freaks”
“AI tools, in 2 months, oh my god, they can make so much more progress than what a year ago you needed 10 people”
How the episode opens
So, Nico, you were at General Catalyst for 15 years before you spun out to start your own firm. Last time we talked, you said something really interesting, which is 50% of the profits are made in a vertical before it even has a name. Talk to me about that.
Oh, yeah. So, I'll do it uh by virtue of giving you an example. So, when vibe coding as a term was coined, Cursor was already sitting at the $10 billion valuation.
Not only that, Anthropic had just started copying them through Claude code. Not only that, Lavoie Ball and Replid in adjacent markets were already minted as unicorns. The vast majority of the profits, over, you know, half of the profits that will ever be realized in any of these companies, have already been spoken by the founders, founding team members, as well as the very early investors in any of the companies mentioned.
So, for anyone who is thinking of themselves as a very early investor, if they want to invest in vibe coding today, or they did so last year, they're betting on one, the founders themselves, out executing any of uh the incumbents that I mentioned, as well as the category of vibe coding to continue to be relevant 5 to 7 years from today. I'd rather buy a bunch of lottery tickets instead. 50% is 50%, it's not 90%.
But, what's crazy about that is often times this is 1 or 2 years, and then the industry proliferates for another 20 years. And within that 1 to 2 years, they're getting 50% of the profits of 2 decades. You're still spot-on.
So, I've been a very early investor for over 15 years now. I actually have studied when does the vast majority of seed money get into a space.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venture capital incentives
- freak founders
- ai company formation timelines
- undervalued consumer gaming crypto
- relationship-building in venture
Companies and tickers mentioned
- Verdict
- General Catalyst
- AlphaSense
Watch the episode
Watch “Midas List VC: Why Most VCs Miss the Biggest Companies” 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.
