Q: Do venture capitalists choose companies that have no competition or ones that are trying to disrupt a competitive market?

I think most VCs do both.

We did an analysis of SaaS startups that had IPO’d and about 70% were new versions of something new, and 30% were truly new categories:

So VCs like to do both.

The reality is, entering an existing market especially in B2B is often faster and easier, despite the competition. But creating a new market is sometimes where the really huge outcomes come.

I think the bigger change in venture in the past few years, with the rise of 1,000+ unicorns and multiple unicorns in categories, is that VCs are less worried about competition. It used to be that you couldn’t make much money as a VC investing in the ultimate #2 or #3 in a space. Now, they might turn out to be worth billions.

More on that here:

This has fueled a lot more large funding rounds in spaces that are or can be large, often with 10+ startups raising tens of millions and more. That’s a lot more common than it used to be.

Startups that had plenty of competition:

  • Slack
  • Zoom
  • Asana
  • Canva
  • Notion

The list goes on

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