Capital Is Not Conviction

A few years ago, the FBA aggregator model was the hottest thing in e-commerce. The idea was simple and, on paper, very private-equity-friendly: buy a bunch of small Amazon sellers, aggregate them under one roof, cut costs by centralizing SG&A, and scale.

I come from an investing background, so I looked at it seriously. I thought I had the right skills: evaluating businesses, buying them, optimizing operations. I spent a lot of time on it.

But two things kept nagging me.

First, the founders of these small Amazon businesses were doing a lot of jobs that you can’t easily replicate with employees and managers. They were obsessive about their products, their listings, their customer relationships. They wore every hat because they cared, not because they couldn’t afford to hire. When you replace that founder with a salaried operator inside a portfolio company, something breaks.

Second, the real skill in e-commerce isn’t aggregation. It’s developing new products. That requires ingenuity, a feel for the market, a kind of scrappy R&D that doesn’t come naturally to the traditional buyout playbook. You can optimize costs all day, but if you can’t create the next product, you’re just managing decline.

I was bearish. I wrote it up, left a note (I always do that when I pass on something) and said: I don’t think this model works.

Then I watched companies in the space raise $3.5 billion. From very smart investors. Silver Lake, Goldman Sachs, and others. These are not dumb people with dumb money.

And then they went bankrupt.

I’m not picking on any one company here. This pattern repeats across industries. Vector databases were the same story two or three years ago, everybody piled in because it felt adjacent to AI and the momentum was irresistible. Now most of those bets look questionable.

Here’s what I think is happening. The top-tier investors (the very best ones) sometimes do have a genuinely unique thesis. But most don’t. What most have is access, brand, and the ability to follow. There’s a massive bandwagon effect in venture capital and growth equity. The top guy goes in, and then everyone else scrambles for exposure to the same theme. Not because they independently arrived at the same conclusion, but because they don’t want to miss it.

The result is that billions of dollars can flow toward something that is fundamentally wrong. Capital is not conviction. Capital is often just momentum dressed up as a thesis.

For founders, I think this is actually an important point. Don’t jump on something just because money is flowing there. That signal is weaker than you think.

I’m glad I didn’t jump on several opportunities like this that I came very close to. Not because I’m smarter than the people who did. I just couldn’t convince myself the thing actually worked, and it turned out that was enough. I felt AI was working, jumped in it, and so far we are not a big success, but I still believe in the technology and how it will change the world.