Why Wave 1 Is Always Overcapitalized (and the Cognitive Dissonance of Sitting It Out)

Every major technology cycle starts the same way: Wave 1 gets overcapitalized.

It happened with railroads, dot-com, mobile, and now AI. Wave 1 is a land grab.

It’s the Gold Rush instinct. We know the pattern, yet we repeat it because the fear of missing the category-definer outweighs the fear of overpaying.

In prior cycles (Mobile, Cloud), incumbents were paralyzed. Being early mattered more than anything. I’m less sure that’s true this time. The incumbents have the capital, the distribution, and the data. The assumption that all the value will accrue to startups feels dangerous.

The hardest part of sitting out Wave 1 isn’t the FOMO- it’s the cognitive dissonance of the split-screen reality.

I spend my days with “traditional” SaaS founders who are not growing 10x+, but possess strong fundamentals, and have real customers. In any other cycle, they would be fundable and valued.

Managing that psychological gap is real work. My job lately has been reminding these founders that this is a moment in time, not a verdict.

This is where not living in the epicenter helps. Distance dulls the hype. If I were in the middle of the echo chamber, I’d probably be chasing the same deals. From a distance, it’s easier to see how Wave 1 incentives encourage bad behavior – I suppose the FOMO is real!

Choosing to sit out has a cost. In the short term, we look wrong. LPs ask about this hot company and that.

Wave 1 is about Attention. I guess I’m a Wave 2 guy. And if history is a guide, I’m not less likely to find the “gold,” I just choose not to follow everyone else in the hunt!