FOMO Investing

Definitions

1. Venture capital investment driven by fear of missing the next big thing rather than sound analysis. When VCs hear a competitor invested, rational evaluation goes out the window. Responsible for many of the most spectacular startup flameouts.

   In plain English: When investors pour money into a startup not because they've done careful research, but because they're afraid of missing out on the next big thing.

2. The peak example: in 2021, VCs invested record amounts at record valuations, driven by FOMO from watching competitors' portfolio companies skyrocket. By 2023, many of those investments had written down 50-80%, proving that FOMO is a terrible investment thesis.

   Example: 'They invested at a 100x revenue multiple because three other VCs were in the deal. That's not due diligence, that's FOMO investing.'

   Source: 2021 cycle example

Related Terms

• Angel Investor
• FOMO
• Regulatory Risk