A perspective on alpha from Ryan Hoover, as shared by Jason Yeh:
I once heard Ryan Hoover, the founder of ProductHunt and General Partner at the Weekend Fund, describe his outlook on founder pitches. He said for a company he’d consider investing in, he doesn’t think he should ever fully understand the business on his own. He essentially said the core essence of a company or the unique insights they possess should be something the founder needs to teach him.
In so many words, this difference between what the efficient market (Ryan) knows and what a backable founder possesses is what produces alpha in startups. Everything Ryan easily understands, even as a hyper-intelligent operator / investor, is already baked into the current market and doesn’t represent a true opportunity for venture returns.
The consumer space, he argued, was so hard to win in because the bar for understanding any problem is so low that almost anyone can work on them. Because of this, tons of smart people have been iterating, testing, failing, and competing in almost any consumer opportunity you can think of. He was essentially describing the dynamics of an especially efficient startup market.
https://www.adamantventures.com/blog-post/seeking-alpha-in-startups-what-is-your-unique-insight