Undervalued Founders and the Sleeper Effect: The Power of Delayed Recognition

In his book Atomic Habits Author James Clear emphasizes that small, consistent efforts compound into remarkable results over time. This principle can directly apply to undervalued founders. ?

Their persistence and incremental progress, even when unrecognized, often build the foundation for future breakthroughs. Much like how habits shape long-term success, the small, consistent efforts of these founders refining their business models, learning from failures, and adapting to feedback compound into transformative outcomes.?

For example, an unconventional founder who continues to iterate and improve their product despite skepticism is akin to someone adopting tiny habits that eventually lead to a significant lifestyle change. The undervalued founder, like a habit-builder, thrives on small wins that accumulate into big success.?

First-time or unconventional founders often face skepticism from investors and the broader market. Without an established track record or the traditional markers of credibility, their ideas can be dismissed as risky or unproven. ?

Yet, history has shown that many of these founders bring fresh perspectives, boundless energy, and an ability to navigate adversity in ways seasoned entrepreneurs may not. Their persistence, adaptability, and vision often become critical differentiators as their ventures mature.?

In the world of venture capital, where the pressure to make quick, impactful decisions reigns supreme, a subtle yet powerful psychological phenomenon often goes unnoticed: the Sleeper Effect Bias. ?

This cognitive bias challenges conventional wisdom and underscores the importance of timing, trust, and long-term thinking in an industry dominated by rapid-fire judgments and FOMO-driven investments.?

The power of communication often lies not in what is immediately impactful, but in what lingers subtly over time. One fascinating cognitive bias that influences long-term attitudes and beliefs is the sleeper effect. ?

Unlike the instant emotional tug of a gripping story or a compelling pitch, the sleeper effect describes a delayed increase in the persuasiveness of a message, often attributed to its gradual detachment from an initially weak source.?

When does the Sleeper Effect occur??

The sleeper effect occurs when people initially discount a message due to doubts about its source but later come to accept it as persuasive after separating the message from its origin. ?

This phenomenon is counterintuitive because we expect persuasive messages to be most effective at the moment they are delivered. Instead, the sleeper effect shows that over time, the content of a message can gain credibility, even if its source is perceived as unreliable or biased.?

This delayed impact arises from a psychological process called?source dissociation, where the memory of the source fades faster than the memory of the message itself. As a result, the message remains intact in one’s mind, unanchored from the skepticism that initially surrounded it.?

The Sleeper Effect describes the delayed impact of a message or piece of information that initially seems unpersuasive or unremarkable but gains influence over time. It’s the psychological equivalent of planting seeds that quietly germinate while attention shifts elsewhere.?At its core, the Sleeper Effect highlights how a compelling idea or insight, once dismissed, can resurface with amplified significance especially when separated from its initial source or context.?

But why does this matter to venture capitalists and investors??

Timing Is Everything?

In venture capital, decisions often prioritize immediacy: deploying funds to hot startups, reacting to market trends, or seizing perceived opportunities before competitors. Yet the Sleeper Effect suggests that some of the most transformative insights require patience to mature.?

Consider a pitch dismissed because it lacked immediate polish, or a sector overlooked because its growth potential wasn’t obvious. Over time, the dynamics of markets, consumer behavior, and technological adoption can vindicate ideas that once seemed premature or improbable.?

The Sleeper Effect in Action?

An exciting application of the Sleeper Effect in modern marketing is its synergy with Micro-Influencers. These influencers, known for their authentic and highly engaged communities, may not generate immediate viral buzz, but their grassroots appeal makes them ideal for fostering long-term impact. The Sleeper Effect the delayed increase in a message’s persuasiveness amplifies their value. While initial campaigns may seem underwhelming, the message’s influence grows over time as its connection to the source becomes less prominent.?

For startups or smaller brands with limited budgets, micro-influencers offer a cost-effective way to create enduring brand impressions. Their relatable content, shared consistently over time, allows the sleeper effect to take hold, embedding the brand message in the audience’s memory. A good example is the "Kya Chal Raha Hai? Fogg Chal Raha Hai" campaign by FOGG Pakistan , which steadily built its brand recall through persistent and consistent messaging, much like how micro-influencers work.?

Emerging Markets and Trends? ?

Emerging markets like climate tech, precision agriculture, and sustainable materials often appear niche, unproven, or financially unscalable during their infancy. However, these sectors are often driven by deep societal shifts and growing infrastructure support, setting them up for exponential growth as circumstances evolve. Early skepticism can blind investors and businesses to their transformative potential.?

Take climate tech as an example. What once seemed like a lofty ideal for eco-enthusiasts has now become a multi-billion-dollar industry, fueled by urgent societal needs and government-backed initiatives. Similarly, precision agriculture, once dismissed as overly reliant on expensive technology, is now critical to addressing global food security challenges. These “sleeper sectors” reward those with the foresight to invest early, offering enormous returns to those who recognize their long-term value rather than their short-term limitations.?

Under-the-Radar Innovations? ?

Technologies often face dismissal during their early development stages due to perceptions of infeasibility, irrelevance, or overhype. However, these innovations can quietly build momentum in the background, refining their use cases and scaling up until they re-emerge as transformative forces within their industries. What initially seemed like a passing trend often becomes a cornerstone of future technological progress.?

Take blockchain, for instance. For years, it was narrowly associated with speculative cryptocurrency investments, and its broader applications were overlooked. Now, blockchain powers innovations in supply chain transparency, decentralized finance, and digital identity. Generative AI faced similar skepticism in its early years; once dismissed as a novelty for creating quirky images or text, it has since revolutionized industries ranging from content creation to drug discovery. These “sleeper technologies” highlight the importance of staying attuned to iterative progress, as today’s niche applications could evolve into tomorrow’s industry disruptors.

Why Do We Overlook the Sleeper Effect??

Human nature favors immediacy and clarity. Investors, like everyone else, are drawn to what feels urgent or obvious, leaving little room for nuanced or slow-developing opportunities.?

The Sleeper Effect Bias is exacerbated by:?

• Pressure to Perform: Investors must show results quickly, often favoring shiny pitches over substance.?

• Echo Chambers: The venture ecosystem amplifies trends, making unconventional ideas harder to validate.?

• Cognitive Filters: Biases against non-traditional founders or unpolished pitches lead to premature rejection.?

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How to Harness the Sleeper Effect?

Embracing the Sleeper Effect Bias isn’t about slowing down entirely, it’s about cultivating a mindset that balances urgency with foresight. Here’s how investors and venture capital professionals can put this into practice:?

For Investors?

Separate Ideas from Sources: A common pitfall for investors is dismissing an idea based on the perceived credibility of the person or context presenting it. This bias can lead to missed opportunities, particularly when the source is unconventional, inexperienced, or perceived as lacking authority. To avoid this, it’s essential to evaluate ideas on their intrinsic merits, focusing on long-term viability rather than the messenger delivering them.?

This means developing a disciplined approach to analyzing ideas. Look beyond surface-level factors such as a founder's lack of a traditional background or an idea’s initial lack of polish and instead consider the broader market trends, scalability, and potential for future relevance. ?

Investors should also strive to recognize the biases at play when evaluating pitches or proposals. For example, an innovative concept presented by an unproven founder might trigger skepticism, while the same concept from a seasoned entrepreneur could be readily embraced. By consciously decoupling ideas from the individuals behind them, investors can adopt a more objective lens, ensuring they don't overlook high-potential opportunities based on surface-level judgments.?

For Fund Managers?

Encourage Contrarian Thinking: To uncover hidden opportunities, fund managers must foster a culture that values diverse perspectives and challenges conventional wisdom. Contrarian thinking seeking out ideas that go against the mainstream can lead to identifying undervalued founders, emerging markets, and sleeper technologies before they gain widespread acceptance. This requires actively creating an environment where unconventional ideas are not only tolerated but rigorously debated and tested.?

For example, setting up dedicated brainstorming sessions to explore ideas that initially seem improbable can help uncover overlooked opportunities. Encourage team members to play the devil’s advocate, questioning prevailing assumptions about markets, trends, or technologies. This approach isn’t about being contrarian for its own sake but about ensuring that all perspectives are considered, even those that may seem unconventional or high-risk at first glance.?

Fund managers can also establish frameworks for testing these unconventional ideas in small, low-stakes ways. Pilot investments, exploratory research, or engaging with founders and startups operating on the fringe of mainstream industries can reveal hidden value. Over time, this practice of embracing and evaluating contrarian ideas can lead to significant returns as overlooked opportunities mature and gain traction.?

Why It Matters Now?

The rapid pace of technological innovation and global change makes the Sleeper Effect more relevant than ever. In 2025, breakthroughs in areas like artificial intelligence (AI), renewable energy, and biotechnology are reshaping industries at a pace few could have anticipated. For example, generative AI—once dismissed as a niche application for creating quirky content—has now become a foundational tool in industries ranging from content creation and software development to drug discovery. Similarly, technologies like fusion energy and synthetic biology are transitioning from the realm of theoretical research to scalable solutions, poised to disrupt entire sectors.?

Meanwhile, global challenges such as climate change, food insecurity, and public health crises are driving unprecedented shifts in societal priorities. Emerging markets like climate tech, precision agriculture, and sustainable transportation are addressing these challenges with solutions that were once seen as niche or impractical. Precision agriculture, for instance, combines AI, IoT devices, and data analytics to optimize crop yields and conserve resources—a vital innovation in a world grappling with population growth and environmental pressures.?

As competition intensifies and sectors evolve unpredictably, recognizing and acting on delayed signals could separate good investors from great ones. Spotting the next transformative innovation often requires looking past immediate market noise to identify solutions that meet evolving global needs. ?

The Challenge??

Developing the discipline to filter out distractions and trust in the power of time to reveal overlooked opportunities. This means recognizing that some ideas or sectors, though undervalued today, will gain relevance as societal demands and infrastructures shift. For example, carbon capture technologies were once considered too expensive and speculative but are now central to achieving net-zero goals, with growing investment from both private and public sectors.?

For investors willing to embrace patience and revisit their past assumptions, the rewards can be transformational—not just for their portfolios, but for the world-changing ideas they help bring to life. Supporting technologies like quantum computing or decentralized energy grids, even when their market applications seem distant, has the potential to redefine industries and address humanity’s biggest challenges.?

Investors who succeed in leveraging the Sleeper Effect develop the discipline to think beyond immediate returns and focus on overlooked opportunities with long-term potential. By revisiting pitches, monitoring emerging trends, and cultivating patience, they can uncover investments that deliver outsized rewards. Imagine the difference between dismissing early blockchain use cases in 2010 and recognizing their transformative potential for decentralized finance today.?

The Real Challenge??

Balancing the pressures of short-term performance with the vision required to back the ideas that will define the future. This requires a willingness to invest in the infrastructure of tomorrow—technologies like space-based solar power, mRNA platforms beyond vaccines, or hyperloop transportation—despite their current unproven status. These “sleeper innovations” may not yield immediate results, but for those who embrace the long game, the potential payoff could be game-changing.?

?About ACE Alternatives

ACE Alternatives (“ACE”) is a leader in managed services in the Alternative Assets sector like venture capital, private equity, fund of funds, real estate, and more. Leveraging a proprietary tech platform and extensive industry experience, ACE offers 360-degree tailored solutions for fund administration, compliance and regulatory, tax and accounting, investor onboarding and ESG needs.

The fintech was founded in Berlin in 2021 and has since established itself as one of the fastest growing alternative investment fund service providers in Europe. ACE is currently used by over 45 funds. In 2024, ACE received seven-figure funding from Bob Kneip to expand into new markets. ACE’s vision is to redefine fund management by demystifying complexities and promoting transparency.

Media Contact: Rhea Colaso

For more information visit us at https://www.ace-alternatives.com/

Source: Rolf Dobelli, “The Art of Thinking Clearly” (2013)

Rizwan Siddiqui?

James Clear?

American Psychological Association?

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