1. The team behind Crytokitties created the most used dApp to date, with excellent UI, attention to detail, and many other innovations behind it. Lots of investors believe in investing in a team first and foremost, and this is an excellent one.
2. Nobody invested in Crptokitties. They invested in a gaming/collectibles company; from TechCrunch: “While the startup is being pretty mum on what the future looks like and what they’re planning on using this funding for, it’s almost certain that the long term goal is to expand beyond CryptoKitties and use the same Ethereum ERC-721 collectible standard to create other game experiences, especially ones that can be played by regular people who are unfamiliar with cryptocurrency.”
You use flappy bird and pokemeon go as examples of fads that would be dumb to invest in, but what about the early investors in Zygna? Gaming and collectibles doesn’t appeal to me personally, but they are massive markets and growing. Early stage investing is a long shot, and odds are this company fails. But the execution to date and market opportunity are sufficiently appealing that I’d invest alongside USV in these guys if I could.