Venture Capital’s Post

Investment losses are tough. It’s one of those big questions that even advisors worry about addressing. But here’s the thing: 𝐥𝐨𝐬𝐬𝐞𝐬 𝐚𝐫𝐞 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐭𝐡𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐢𝐧𝐠 𝐠𝐚𝐦𝐞. A few years back, I invested in a promising tech startup. Everything seemed perfect—great product, solid team, strong market potential. But then, things went south. The company hit some major roadblocks, and my investment plummeted. 📉 It was a hard pill to swallow. Here’s how I managed to handle it without losing my cool: 𝐒𝐭𝐚𝐲 𝐂𝐚𝐥𝐦 𝐚𝐧𝐝 𝐀𝐬𝐬𝐞𝐬𝐬 𝐭𝐡𝐞 𝐒𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧 🧘♂️ I took a deep breath and avoided making rash decisions. Instead, I looked at the bigger picture to understand what was really happening.    𝐑𝐞𝐯𝐢𝐞𝐰 𝐘𝐨𝐮𝐫 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐲 📝 I revisited my initial goals and risk tolerance. My current plan needed some tweaks, so I made adjustments to align better with my long-term objectives.    𝐃𝐢𝐯𝐞𝐫𝐬𝐢𝐟𝐲 𝐘𝐨𝐮𝐫 𝐏𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨 🌐 I learned the importance of spreading my investments around. Diversification helped me balance out the risks and protect my portfolio from significant losses.    𝐋𝐞𝐚𝐫𝐧 𝐟𝐫𝐨𝐦 𝐭𝐡𝐞 𝐄𝐱𝐩𝐞𝐫𝐢𝐞𝐧𝐜𝐞 📚 I analyzed what went wrong with the tech startup and took those lessons to heart. It taught me valuable insights on evaluating investments more critically.    𝐒𝐞𝐞𝐤 𝐏𝐫𝐨𝐟𝐞𝐬𝐬𝐢𝐨𝐧𝐚𝐥 𝐀𝐝𝐯𝐢𝐜𝐞 🗣️ I consulted with a financial advisor who provided a fresh perspective and helped me develop a recovery plan. Even the best investors face losses. What matters is how you handle them and bounce back. Let’s turn those tough moments into valuable lessons and build a stronger financial future together. 💪💼 #InvestmentTips #FinancialPlanning #InvestmentStrategy #WealthManagement #Resilience #LearningFromLosses

Investors reaching out, eager to know the status of their investments. It's a classic scenario, the constant inquiry about cash flow and performance metrics. Yet, in today's ever-changing landscape, it's essential to approach these conversations with a strategic mindset As a founder, I've shifted gears into support mode. Instead of rushing into new investments, I've taken a step back to evaluate the needs and expectations of my current and future investors. It's about understanding what resonates with them, what metrics matter most, and how we can best position ourselves for success in the long term The result? A remarkable 75% of my portfolio companies have successfully secured follow-on capital. This isn't just about immediate profitability; it's about laying the groundwork for sustainable growth and future rounds of funding. While profitability remains a priority, my focus extends beyond mere financial returns. It's about investing in companies with the potential to thrive and attract further investment down the road. Adaptability and foresight are the name of the game, and I'm confident that as the landscape evolves, so too will our strategies Thoughts?

Investors reaching out, eager to know the status of their investments. It's a classic scenario, the constant inquiry about cash flow and performance metrics. Yet, in today's ever-changing landscape, it's essential to approach these conversations with a strategic mindset As a founder, I've shifted gears into support mode. Instead of rushing into new investments, I've taken a step back to evaluate the needs and expectations of my current and future investors. It's about understanding what resonates with them, what metrics matter most, and how we can best position ourselves for success in the long term The result? A remarkable 75% of my portfolio companies have successfully secured follow-on capital. This isn't just about immediate profitability; it's about laying the groundwork for sustainable growth and future rounds of funding. While profitability remains a priority, my focus extends beyond mere financial returns. It's about investing in companies with the potential to thrive and attract further investment down the road. Adaptability and foresight are the name of the game, and I'm confident that as the landscape evolves, so too will our strategies Thoughts?

The relationship between risk, return, and alpha is one I think about a lot in the context of our venture fund. In his most recent memo "fewer losers, or more winners", Howard Marks (whose memos I read religiously) dives in on the role of risk bearing, how to think about alpha, and what that means in practice. Not only does his piece provide some great reality checks for investors: "𝘈𝘭𝘮𝘰𝘴𝘵 𝘯𝘰 𝘪𝘯𝘷𝘦𝘴𝘵𝘰𝘳𝘴 𝘱𝘰𝘴𝘴𝘦𝘴𝘴 𝘣𝘰𝘵𝘩 𝘧𝘰𝘳𝘮𝘴 𝘰𝘧 𝘢𝘭𝘱𝘩𝘢, 𝘢𝘯𝘥 𝘮𝘰𝘴𝘵 𝘱𝘰𝘴𝘴𝘦𝘴𝘴 𝘯𝘦𝘪𝘵𝘩𝘦𝘳. [...] 𝘏𝘰𝘸𝘦𝘷𝘦𝘳, 𝘮𝘰𝘴𝘵 𝘣𝘦𝘭𝘪𝘦𝘷𝘦 𝘵𝘩𝘦𝘺 𝘥𝘰 𝘩𝘢𝘷𝘦 𝘪𝘵 [𝘢𝘭𝘱𝘩𝘢]." But it also provides many great frameworks re how to think about risk and alpha in the context of both venture and startup building. My latest piece covers my take aways from Howard's latest memo - check it out:

In today's evolving global economy, savvy investors know the importance of selecting businesses that not only offer high returns but also align with their strategic visions and core values. At Fundwise, we've since long realized the essence of smart investing and its role in amplifying growth for investors and entrepreneurs alike. • In the world of investment, the business model isn't the only element to consider, but the leadership team, market scope, and scalability of the ideas. • A solid team can oftentimes spell a difference between a profitable venture and an-sore loss. Investing isn't merely about tossing money into a venture and hoping for the best. It's a calculated and planned step to secure future growth and stability. How does one ensure this stabilized growth? The answer lies in 'Smart Investing.' • Smart Investing is a thoughtful process of identifying, analyzing, and investing in business opportunities that promise not just good returns but also resonate with your long-term goals. • A smart investor isn't swayed by temporary market fluctuations but focuses on the bigger picture. But one might wonder, How do we apply this Smart Investing approach? At Fundwise, we spearhead this strategy with three key points: 1. Diligent Research and Analysis: We value a thorough understanding of our clients' investment goals and the industries they wish to invest in. Constant monitoring of market trends aids us in identifying promising opportunities. 2. Prioritizing Long-term growth: Momentary success can be misleading; we focus on opportunities with the potential for sustained growth and profitability. 3. Proactive Client Communication: Transparency is our key forte. Keeping clients well informed about their investments enables them to make well-informed decisions. At #Fundwise, our objective is to bring holistic growth to both the investor and the invested-in. After all, it's not always about taking the plunge but making the plunge count! Join us on this journey of smart investing. Let's redefine success together. #InvestmentStrategies #SmartInvesting #GrowthMindset #FinancialGoals

Thought Experiment: According to Harvard Business Review, VCs have identified the management team as the most crucial factor for the success or failure of their portfolio companies. Now, let's survey the same group of VCs and inquire about their hesitation to conduct thorough due diligence on a management team, considering the risk of losing a deal to another firm. Furthermore, let's survey the fund's LPs and ask them their preference: Do they prefer FOMO investing, where funds are afraid of losing a deal? Or Do they prefer more informed diligence and general partners who are willing to walk away from a deal if a founder throws a tantrum about a few interviews? Based on my assumption, your LPs would prefer option #2, especially because a significant percentage of your investments either have low returns (1, 2, or 3x) or fail entirely. That being said, if all your bets consistently achieve a high return (10x), feel free to FOMO my money away. But realistically, that's not the case.

If you are exploring the idea of an investor in order to acquire capital for your #StartupProject or for #Expansion here are a few things to look for 1. Research and Track Record: A good investor will have a solid research process and a track record of successful investments. Look for investors who have a deep understanding of the market, industry, and companies they invest in. They should have a proven track record of making sound investment decisions and generating consistent returns over time. 2. Risk Management: A good investor understands the importance of managing risk. They are not driven solely by the potential for high returns, but also consider the downside and implement strategies to mitigate risk. Look for investors who have a disciplined approach to risk management, such as diversifying their portfolio, conducting thorough due diligence, and having a clear exit strategy. 3. Long-term Perspective: A good investor takes a long-term perspective and focuses on the fundamentals of the investment. They are not swayed by short-term market fluctuations or trends. Look for investors who have a patient and disciplined approach, and are willing to hold onto their investments for the long haul. They should also have a clear investment thesis and a well-defined strategy that aligns with their long-term goals.

99% of VCs and most angel investors are highly biased, egotistical and believe they are smarter than you... Think I'm wrong? If an investor didn't at least think that way, they wouldn't cut it as an investor Now, I know my investor or VC friends are probably going to dislike or disagree with some aspect of this But follow me for a moment I'm not saying all investors are wrong for being biased Just suggesting that you might be more biased then you really think you are Its human nature to be the biased - have opinions and preferences And when you add the responsibility and accountability of deploying money as a tool to achieve some outcome (reward or impact) I do think you become way more opinionated and biased Is this a controversial point You bet it is But not because I want to trigger investors and piss you off Rather, I'm curious if you've thought about this enough to make the adjustments before making more decisions You see, I think I'm pretty level headed and use facts before making decisions as an investor I also think I can sense or perceive things of value But am I really right about what I think I know? I completed a survey recently that had me straight up second guessing myself I mean, I had to really dig into my decision process and my assumptions afterwards And I made a few adjustments, which I'm glad I did ----- So if you're an investor and think you make sound decisions Lets test that theory, complete the survey and see how you feel afterwards No promises, but if you really want to be a better human This is one of those quick ways to do a reassessment of yourself It took me all of about 3 minutes to complete But the impact will touch thousands of lives to follow And no this isn't asking for any money or investments at the end. ------ Find the link in the comments P.S. my friend Jonathan Preedom has been digging into this for a while now as part of his PhD. Encourage you to follow him for more research on this topic as an investor p.p.s Tagging those I know impact others with your work... this is for your networks Taylor Weeks Kurt Walker🌶Tess Robinson Ian Utile Allyson Pritchett Roy Dequina 🇵🇭🇺🇸 DeReK WaTSoN Hua Wang David Culver

How do VCs (say they) make decisions? I read a 67 page research article so you don’t have to. Here are my key takeaways: ➡ VCs invest in 1% of companies they see ➡ Few VCs use quantitative, data driven tools  ➡ Universally team > everything else ➡ An alarming amount of investors make gut investment decisions ➡ Most investors do not analyse their past investment decisions So what does this mean for founders? The data confirms the odds are stacked against you. 99% against you, in fact.   But it also holds some hidden clues as to how to beat those odds. Unequivocally, the team is the single most important factor when it comes to getting a VC to give you a big fat yes. Armed with this knowledge, you should be doing everything you can to prove you’re the team to do this thing. And for investors? It’s time to stop making decisions based on gut feel and start using quantitative data sources that are less prone to bias.