HOW DO I INVEST in startups?
I think of startups in broad strokes and try to take a 5 to 10 year view, occasionally updating the picture of where my particular area of focus is going. I'm still trying to exercise the discipline to develop my own thesis and to put each investment through the thesis test.
Truth is - I still screw up and I'm always learning. Everyone is. There are so many variables and unknown unknowns around an early stage venture that it's simply impossible to completely eliminate gut feeling from the equation. However, I do believe in crunching the key numbers, sensitising business plans and making data-driven decisions to the extent that is possible. Here's a vignette of my investment thesis.
Products and services that...
- Create markets, networks and communities;
- Focus on industries with middlemen who are responsible for high transaction costs;
- Aggregate, organise and simplify data;
- Solve a relevant pain point through a practical solution;
- Are built by founders who espouse a grand but concise vision;
- Are managed by teams who believe that good governance is an IPO-able / tradeable quality.
Going forward, I'll focus my investments on products and services that...
- Are developed as an API from the get-go;
- Can be accessed at anytime via any device;
- Monetise through API access;
- Are defensible through a large network of engaged users.