InVESTING IN StARTups
"It is with the heart that one sees rightly;what is essential is invisible to the eye."
Investors generally evaluate and fund companies based on revenue models/sales / costumer acquisition/marketing and whether it falls under their expertise . Venture Capitalists, Angel-Investors and Private Investors do this as investing in early stage companies is a very high risk and high reward game only 5 out of 100 investments make it big or become successful and all their losses are compensated by these few blockbusters.
The stakes are high as one could loose all their money. Knowing about a company’s sales, product differentiation, target-audience, retailer outreach, customer acquisition,KPIs, USPs, supply chain disruption, branding, distribution, previous valuations, dilutions, equity-split, revenues, per-unit economies, and gross margin may pay an essential role in whether to fund or not to fund a startup .
Building a startup has another parameter which is not much considered now days which is its “art-form”. Building startup is generally like someone making an art so the above standardizations of supply chain and gross margin could be essential but the uniqueness of it really lies when we view it as an art where the builder’s vision and what he/she brings out as his/her perspective which maybe could be very non-linear and orthogonal to the investor but is appreciated eventually.
Jason Calacanis mentions about an entrepreneur who give him a pitch wherein he said he is going to create an app to get millennials to trade stocks. Jason questioned the entrepreneur about how it was going to monetize to which the entrepreneur replied “it’s going to be free”. Without thinking a second Jason said he was all in. Jason in a podcast said “ The crazy outlandish ideas that nobody believes in are the ones that have the greatest returns”. “The way to do good as an Angel Investor or just in technology or in life is to not say what could go wrong but to say what could go right and then to just imagine for a moment if it does work what would the work look like.”
The entrepreneur who pitched Jason was none other than Vladimir Tenev and the company we are talking about is Robinhood. Investments like this make not make it big each and every time but appreciating and evaluating on the basis of “if it does work what would the world look like “ despite being an outlandish thoughts sometimes delivers bangers like Tesla and Robhinhood