Over the past ten years, along with my investment partner, I’ve honed an absolutely perfect investment process. For the first time ever, I’m going to share the data-centric, secret strategy developed over years of sitting across the table from some of the Internet’s most impressive slide decks — a period during which I’ve become an expert on expertise.
Let me take you through the process. Two guys come to our offices and present their idea and walk us through their achievements to date. Like always, we interrupt the presentation several times. In part, we do this because it’s fun. We have the money. They want the money. So we can be rude as fuck and it’s totally kosher. But equally important is our steadfast determination to never let anyone get through a deck without getting in the five key questions which we like to call the five key questions.
- “Wait, what?” (Yup. It’s so simple, it’s genius.)
- What would Steve Do? (If the entrepreneurs know we mean Steve Austin, the Six Million Dollar Man, we generally write a check right then.)
- Want another Diet Coke? (Admittedly, this is a trick question. Most young entrepreneurs will think they are being too forward by asking for a second Diet Coke. In reality, we almost always invest in those who have a second, and I can’t think of a time we’ve passed on a deal when a prospective CEO consumed a six-pack or more. Why? Just check the data. The more hydrated entrepreneurs always do better with one critical caveat: Non-carbonated liquid is for fucking losers.)
- If we give you money n0w, will you give us back that money and more later?
- Is your product simple enough for my mother to use it … on her rotary phone.
We get our answers. We put our heads together. My partner looks at market size, deal terms, legal issues, revenue potential, competitive landscape, sector growth, and asks for more and more spreadsheets (partially to get an overall picture of the marketplace and industry, partially just for fun). I am tasked with one key function. On a scale of one to ten (from least to most likely), I determine the likelihood that at least one of the founders has a basement fridge filled with human body parts. As long as the score is over a seven, we’re still in. We then put the deal through a universal litmus test. We both ask our wives if the idea sounds good (almost always over drinks so we can work in a decent big data that’s what she said joke).
If we like the team and the idea, we invest. (My partner is going to kill me for giving that part away.)
If the company does well, we invest more (what the hell, if you’ve read this far, I’ve got nothing left to hide).
Then comes the big pay day. It’s at that moment that we realize, yet again, that this business is not about the money. It’s about living to be 250 years old, getting a ticket to a habitable planet when the Earth starts to burn up, and reminding oneself anew that people in our industry are special enough to deserve these wildly massive returns and that it’s entirely likely that we could get laid without having equity in a few choice deals (even though no one fucked us before we did).