How to look at Early Stage Investments — VC style
When you are watching a football match, you generally listen to the views of the pundits (as they are the experts). In the same way, we thought it would be useful to share some tips from the experts on this field (the Venture Capital firms).
Dalton Wright, of Kickstart Seed Fund, recently shared his fund’s investment mindset for the rest of this year.
The full article can be found here. However, we thought that we would take the liberty of extracting his most interesting points.
- Avoid Compounding Risks
We’re skeptical of startup plans that require multiple leaps of faith in order to be successful.
We’ve avoided the Bay Area billion-or-bust mentality and instead have targeted capital efficient startups with strong fundamentals. This is an approach that’s now coming back into vogue among venture investors across the country.
“Go big or go home” usually ends up with you packing your bags and ending up at your parents!
- Create a diversified portfolio
We’re constantly reminded that picking winners is extraordinarily difficult in this business as so many factors- internal and external, known and unknown- come into play to determine the success of a tech startup.
We make a lot of investments in a portfolio because we have a healthy respect for the unpredictability of the seed stage.
Have a diversified investment portfolio!
- Stay flexible and embrace the unknown
Many investors missed Facebook because they were looking for the next Google, and many then missed Uber because they were looking for the next Facebook.
Our advantage as seed investors lies in our ability to consider weird, sometimes random, seemingly impossible ideas and to make an educated bet in spite of the uncertainty… and then we work to affect the outcome.
Be open-minded!
Bottom Line
Investing in early stage startups is risky enough. If you want to maximise your chances of picking the big winners, then don’t make it any harder for yourself!
