Catch up Gary!
A few weeks ago James sent me the following video of Gary Vaynerchuk:
James sent it to me because for some time I’ve been saying that the 2020s will be the decade of the investor — everyone will be doing it. In this post I’ll share what led me to that view, where things will go in the 2020s and what you can do about it…
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Choose yourself
I started working for an early stage investor in 2010 and the 2010s was definitely the decade of the entrepreneur. By that I mean that at the beginning of the 2010s it was a bit weird to start a startup in London. A few people were doing it in shitty offices around Old Street but it was unusual — some people thought that’s what you did if you couldn’t get a proper job.
However by 2018, 2019 *everyone* was an entrepreneur — the ‘brag’ was about being a startup founder and everyone, from people working in boring corporates to celebrities, were now entrepreneurs with startup ideas. And that’s a good thing — the more of it the better — as ever, most will fail but more people trying new things that they’re interested in and more people challenging themselves and the status quo is wonderful.
What about the 2020s?
So towards the end of the 2010s that got me thinking, what will the 2020s be about? If the startup ‘scene’ was so big there wasn’t a scene anymore then what might the next phase be? What was bubbling underneath that might rise to the surface?
I realised that to answer this the best question to ask was, “What will people be bragging about in the late 2020s?”.
And I thought, for people in a boring job that doesn’t satisfy them, for those who maybe can’t talk about their day jobs because it’s all confidential and for those who will never start a startup but want a bit of ‘cool’ in their lives and on their LinkedIn profiles, the brag in 2028 and 2029 will be, “Oh yes, I invested in that startup when they were tiny”. (I think a bigger brag still (but one that won't deserve as much credit as being successful at the first) is, “Oh yes, I’m an LP in that fund”1).
What can you do about it?
This year I’ve had a couple of exits (thanks FanBytes and NoblyPOS) and they were great, but I’m not sitting on a pile of millions just yet.
I call myself a ‘Pay-as-you-go’ angel investor — I do some work, get paid, keep some money to one side and then invest in founders I like who also like me (two new and two reinvestments this year).
Like me, you can do the same:
Observe. Richard Koch wrote about me and 9others on page 296 in the latest edition of The 80/20 Principle and said that you have to have some sort of vehicle for meeting entrepreneurs. How can you meet lots of founders, observe them, then invest in a few? It doesn’t have to be complicated — how about you set aside, say, Tuesday mornings and have back-to-back 30 minute coffees with founders?
Practice & patience. I’ve heard stories of people who want to invest in 100 startups within a couple of years but are only investing £50 in each. That’s a poor strategy, won’t make any significant money and very short sighted. Yes you have to spread your bets but the best startups aren’t all going to come in the first year or so and saying ‘no’ to most founders is very good practice. (Also, it’s not a money thing — even if you have 100 x £10k to invest I wouldn’t do 100 in the first couple of years).
Activate. After a few of years of focus you should have developed a good thesis that sits well with you, you might even have had a bit of success. This is then perhaps the time to start writing bigger cheques and reinvest in winners. The real financial success comes from building up a position in a winning company. I have invested in 23 startups, 5 have failed and 2 have exited. I think that in the next few years my strategy should change away from new investments towards more reinvestments. It’s hard because new is exciting and there’s more, quantity-wise, to show for it.
How do you practice this practice?
To ‘Observe’ you have to meet people in-person and if there’s more than one founder meet them together so you can see the dynamics between them (do they talk over each other, do they know what each other can and can’t do, do they arrive together, are they early or late etc?2). For, say, a Tuesday morning this is a small investment in time and a huge return over a few years. Of course there are remote demo-days and Zoom calls, and they can be good for getting a sense of what’s happening around the world (San Francisco demo days are during London evenings so perfect) but if you’re in the same place then meet in-person.
For ‘Practice & patience’, use your own money and make the decisions and transfers yourself. The thing about being an LP in a fund is that you have an excuse for poor performance, “Argh, those VCs don’t know what they’re doing!”. When it’s you saying ‘yes’ then logging into your online banking, punching in the sort code and account number and then hitting ‘send’ it’s all on you and you’ll take it much more seriously.
And to ‘Activate’, write down what you’re doing and what you’re learning. Write down your first impressions of people, business models, what makes sense (and what doesn’t), note things that you agree with and things you don’t3 (why is that?), and reflect on yourself too — what was your mood that day, was there any bias in play? This part is critically important for long-term success and very easy to put-off until 'later' so make sure you make time.
Good luck!
In other news
More running
I have a place in the Marathon des Sables. I’ve fancied doing this for at least 15 years and things have lined up nicely so I’m giving it a crack in 2023.
If you’ve done the MdS before or know someone who has please get in touch.
JV Network panel
On Wednesday 23rd November from 7-9pm I’ll be on a panel talking about angel investing.
The panel and Q&A is organised by the JV Network and hosted by Seedrs.
Details and sign-up here.
World Bank Demo Day
For the third time I’ve been advising the World Bank as part of the IGNITE Program to help startups in Palestine become investment-ready. The demo day is on Monday 5th December. Details and sign-up here.
And I’m reading
Important: None of these posts are investment advice. If you are thinking about investing you should seek the advice of a suitably qualified independent advisor.
#CapitalAtRisk
It’s a bigger brag because it’ll make them feel more like a big-shot, but it doesn’t deserve as much credit as taking the decisions of which startups to invest in.