The rules of the game
Perfect is the enemy of growth
If you’re dealing with startups, whether that’s working for one or investing in many, there will be failure. It will test you financially and mentally. I’ve written before that by starting a start the founder should know that at some point they will want to, and be under huge pressure to, give up. That’s true but so is the step beyond that — failure. Sometimes no matter how much grit the founder has something will go catastrophically wrong and their startup will fail.
I know and accept that myself but when I invest in a startup I also syndicate the deal to a bunch of people who want to see what I’m investing in and are keen to follow me1. Should I feel responsible for their risk too? The likelihood when syndicating investments is that people, including myself, will lose some of their money.
How much emphasis do I need to place on that risk when talking to syndicate members about an investment opportunity? Sometimes I think I don’t stress the risks enough, and sometimes I think I’m over cautious and don’t involve people who are up for taking those risks2.
The Race That Eats Its Young
Then, if I ever need to snap out of the ‘I-must-cover-all-bases’ thinking, I remember The Barkley Marathons.
I did, however, buy a book about The Finishers. If you’ve watch the documentary, “Barkley Marathons: The Race That Eats Its Young” you’ll know what an eccentric and utterly bonkers set of marathons it is. Equally eccentric is ‘Laz’ the founder. If runners complete three loops (around 60-75 miles, or 100-120km) then they can say they’ve completed the ‘Fun Run’.
The full five-loop race is around 100 miles (160km) but some think it could be as much as 130 miles (210km). As of 2022 the full five-loop race, which was first run in 1989, has been completed only 18 times by just 15 runners.
The participants sign a legal disclaimer, which simply states:
“If I am stupid enough to attempt the Barkley, I deserve to be held responsible for any result of that attempt, be it financial, physical, mental, or anything else”.
If in doubt, simplify. Maybe, if I am stupid enough to invest my money in early stage, risky, illiquid, unproven, obscure startups then I deserve to be held responsible if I lose all my money and subsequently feel stupid, embarrassed and full of regret.
Embrace the inevitable failure
I know that unreasonably successful people thrive on setbacks; actually thrive on them — not just accept and move on but thrive because of them. It’s the setbacks spur them on to what might be enormous success. After all, it’s the obscure that becomes obvious, the risk that gets the reward and the early punt that will make you look like a genius.
In other news
If you read my posts regularly you’ll know that I have invested in a bunch of startups3.
This week FanBytes announced that they have been acquired by Brain Labs. This is a terrific result for Tim, Ambrose, Mitchel and the team — they thoroughly deserve all their success and I’m pleased and proud to have played a part.
These days when I invest my own money in a startup I also syndicate the deal to a small group (currently 75 people) who want to see what I’m looking at to get the chance to invest themselves.
Since 2017, when I started taking my startup investing much more seriously, no companies I’ve invested in have failed, the syndicate has invested in some of the startups multiple times and I’ve had two (soon to be three, all being well) exits.
Email me on email@example.com to ask any questions and/or join up.
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.
See the ‘In other news’ part if you want to join.
I took the above photo in Nick’s kitchen just after they’d signed the investment documents.