It’s coming up on 3 years since I started working at Aslanoba Capital. I’ve had the opportunity to invest in over 70 companies during this time, and to personally work with the founders of over 40 of these companies. The 30 company difference represents our US investments where we’re hands-off investors that serve simply as a source of capital.
Here are my learnings from the last 3 years:
- People are what make or break a startup. You don’t need to be 100% correct on the market and the startup’s specific approach. You do need to be directionally correct, and being directionally correct is enough. But you need to be absolutely correct on the people. It’s the people who decide what strategy to follow, how to revise that strategy when necessary, who to hire, what to build in-house and what to outsource, when to fundraise, who to fundraise from, and when to sell. It’s also the people who decide how big and realistic of a vision to set and how hard to work towards that vision.
- You should invest with the assumption that you can’t change a startup’s direction after investment. Sometimes you will be able to help out at the margin (through your network, the psychological support you provide, and feedback in areas like strategy and product), but your input shouldn’t be required for the company to succeed.
- Venture is a local business. You need to be on the ground meeting entrepreneurs in order to identify the best entrepreneurs and have a competitive advantage in getting them to take your money. You can make money investing abroad, but your upside will be limited to the upside of the market.
- Your gut feeling, independent of what the crowd thinks, is very often right. In fact, it’s when your gut feeling diverges from what the crowd thinks that you have the biggest opportunity to create value. And you need to spend time alone in order to access your gut feeling. This is especially important right before making an investment decision.
- You’re good at identifying companies before they break out, not competing to invest in them after they’ve broken out. Fortunately, the former also produces better cash-on-cash return multiples.
It’s important to point out that these learnings are specific to my experiences and character. These are the fundamental truths that work for me.
A different investor will have different beliefs which produce a different investment philosophy. What’s important is that each investor reflect on their experiences and character to inform their own investment philosophy. This is what makes a good investor.
Also published on Medium.