I was recently thinking about the investments which I passed on that turned out to be big winners. There were two common threads across these investments:
1. I understood the importance of the company’s market and the company’s high level approach to attempting to win in this market. However, I couldn’t clearly envision the exact path that the company was going to take to achieve this outcome.
2. I was very impressed by the founders’ attitude, intelligence, ambition, competitiveness, and diligence.
Bringing these two observations together, here’s my learning:
Sometimes you will sense a market opportunity but not see the exact path which a company will take to win. This is due to a combination of two reasons. The first is that you don’t know the market in as much depth as the founder and the second is that even the founder acknowledges that he doesn’t know the exact path and will be discovering it as he goes along.
However, you may be fully convinced that the founder is a winner.
When this is the case, you should let the founder take you on the journey. Since he’s a winner, he has a good chance of discovering the path. And as he does, so will you.
In other words, an investor’s role is to know A, have a good idea of what B looks like, and to partner with the people who are most likely to get from A to B. It’s OK to not know the exact path between the two points.