I recently listened to Tim Ferriss, author of The 4 Hour Workweek, interview Chris Sacca of Lowercase Capital. Lowercase Capital invested in companies like Twitter, Uber, and Instagram. It’s a great interview with a lot of insights on investing and life in general. I encourage you to set aside an hour and a half and listen to the full piece here.
Here were my key takeaways from the interview:
1. No conditional statements from entrepreneurs: Don’t invest if there’s any hint in the entrepreneur’s pitch that they’re trying to convince themselves of the future of their business. There should be no conditional statements in the pitch. The entrepreneur should have no doubt that they’ll be successful.
2. No investment decisions dominated by the negative case: Don’t make an investment decision based on the negative case about a startup. Invest based on what could happen in the event of the positive case playing out. Chris didn’t invest in DropBox because Google was working on Google Drive, Airbnb because of the physical danger that guests and hosts pose each other, and Snapchat because of its usage to transmit inappropriate messages. While these risks do exist, every business will have risks at scale. You need to think about what could happen if things do work out.
3. Give yourself a chance to get rich: You need to make a concentrated portfolio of bets in businesses targeting a large enough market where you have an ownership stake high enough to produce a meaningful return. If you spread yourself too thin or invest in companies where the target market size and your entry valuation aren’t enough to produce a 10X return, you’re unlikely to achieve success in venture investing. Successful venture portfolios are built on a select few companies that produce over 10X returns, not a majority producing 3X returns.