When you invest money in a startup, you actually invest a lot more than that. You embark on a journey which will likely take at least 18 months and maybe longer than 10 years.
18 months is the shortest path to a successful exit that I’ve seen. It’s also how much runway most funding rounds offer in the event of failure.
And if you catch on to a big winner you’ll likely want to see it play out for as long as possible so this may mean a journey longer than 10 years.
So, in addition to money, you also invest your time in a startup. You spend time strategizing with the founders, helping the startup recruit, pitching the startup to other investors, solving founder problems, but also problems among investors and between founders and investors.
And while money is replaceable, time is not. If you invest in the wrong startup, you spend the precious moments of a finite resource on a business that gets less and less likely to succeed each day. The feeling of lost time hurts a lot more than the feeling of lost money.
As a result, when I’m evaluating whether to invest in a company, I’m not simply deciding whether to invest money in the company. I’m deciding whether it’s worth investing time in the company.
This forces me to hold potential investments to a higher standard. And more importantly, it makes me spend a finite resource in the way that I believe will create the greatest value.
Also published on Medium.