A startup ride, either as investor, entrepreneur or employee, is most likely one of the most valuable, exciting and unique experiences anyone can have. That been said, such experience does not allow you to stop and analyze it properly, everything happen in a blink of an eye, as a result most of the times you learn things in the hard way. I, personally, do not consider them failures but instead a painful opportunity to learn, yes I said painful.
As an investor no matter what kind of asset you invest in, you have to be discipline and set the framework better fits to your profile. Here, there are three lesson, that turn into investment rules in the hard way, I hardly ever will break again:
- Be part of projects with 3 or 4 decision makers, whether they are founders, cofounders or “real” board members, let me sleep a little bit better.
3 or 4 decision makers, it is not a random number, with 3 decision maker, 6 relationships get involved, while with 4 stakeholders the number of relationships goes up to 12, doubling the previous option. 5 member involved in the decision process will shoot the number of relationships up to 20, which will turn the decision making process in a house of cards situation, with more about game theory rather than running a business.
There are several advantages of keeping the strategy design within an ecosystem of 3 or 4 members:
- Business strategies decisions will take a longer but last longer too
- Consistency running process due to strong strategy, no individual IDD (Intuition Driven Development)
- Not unnecessary business pivots, will fight challenges relentless
As a result, Leadership team will invest invest more time designing and planning, while the execution will be clear and faster due to previous work done.
- You trust your money to people
While the previous statement is completely true, there is one key and important piece of information missing, you don’t really investment in people, you invest in their background.
Accordingly, I would feel more comfortable investing in solid profiles with previous experience.
Having previous experience, even when might not be related with the adventure is crucial because provides a critical thinking to assess what would be the most suitable for each situation or context. By the default, I would reluctant to jump over the wave of those entrepreneurs that never had learn from other managers, colleagues or enterprise. I know here I am most likely wrong but I believe that learn from others makes you better and building an adventure is not an exception.
- Every single startup is unique, therefore there are not such as serial entrepreneur or people involved without getting their hands dirty
Here it will be the most controversial point, where many of you might disagree, but from my humble point of view, entrepreneur is an attitude is not a profession. You can be entrepreneurial, regardless who you work for. Accordingly, I don’t investment decisions based on how successful the team or the leader has been previously.
Each project or adventure will vary from each other, therefore strategies and tactics should be different. “Serial entrepreneurs” usually aim to replicate past experience, past insights or success. Although it is possible, and previous experience are highly valuable (take a look at rule#2) it should not be the driver of your investment. Bear always in mind the disclosure from traditional investments: “Past performance is no guarantee of future results”
Last but not least, it is a symbolic yet committed gesture of contributing not only with the day to day job and responsibilities yet contribute financially speaking with the project. If you truly believe in the project and yourself, the trade off should be low. I don’t personally need to see from the entrepreneur bet all in, just a commitment gesture.