If you’re like most people interested in the world of investing, you’ve had your share of daydreams about investing in exactly the right stock at the right time. You’re almost definitely wondered what it would have been like to invest in a serious juggernaut like Twitter, Apple, or Facebook at the very early stages. Thankfully, venture capitalist-style investing isn’t as much about the luck of the draw as it might appear to be from the outside looking in. It’s completely possible to hone and refine the instincts involved.
Lowercase Capital chairman, Chris Sacca is a perfect example of exactly what an investor can become if he puts his mind to succeeding. Sacca now specializes in philanthropic startups, but he also oversees an impressive portfolio populated by over 70 different companies, many of them hugely famous. In fact, he knows exactly what it’s like to have invested in prime projects during its earliest stages, as he did exactly that when it comes to many big names, including but not limited to Uber, Instagram, Twitter, and Kickstarter. With a little hard work, you too can learn to think just like Sacca and the rest of the world’s most successful investors when it comes to spotting the best opportunities. Here are a few things to keep in mind.
Surround Yourself With Mentors
It just so turns out that you really are who you hang with. Human beings are social animals, so they can’t help but influence (and be influenced by) those they interact with the most. In fact, experts believe most people evolve into an average of the five other people they spend the most time with, so take a moment to consider who those people are in your life. Are they total rock stars with their eyes on the prize, or do they leave a lot to be desired? Fill your life with other winners who will influence you for the better when it comes to thinking like a successful investor.
Go out of your way to seek out investing mentors in your professional life who can teach you to think the way they do. The more time you spend in the company of people who are where you’d like to be someday, the better your chances of actually getting there sooner rather than later. Start by connecting with a few good people, and then work on growing your network over time.
Look for Companies That Are Good but Simple
The more a given company is looking to get done, especially in the early start-up phases, the more likely that company is to ultimately fail at all of them. Although there are always going to be exceptions, “the simpler the better” is an excellent rule of thumb to follow when evaluating investment opportunities. Look for teams, companies, and start-ups that are focused on doing just one thing really well, instead of trying to be all things to all people. Then ask yourself the following questions about that singular focus.
- Is this company looking to create something that serves a genuine purpose, as opposed to simply trying to cash in on the latest fad?
- Does what this company creates aim to be better at filling a need that already exists, or are they hoping to do something no one has ever done before?
- Are the minds behind this company interested in solving problems and generating solutions that society truly needs to be addressed?
Good companies to invest in aren’t usually the ones hoping to hit on something that’s never been done before. The best entrepreneurs understand that just about everything’s been done before at this point, so they’re focused on creating indispensable products and services that address an existing need in a better, more productive way than what’s already out there.
Think Toward the Future
Most investment opportunities, especially of the venture variety, take some time to reach their full potential — around seven to ten years on average. That said, it’s always a good idea to spread your efforts and resources across several different channels instead of banking on just one company. In fact, most industry experts recommend investing in ten or more startups at a time, as this lets you leverage the odds to your advantage. Around 50 percent of all startups wind up failing within the first few years. Perhaps 20 percent achieve success, while the remaining 30 percent may go on to be about average.
If you’re thinking that a 50 percent failure rate sounds high, you’re right, but that’s part of what comes with being a top investor. Even the best investors fail a lot. They go out on a limb a lot, and they take many chances, but when their gambles pay off, they tend to pay off big. That said, becoming an investing success means learning to make friends with failure and knowing how to turn each loss into a learning experience that makes you stronger the next time around. Are you ready to take the plunge and live the life of a master investor?