How do you maximize investment returns?

Let's talk about Warren Buffett, one of the most successful investors. His investment thesis is all about investing in companies with strong brand value and solid financials, which he understands very well (think Coca-Cola or Apple). Because he has this thesis, he doesn't get swayed by the hot stock of the moment; he sticks to what he knows and understands, which has paid off well for him over the long term. Understanding your risk tolerance is also crucial when forming an investment thesis. Risk tolerance is about knowing how much financial risk you're comfortable taking. It ensures you don't bite off more than you can chew, which is pretty crucial in investing.

We also noted a number of key points: i) Mapping the benefits of technology to real estate was poorly achieved. ii) Highly fragmented market meant poor adoption. iii) The models on offer for those seeking a digital strategy was poor. Was either invest in venture capital firm or low ROI type initiatives like events or accelerators.

3 advantages of having a strong investment thesis: 1. In a highly uncertain market, focusing on specific industries, types of founders, business models, helps Investors cut through the noise and more narrowly identify patterns of what makes companies successful. 2. Builds a common understanding internally of the type of risk the Partnership is willing to take e.g. Are we willing to take product risk or do we need to see early signs of product market fit? Are we comfortable with team risk? 3. It ensures Investors ask themselves what they are able to diligence, and where they do not have expertise i.e. being honest about their limitations. Hence, ensuring competent decision making.

Regardless if stage, having a clear thesis based on specific access to knowledge is critical to inform your decision making when investing

A strong investment thesis acts as a compass in a sea of opportunities. It guides decision-making, streamlines focus, and enhances clarity in communication. For instance, if your thesis revolves around investing in sustainable tech, not only can you easily sidestep unrelated pitches, but you also attract eco-focused startups. When approached by an AI startup in fossil fuels, you'll swiftly discern it's not aligned, saving time and resources. Conversely, a green energy storage solution will resonate immediately. This clarity helps in efficiently conveying value propositions to founders, ensuring both parties are aligned in vision and purpose. A sharp, well-articulated thesis is an invaluable tool in the investment realm.

Think of it like buying a used car. You wouldn't just hand over the cash based on the seller's word, right? You'd probably want to see service records, take a test drive, perhaps even get an independent mechanic to look it over. Similarly, in 2012, Facebook bought Instagram after doing meticulous due diligence, including understanding how it could fit into Facebook's broader ecosystem. In a real-world scenario, you might be working against a clock, especially if other investors are eyeing the same opportunity. Speed and efficiency in due diligence could be as crucial as thoroughness.

Not every deal that comes across an Investor's desk can go through a comprehensive due diligence process. As a first filter, Investors focus the DD on (1) the most critical perceived risks associated with a deal, (2) the most exciting aspects of the deal. E.g. > Most critical risk: Founders with no prior experience. > Most exciting aspect: Strong market tailwinds. This leads the Investor to conclude whether: (1) The most critical risks can be mitigated and/or whether she/he is willing to take them. (2) What made the deal exciting at first glance is in fact substantiated when doing more analysis.

Remember that you will see 20, 50, or 100 deals for every one that you eventually fund. So, your diligence process needs to be efficient. Perhaps you will want to have a checklist of "must haves," and if the company does not pass the check list, you quickly move on. Then you have a meeting with the founders. Perhaps you have one more meeting. Then you do your diligence. If you are lead, your diligence needs to be thorough. Overdiligence, and you waste time and risk loosing the deal. Underdiligence, and you risk making an investment into something that is not what it seems. If you are follow, then you can perhaps do a little less diligence, but you still need to convince yourself this is a good investment.

Agreed 💯 on QUALITY > Quantity. It applies to most of situations anyways. Key question here is to know what is Quality vs. Hype.

A classic example is how venture capitalist Peter Thiel invested in Facebook. He didn't just put money into every social media startup available; he was selective and chose Facebook, a company that aligned well with his thesis and seemed to have high growth potential. And we all know how that turned out! It's good to think about how you'll eventually sell your stake for a profit. Knowing your exit strategy aligns well with being selective, as it's another point on which to evaluate a potential investment.

Um bom projeto não resiste a empreendedores ruins, assim como um projeto mediano pode ser salvo, aprimorado e transformado por bons empreendedores, desde que eles tenham uma mentalidade de experimentação e aprendizado. Para investir corretamente, portanto, a seletividade dos quens é, na maioria das vezes, é muito mais importante que a seletividade dos porquês, o quês e comos.

I once heard advice of a senior parner to a new parner: don't do any deals the first year. And there is at least one big fund that only allows partners 2 deals per year. So ... this is evidence that being selective is part of what makes a VC successful. Successful VCs might see 50, 100, or even 500 deals for every one they write a term sheet on.

Take the venture capital firm Sequoia Capital and their investment in WhatsApp. Sequoia didn't just provide money; they were deeply involved in guiding the company, even helping to focus the app's offering and scale its infrastructure. Their active involvement was a key part of WhatsApp's eventual $19 billion sale to Facebook. An aligned investment horizon between the investor and startup can be crucial, as it sets expectations for both short-term challenges and long-term goals.

Funds that support their portfolio companies have a roughly 5% alpha over those that do not. So, if you set up a good mentoring program, both you and your companies will benefit. Try to have a partner meet with the CEO on a monthly basis. This is in addition to the quarterly board meetings.

Consider Facebook's acquisition of Instagram in 2012. Instagram's investors made a hefty profit, but they also had to be okay with Facebook's vision for the platform. This exit was beneficial for both sides. Sometimes, an investor's exit can lead to a redistribution of power and control within the company, which is something to be cognizant of.

There are two aspects to this. HOW and WHEN to exit. As a brief summary, consider the following: [A] How to Exit? - Set objectives for exiting - Monitor existing performance against targets - Don't panic sell (patience is a virtue!) - Evaluate reasons for exiting such as tax implications - Detailed understanding of short term liquidity needs and long term liquidity for investments and acquisitions - Due diligence with financial, investment, tax and legal experts. [B] When to Exit? - Initial goals are met - Market and investment fundamentals have changed - Alternative better opportunities have arisen - Overvalued investment and exit before it loses value - Rebalancing investment portfolio - Tax & estate planning

You want to exit when the company is ready, and when the market is excited about the company's niche. Market sentiment can swing your company's valuation 2-4x. How you exit matters as well. An IPO will usually have the highest valuation. An acquisition next. And an aquihire may only return your investment.

~~ Founder is always 🔑~ -- Investing in unlisted securities (startups) is always froth with risk, no matter what. -- One can talk about investment thesis etc, but it only helps that much. -- One can focus on a stage basis risk/reward appetite, but then the returns will mimic that. Having been in startup ecosystem and looked at over 5K+ startups over last 10 yrs, for me.. -- Founder is key. #his ability to orchestrate the story, # ability to hustle # ability to maneuver in tough situations # ability to pivot as needed # ability to rally team around him # ability to sell, make actual money # ability to raise These to me are more pertinent than -thesis, stage, sector, trend etc..