It is easy for me to geek out on investment theory, growing GDP, tectonic shifts in the agriculture industry structure, or a new high density rocket fuel that will let astronauts return from Mars. But understanding the nuances of the market is just the start of the investing journey for many people.
In fact, this is the main reason so many family offices and investors have chosen to invest through iSelect. It is simply an easier, better option.
If you are successful, people pitch you investment deals non-stop. In some ways, it is tempting to invest in way too many deals because of the sheer wealth of opportunities that exist. Yes, we all know we should do careful diligence, diversify our investments, spread out risk, etc, but for those of us who made our wealth as entrepreneurs, it is often too tempting just to take action.
That’s what we know, and it has worked for us in the past.
But when investing, particularly in a complex asset class like venture, that is the incorrect approach.
The patriarch of a family office that invests through iSelect said it simply in a recent email to his friends, encouraging them to invest through iSelect:
…Like most people who have acquired some wealth, opportunities are always knocking on my door. The problem for me has been the need for diversification, but not having the time nor the skill set to properly vet opportunities outside my area of core competence. As such, my success rate on outside investments has, regrettably, been poor. When my family office decided to invest through iSelect, it was with the commitment from iSelect that they would perform due diligence on any deal that I asked them to look at on my behalf. In the past four months they have reviewed three “opportunities” that I deemed worthy of consideration. Based on their work, I decided to pass on two. In addition to the analysis that is performed, creating distance between myself and those who approach me with deal flow is equally important. That value added feature alone has made the investment in iSelect worthwhile for me…
Adam Smith taught us long ago that economic growth is a result of capital formation. Today’s family offices understand this, and often invest in emerging opportunities. These are opportunities that create a step function in productivity, solving problems that previously seemed intractable.
If people with means improve their venture investing odds, they get a good return, the economy grows, and the world gets a bit better.
When I look back at all the venture deals I invested in that later failed, it’s quite easy to conclude that more diligence, deeper domain experience, and diversification eliminates the losers. Picking fewer losers improves returns.
Try this homework assignment:
- Think about every deal you invested in and it failed.
- Read our diligence standards.
- Honestly ask yourself, had you gone to the depth of our standards, would you have made those investments?
- Sum total the deals you would not have done.
- Record your homework assignment in our quick survey.
It is sort of an annoying number isn’t it?
I like to think of iSelect as a sort of Angel’s Anonymous for those who have invested in a few too many venture deals without looking enough under the covers.
Investors too often think venture investing is about picking the best deal. In reality it starts with rejecting the deals that do not quite have what it takes. Concentrating on what is left. Doing all of the necessary due diligence and follow-up. And managing the investment to success.
I will admit I am a member of Angel’s Anonymous. We created iSelect for people like me to improve venture investing.