What does an investor need to be successful? To answer this, we need to analyze what his main problem is.
By definition, the investor has a surplus of money resources available to put into projects managed by someone else. Therefore, at first glance, the investor has the problem of choosing which company to give funds to and which not. In other words, the investor’s main task is to distinguish the signal from the noise.
The investor relies not on the company’s past merits, but on the possible increase in its capitalization, that is, on its future cash flow. But, as we know, the world around us is volatile and unpredictable. For a beginner it is still forgivable to dream about King Midas’ gift to turn any object into gold. A mature investor, on the other hand, has no illusions that he is guaranteed to pull out the winning ticket in the lottery.
Instead, the investor focuses on what is within his sphere of influence and competence. On the one hand, he needs to eliminate the possibility of catastrophic losses and, on the other hand, to have in his portfolio companies that in principle have a chance to hit the jackpot.
However, any investor’s personal resources are extremely limited. Even if he has all the necessary skills for that, the investor simply can’t afford to spend a long time fighting over assets, fixing the company’s operations or inspiring a burned-out founder-CEO. The investor needs to create an environment where he doesn’t have to spend his precious time on all these issues at all.
This is possible if you build up the inbound deal flow correctly. The best companies don’t just have a professional team, a competitive advantage, or a profitable business model — they are able to solve complex problems on their own, without expecting a wizard-investor to save them.
If the projects with the highest potential come to you as an investor on their own, the expected return on your capital tends to infinity, and the cost of your most valuable resource — your personal time — tends to zero. For an investor, this is the ideal.
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