What Makes You So Special? …and Can Anyone Learn to Invest Well in Startups

This post from venture capitalist Jerry Neuman is excellent and got me thinking once again about my chosen career?

Investing in startups is way different than investing in stocks.

I have sat with Chris Douvos myself (who Jerry talks about in the post) and he has asked the same question…’What Makes Me So Special?’.

I am sure I gave a smart ass answer like ‘my red back hair’ to buy some time. My follow up answer has not been good enough because Chris has yet to invest in our funds (or he hates guys with red back hair)!

As Jerry gets to in his post:

Is there no how?

Some people have better investment results. Is it luck? Michael Mauboussin said you can tell skill from luck by asking yourself “can you lose on purpose?” This is an amazing question. In venture the answer is, trivially, yes.

There are two kinds of pitches. Those that are clearly bad ideas, and those where it’s not clear at all if it’s a good idea or a bad idea. Investing in the former will lose you money. Investing in the latter might lose you money or might make you money. Skill is distinguishing between the two. Then luck comes into play.

The reason I could never say how I’m special is because I’m not. And neither were any of the other VCs I met with. At least not in a way anyone could wedge into a 30-second pitch. Divvying the world into two piles is hard, but it’s not magic. Being special is being magic, that’s what the question is really, how are you magic?

Anyone can learn to invest well in startups. But you do have to learn how to do it and then you have to work hard to do it right, every time. Like any job, you show up and you do the work and you notice your mistakes and you try to do better and you improve over time. It requires thinking and trial and error and trying to be rational and asking yourself if you’re thinking about this right and asking other people how they did what worked and what they think about this one you’re thinking about. Figuring out the nos from the maybes is, more than anything else, like solving a puzzle. The puzzle is different each time. Your job is solving the puzzles.

Good puzzle-solvers have all sorts of strategies they use to solve puzzles, but the main way they become good puzzle-solvers is by solving puzzles. Good puzzles are never the same as other good puzzles. There is no generic puzzle solving process. If you ask a good puzzle solver what makes them so special, they would ask for a puzzle to solve, and solve it. What makes them special is that they solve the puzzles. They do the job.

Also published on Medium.