If you don’t have an edge you are someone else’s edge!
I come back to this riff as I make stupid investing and trading mistakes.
I write about investing almost every day here and share ideas about stocks and startups as I have them, but I wanted to take a step backward today and talk about ‘edges’. Particularly, in today’s post, the edge I believe we have built at our firm/fund at Social Leverage.
I get this question a lot because I seem to always be raising money.
I also get the question because a lot of people that follow along here want to do what I do. I am thrilled that my blog and my tweets inspire people and make my job seem exciting and doable but I find myself talking people out of what I do for a living, because it’s not for everyone. Your job needs to be fulfilling, not just exciting and about the money. Investing through difficult markets and explaining losses is a big part of the job.
I thought it would be a good exercise to update our ‘edges’ (at least as we see and explain them when asked) on my blog here today. Feel free to email me if you have questions or think we are missing something.
We have raised three funds at Social Leverage and while we cover what we believe to be our edge in our deck, we can’t fully fit all our years of knowledge and view points on one or two slides. We love what we do. My partners Tom, Gary feel we are just hitting our stride and as we get great joy from getting to do what we love we hope we can help others as they move down the investing path.
Why Social Leverage ?
My partners and I have been working together for over two decades. Like I mentioned above, we have raised three funds together and invested in over 100 startups.
Our strong track record is an edge. People like winners and it helps to have a good track record with high net IRR and cash on cash returns. Do not underestimate cash on cash returns. A good track record shows thats you have a history of spotting and riding trends and finding great founders.
A Unique network – Networks are not built overnight. Our competitors (those funds raising money from the same people) have great networks too so it helps to have a unique network. Our 100 plus founders, Gary’s enterprise experience selling to and working for Salesforce and my fintech and financial markets experience bring us a unique network.
Domain Experience – It is too hard to be a generalist long term (at least in my opinion) and that ties to our unique network. A bull market will bail out generalists, but recessions, bear markets and illiquidity happen. Having the domain experience to help founders and their teams survive and thrive through a bear market is an edge. If we don’t need this edge…wonderful.
Size – We are purposely not too small that we can’t lead all our investments, but not too big we can’t just co-invest and help a lead investor finish a round.
Unique and Abundant flow – Having started Wallstrip and Stocktwits and invested at the seed stage in Robinhood and Etoro, I have a point of view of course, but I also have flow. Fintech founders track me down. I obviously put that vibe out there on my blog, but being easy to find all day on Stocktwits and Twitter and daily on this blog I make it easy to find me and share what we are looking for. Knowing what we are looking for is part of that edge that helps me write everyday and live just enough in the future to make a difference. My partner Gary has built four enterprise businesses, one which went public and his latest acquired by Salesforce where he worked for four years. Gary knows modern enterprise software and how to grow teams and position products.
We have seen the endzone (founding, building, being acquired, selling, going public, unicorn status). We have laughed, we have cried and we have been to the bank and cashed a few checks. It is hard to explain what the feeling of a large exit is like until you experience it. I have talked to so many investors and founders that have experienced it and it is different for everyone but I am glad I know how it feels. Unicorns are mythical creatures, but to have invested in seed stage teams that have less than four people or just an idea and no code or sales and see billion dollar exits is an edge (even if it is just psychological).
Our LP network is very diversified so we can tap experts as we need them to help our companies grow faster.
We are the right amount of paranoid. We know who not to work with. You can only really know this by working with bad people. Mistakes like this lead to losses, but when we talk to new investors those mistakes are pitched as our edge. At least that’s how we sell it :) !
No’s motivate me. I am in the business of no’s – telling entrepreneurs no, and hearing no from potential investors. I have lived a NO life.
Process – from term sheets, to cap table management to helping our companies raise additional capital, while everybody should fake it until they make it, this knowledge of the process first hand is an edge. Our partner Tom is a superhuman when it comes to process.
Our eyes and ears and feet – spotting and chasing down talent. We are on a plane a lot. Face to face matters. Without a point of view and domain experience you can’t possibly chase down talent and in the seed stage investment business where power laws rule, you have to chase down the best teams, especially when they fit into your view of the world.
We are curious and we love what we do. Believe me the money can be great, but do not do it for the money.
We are optimistic. If you think Amazon is overvalued, you may be right, but angel investing is likely not for you.
Also published on Medium.