Why I Sold Twitter… Because I Could

I have a history of selling early. I do it consistently. It seems to be working.

In the world of investing, there has never been a better time to think for yourself and yet there has never been so little thinking.

Everyday I see examples that make me cringe. I am trying to be a professional investor, but the term ‘professional’ gets bludgeoned by the ones that have the title.

Just yesterday $IBM raised 10 year notes at checking account rates. If you could sell those to your clients, yes…you are a ‘professional’…salesman! IBM is smart for locking down that cheap money, but if you are buying those bonds for yourself or your client, you are not thinking. You are not working for your client. How does your client win here?

$ZNGA a stock that has been in a downtrend for months, crashed after-hours. According to the ‘professionals’ it was a ‘buy’ and or ‘attractive’. I would argue that nobody on this list has done their work .

All that said, ‘the system is broken’ is NOT an excuse if you are an investor in 2012.

In NYC I talked to some very successful and young entrepreneurs that are hiding out in T-Bills and FDIC bank accounts. They want nothing to do with investing. They associate risk with their startup, therefore, the rest of the money can be in cash.

I hear this and I am disappointed but I don’t argue. It’s one less person to compete against in the strategies that I like.

The tools are available for anyone to find a few people, firms and styles that will allow you to manage risk in a better way than cash. Cash is the rage these days, but cash, like leverage is a tool, not a strategy.

It took me years to develop a strategy that I felt comfortable with. I enjoy early stage company investing (almost always a finished product and low valuation) and in the stock market, highly liquid stocks that are moving up and to the right. Many call it momentum investing, I prefer trend investing. When companies are in between, have exceeding my wildest expectations and not liquid – I am on the alert for liquidity.

The other day I sold my Twitter stock. To be honest, I would have sold it at $1 billion, $4 billion and $9 billion …if I could have. Because my shares were not directly owned by me for a good while, I had no control over them. For me, Twitter did not fit into my strategy anymore and I was lucky to have the window to sell. I want to invest in another batch of great entrepreneurs like I did in 2005-2008. Some of them will be the same guys again shortly.

In just 2008 – I invested in Mike Lazerow (Buddy Media), Brett Wilson (Tubemogul), Ben Kartzman (Spongecell), Alan Levy (BlogTalkRadio), John Borthwick (Betaworks), Andrew and Dan (Ticketfly) and Ed Siegel (RentMineOnline) as well as a slew of other great products that I loved and used at low valuations (whose founders I did not know extremely well).

I want to be in the position to do the same thing in 2012 and beyond that I have paid my dues learning up until now.

Cash is the tool today that will allow me to invest in my areas of passion and expertise. We should all be so lucky.

21 comments

  1. John Revay says:

    “great products that I loved and used at low valuations (whose founders I did not know extremely well).”

    Well stated

    How do you source deals?
    Inbound calls from VCs,

    Inbound calls from entrepreneurs (young & old?)

    Or just products that you come across and like – re: they solve a problem you have

    • mostly my own instinct around entrepreneurs I meet and products I use that I inquitre about. when I chase the entrepreneur is better than the other way around (at least my results). But i rwad everything and have a trusted network to source from

  2. Brendan Daly says:

    Congrats on the big win Howard! You clearly state that Twitter no longer fits your strategy, however, do you also have concerns about their impending restrictions on Developers using their API’s, and the impact that could have on Twitter’s future revenue opportunities? Also, based on the rumors, do you think these changes will impact StockTwits (why/ why not)?

    • good questions Brendan . Yes they will continue to wall the garden thats the trend. Its easy to armchair quarterback. I will do another post on my thoughts. Time will tell what would have worked best i guess. The main lesson is freemium is cool but it only delayes the pressure of monetization and increases the scale of the stress.

  3. Butta Kake says:

    Well put I have yet to form a net figure. I’m inspired by your savy strategy ….. good luck which you don’t need you know what you doing

  4. Aaron says:

    Howard,

    I would love to see a post from you about how to get started investing in startups? For someone who is ready to dip their toes into investing in other companies directly but that doesn’t have six figures to invest.

    Could you tell us how you started, your tips for the basics, and what is a reasonable amount to start investing with?

    • there are plenty on the blog from back in 2006 and 2007 will dig a few up. go the right hand bar…search golfnow golfnow.com wallstrip and thegripp

  5. Pingback: Thursday links: permanent decisions | Abnormal Returns
  6. William Mougayar says:

    Yup, I love Twitter, but the company’s strategy is so unpredictable and full of surprises. That makes it tough to predict/assess anything about them from an investment point of view.

  7. I am asking this question as a complete novice when it comes to stock investing – but how easy is it to get the opportunity to invest in non-public startups such as Twitter? Do you have to be part of an exclusive club that gets invited to invest privately or is there a process that anyone can go through?

  8. kenberger says:

    …so you will now append this blog’s tagline “find them, ride them and get off” with “and embrace premature ejection.” ??

  9. Pingback: Twitter and Vine...So Interesting - Howard Lindzon | Howard Lindzon

Comments are closed.