I have blogged before about my approach that I have developed to investing.
On illiquid angel investments I want/need to be as cheap as possible. It means despite my improving flow of deals, I say NO more than ever. I have learned to embrace the NO and am getting better at it. When I knew I had to say no more often (Stocktwits time commitments) I invested in Betaworks back in 2008 and also started investing in Techstars so that my early angel money could be surrounded by a very experienced group of eyes and execution mentors. I am STILL finding amazing opportunities at the $2 million pre money valuation. Many more than I could possibly say yes to, even though I would pull the trigger if I had an endless supply of capital right now.
On liquid investments, I don’t care about P/E or balance sheets or what’s in the past. I want to pay up for the best stocks because I can get out!
Fred uses the term ‘Invest in the Mess’, but I don’t think he means the type of mess that I would call a mess. To me, a mess is what certain private equity people do. They come in, change management teams, grind all parties to the ground to reduce their cost basis and risk and than roll up their sleeves and go to work rebuilding sales channels, products and operations. I have seen partners do this and I don’t know much, but I know that investing in the mess is NOT FOR ME.
You need a different stomach.
I believe the next stage of the web will be about grinding it out. Building sales teams, doing the dreaded ‘off web’ marketing. Has anyone in the web 2.0 world of Silicon Valley bought local televeision time or national radio plans. I believe in the mathematics of Revenue Per User (RPU), but now that everyone is using that term, I doubt that the strategy will continue to work long term for building a business. I believe you will have to recruit talent that knows how to acquire customers in more old fashioned ways. Face to face…travel, phone, shmoozing etc….That will take time and patience and that’s what the next phase of investing is about more than the mess.
It’s the GRIND. Your leaders should be prepared for it.