I met with a friend who was in town last week. He told me he had "hit his stride" as an investor in the past year and a half. He is a former entrepreneur who became an angel investor and then a VC. I had a similar conversation with the Gotham Gal on a long car ride yesterday afternoon.
In listening to both of them, I heard something that I have found to be true in my own experience. It takes time to learn how to be an early stage investor. You have to make a bunch of investments and learn from them. And you have to develop a strategy, a thesis, and your own differentiated style which people can then attach to you. In effect you have to build a brand and become known for what you do and how you do it.
None of this happens overnight. I think it took my friend about four years to hit his stride. I suspect it took the Gotham Gal about as long. Part of this is that is how long it takes to know if you've made a good investment or not. You might know in two to three years. But by four years, it is going to be pretty clear. As these outcomes start coming in, you can start to see what is working and what is not.
And "what is working and what is not" is not just about your investment selection. It is about the fit between you and a certain kind of entrepreneur and a certain kind of target market and a certain kind of business model. Some investors are better at investing in SAAS companies. Some are better at investing in e-commerce. Some are better at investing in mobile apps. Some investors are better at working with teams that need a lot of help. Some investors are better at working with teams that don't need any help and want you to get out of the way.
It is important to figure out who you are and where you fit in the startup economy before you can become a good investor. But once you do that, you can "hit your stride" and start investing with conviction.
Conviction is one of the most important things entrepreneurs want to see in an investor. The overhead of working with an investor who lacks conviction is just too much for an entrepreneur. It can become a major drain on them and their company. I'd rather have conviction and be wrong than have doubts and be right. Because the latter doesn't work in a relationship with an entrepreneur and you are likely to lose anyway.
So for those just starting out in a career as a venture capital or angel investor, I would suggest that they take their time, be patient, and build a portfolio slowly and deliberately. And pay attention to what is working for you and what is not. Over time you can build an investment thesis that works for you and that you can become known for. That is when you will hit your stride and when you can step on the gas.
