Allocating capital into startups is one of the most challenging and exciting things you can do as an investor. As a generalist investor, the challenge is especially hard. You are a functional expert in nothing, making it hard to identify the next big thing. Being a vertical saas investor makes this even more difficult. As a result, you need to rely heavily on your network to discover industry trends and to find the next hot investment. In this blog post, I will share with you some tips on how to overcome the challenges that come with being a generalist investor.
Network is Everything
As a generalist investor, your network is your most valuable asset. You need to build relationships with industry experts, founders, and others in the startup ecosystem. Attend industry events, participate in online forums, and connect with people on LinkedIn. The more people you know, the better positioned you will be to identify industry trends and to find the next hot deal.
Ask the Right Questions
One of the greatest questions you can ask people with unique insight or knowledge into an industry is “If I was to give you $10M to invest in your industry- where would you do it?” It cuts to the chase and helps you identify where the puck is going within an industry. It’s not just about asking the right question, but also about asking the right person. Make sure you are talking to people who have a deep understanding of the industry you are investing in.
Be Realistic About Your Industry Expertise
As a generalist investor, you need to be realistic about your industry expertise. You won’t know everything about every industry. Focus on what you do know and be upfront about what you don’t know. If a deal falls outside of your expertise, be open about it and ask for help. This will help you build credibility with founders and other investors.
Research, Research, Research
Investing in startups can be a precarious business, but mitigating risk is readily achievable through sufficient research. Before pouring money in, ensure that you possess an in-depth understanding of the industry, market, and competition. Conduct interviews, forge market maps, and subscribe to newsletters that cater to your vested interests.
Trust Your Gut
At the end of the day, investing is about taking calculated risks. As a generalist investor, you may not have the deep industry knowledge that some investors do, but you have something that is just as valuable: your gut instinct. Trust your instincts and make decisions that feel right, even if they are not the most obvious choices.
Conclusion:
Being a generalist investor is hard, but it’s not impossible. By building relationships, asking the right questions, being realistic about your industry expertise, doing your research, and trusting your gut, you can overcome the challenges that come with being a generalist investor. It’s not about being an expert in everything, but about leveraging your strengths and building a network of experts who can help you navigate the complex world of startup investing.
