If you’ve been following along the episodes of Inside the Mind of An Investor, guess who’s been behind the scenes! Yours, truly. My eagerness to watch (and edit) each episode is almost parallel to my enthusiasm for Hawkeye and WandaVision.
I came to these videos with largely a blank slate of the thinking behind the investor world. Despite a few years of watching Shark Tank under my belt, I am constantly baffled by how investors decide to invest in, or decide to say “I’m Out” (I’m looking at you, Barbara) for companies. As a high school sophomore, I am still largely unsure about what I want to do in my future, and learning more about the nuances of investing has been beneficial in learning about unique career paths. Every 5 episodes, I will be gathering my thoughts and takeaways.
Funding streams — You don’t always need to exit. Also, call the feds for funding.
The mindset that entrepreneurs often have is “focus on getting pitches out, products out, and exits out.” It always seems like there’s one track that most entrepreneurs take, but as Melissa Withers notes in Episode 5, this has restricted a lot of companies from coming to fruition or getting funding, and perpetuated the lack of opportunity and growth for underrepresented founders. Melissa talks about her investment platform breaking from this mold. It’s not solely focused on making exits; rather, it’s revenue based.
Another way that founders are getting funding is through government investment, as highlighted by Warren Katz. When I first heard about it, I was very intrigued. I had always felt that investments and entrepreneurship seemed more of a free-market initiatve (that might not be the most accurate analogy, lol, just covered this time period in World History), while the government seemed less involved.
Having learned more about the history of industrialization and US economy, I also learned that the US government would often give tax breaks and grants of land to encourage industrialization and enterprise, which would help to benefit their own economy (and the New Deal was created by the government to boost the US economy during the Great Depression). The US is continuing to play as an R&D tech investor, and Warren focuses on Department of Defense investments in tech companies. So, if you’re interested in creating a tech startup, the US Department of Defense could be an option… 😉
How to choose who to invest in — Prowess, pain points, profiles
Among other cool, new entrepreneurial parlance, one that is important to this topic is “smart money.” Many investors like to invest in industries that they’ve had expertise in. It was very interesting to see different points on the spectrum — such as James Doscher, who has a background in engineering, specifically in high-tech semiconductors. Semiconductors make up devices in health and tech industries everywhere.
He loves it, has many years of experience in it, so he’s going to invest in it. There, he has a deeper understanding of the market and the product’s workings than the usual investor, which means he finds he can be more sure in his decision-making and provide more assistance in the specifics of it.
Similarly, Warren usually invests in deep tech: “I usually only invest in things that I think I can assist the company in, [such as] getting some government funding to subsidize their R&D and product development. […] I can be very helpful to the company [in winning] those kinds of grants, so I typically only invest in companies that have unique technology and could win these government grants.”
Denise Saltojanes also agrees that investors usually tend to invest in industries they have expertise in, but she adds another to her list: where she has pain points or an interest in. She gives an example of an investor who knows someone with epilepsy, so they’re always interested in finding the new solution for that. For Denise, it’s women-led startups.
On another part of the spectrum is Tasha, a Gen Z investor interested in consumer goods. But consumer goods are harder to differentiate; the market is always saturated with the next everyday thing that makes your life easier. That’s why as an investor, she doesn’t invest in goods that she doesn’t use. Tasha only invests in goods that she is the target market for, goods that are familiar to her. Why might this be?
Unlike typical investors, Melissa, a revenue-based investor, does not need to focus solely on selling the company and getting it liquidated. Rather, simply the growth of a company can be a source of success, which means she doesn’t feel obligated to always go the “smart money” route. Listen to this section to understand why this breaks down funding barriers for traditionally “not venture scale” startups.
My thoughts — It’s so awesome to see a wide variety of approaches that investors take in choosing their investments. From the “smart money” route to the “I would be a consumer” to “my pain points,” the fact that investors are embracing new ways and changing old ways is very refreshing. I also learned a lot about each approach and how investors choose them (or shift between them). Additionally, investing approaches are not set in stone, investors flow between them as they see fit in terms of the investor space, their preferences, etc.
The investor space
To me, investing has always seemed like this high-level space, on the god-knows-what-hundredth-level of a skyscraper, with men wearing suits making million dollar deals with high-tech startups. From these videos, I realize that this has prevented progress throughout the investor space and the encouragement and empowerment of startups with fresh perspectives and backgrounds. It’s been really cool to hear about how investors are taking part in changing the space to open doors.
That’s why we’ve introduced a new question onto the scene: “Do current investment strategies/models affect flow of funding to underrepresented founders?” Sneak preview to Episode 6, where this question is addressed here.
Posing this question is especially important for youth of color, like me. My generation is made up of a vibrant group of great creators and innovators who are changing the world and addressing its urgent issues. And if there isn’t diversity in the startup and investing world, the acceptance of different backgrounds who have an innate understanding of these problems will continue to be largely mishandled — and thus, the solutions largely forgotten.
If there are systemic barriers to entry in a support system like venture investing, then I believe that we need to take another look at, and make moves to, break them down.
Quotes of The Season:
“B people hire C people, while A people hire A+ people.” — Episode 3 (26:31)
“[Asking] ‘were they at the right place at the right time?’ in order for this venture to be successful. For so many companies, putting yourself in this position and really owning what’s happening around you in your industry — in the ecosystem. That’s leaning in towards your business.” — Episode 5 (7:40)
Want to watch all episodes of Season 1? Check out each one here (they are all split by question):
EP5: Melissa Withers: The importance of “in the right place, at the right time” in the startup world
EP4: Tasha Kim: In an oversaturated consumer goods market, Gen Z investor takes a different approach
EP3: Warren Katz: Even for tech investors, value propositions must be crystal clear
EP2: Jim Doscher: Hardware can be an unloved segment, or a part of your secret sauce