Three Venture Capitalist tips
Here is some hint in venture capital investment
1.Know your goals to build trust in wealth
While the average first-time billionaire reaches that status around 51 years old, reaching their first million happens about 14 years earlier, at an average age of 37. When building a startup(or a venture capital), aiming for an exit within 20 years can be a good long-term goal. However, an IPO in year 10 is not necessarily a guarantee of success, but rather a potential mid-point milestone for some entrepreneurs to be multi-billionaire after decades.
2.Focus on free cash flow rather than diversify your portfolio
Mutual funds, like unit trusts, are known to reduce portfolio volatility over time. However, I have a different opinion about diversifying a portfolio in venture capital. All startups are volatile and their future revenue growth is inherently unpredictable. But one key principle remains true: the power of free cash flow. While basic valuation often focuses on ARR, the most critical factor I see in venture investment is marginal profit. If a startup shows increasing marginal profit in its growth pilot test, it’s more likely to become profitable and generate competitive free cash flow. Ultimately, as long as a business achieves this competitive free cash flow, I don’t care what industry it’s in – mobility, healthcare, SaaS or anything else.
3 The height of ambition
When supporting founders, one of the most crucial things I clarify is their ambition for the company’s size and willingness to be billionaires. If the founders don’t aim to become billionaires, that venture capital investment is likely to deliver only mediocre returns. However, founders often embellish their ambitions when their company is still small. Founders often overstate their target in the early stages. If their revenue is still around $1 million, many dream of riches, but when the company reaches $100 million, some lose their eagerness to retain control for further growth and start to sell their stocks. This is because becoming a billionaire requires immense dedication and sacrifices that not everyone is willing to make.
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How can you balance patience and returns as a venture capitalist?