Article #19: Defining your investment strategy

In previous blog posts, we explored diagnoses and investment tactics for start-ups. But before diving into those details, there's a critical first step: defining your investment strategy. This is especially important for private investors who want to forge their own path, rather than simply copying successful investors or investment funds.

Let's establish a clear distinction between strategy and tactics. After all, there's a saying: "If you can't tell the difference between the two, you don't have a strategy!"

Here's a helpful analogy: Imagine your investment strategy as the overall roadmap guiding you towards your financial goals. Tactics, on the other hand, are the specific steps you take along that roadmap.

So, how do you develop your unique investment strategy when faced with numerous options? Here are some key factors to consider:

• Market Analysis: Conduct thorough research to identify promising sectors. For example, you might conclude that the future belongs to Artificial Intelligence (AI) and choose to focus on start-ups in that field.
• Personal Expertise: Leverage your strengths and background. A Ph.D. in Biology, for instance, might choose to invest solely in companies developing biological technologies.
• Time Constraints: Consider how much time you're realistically willing to invest in start-ups. If you have sufficient time, you might consider becoming a more involved investor or even a board member.
• Investment Limits: Set clear financial boundaries. This includes the amount you can invest per company and the desired equity stake (ownership percentage) you expect in return. As discussed previously, it's wise to reserve funds for future investment rounds. Example: A private investor plans to invest $50,000 in each of 10 companies over the next five years. In return, they aim for a minimum 10% equity stake in each start-up.

Building on this example, your investment strategy could be: investing $50,000 for at least a 10% equity stake and a board seat in biology start-ups focused on AI technology.

These are just a few key considerations. Other factors, such as company size, age, product type, leadership team quality, development stage, and geographic location, can also influence your strategy.

What happens when strategy and tactics clash? Generally, your overarching strategy should take priority. However, there's room for minor adjustments. Don't be afraid to adapt your tactics slightly based on specific situations, but ensure these exceptions don't derail your overall plan.

Here's to making informed investment decisions!

Ido

Disclosure: I am not a professional consultant. I wrote this article myself, and it expresses my own opinions.