Episode 20: Non-Unicorn Investing (Jerry Neumann)
Jerry Neumann joins Nick on The Full Ratchet to talk strategy, systems and sector-based investing including:
- Can you give us a brief overview of Aileen Lee’s famous study on unicorns in Techcrunch, the results and the lessons from those results?
- You mention two main VC strategies for investing in unicorns… An easy way and a hard way. Can you describe each and why both are actually quite difficult to pull-off?
- With regards to picking unicorns… Paul Graham said that you shouldn’t spend time thinking about price, you should spend time trying to get into the right companies. While that seems logical, why do you think this comment is contradictory?
- Talk about why picking unicorns is so difficult and why you suggest picking a system that has the best odds over the long-term as opposed to picking based on outcomes?
- There are four major elements to your system, the first being “Don’t look for Unicorns.” Can you talk about this first element and the two things that you need to check off before investing in a company
- The second item in your system is about the “flock” and building businesses or products around a fundamental, secular, technological shift. What is the message here and why is support of a sector as a whole, by an investor, important?
- The third element is about publicizing your focus. Why is this important and what are some examples that you have done in the past?
- The fourth and final point in your system is about investing in sectors that others may not want to invest in or may be confused by. Can you talk about why VCs avoid certain sectors and how that can provide some opportunity.
- Finally, you provide some portfolio management tips related to “the gambler’s ruin.” Can you walk us through some of these tips when making “bets.”