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A reader asked me the other day if – in the words of Charlie Munger – I have a “mental model” for investing in early stage companies. I do, but I’d rather give examples of the two best approaches I’ve heard of from other people.
This first approach is David Cowan’s Road Map investing at Bessemer. He recently wrote a short “road map post” on Television 2.0. While it’s really just a pithy overview of what David is starting to think about, it gives a good feeling for what the executive summary of a new road map might look like.
The other approach is Jerry Colonna’s “Analog Analog.” When Jerry was actively investing in stage one of the commercial Internet (1995 – 2000), his premise was that every technological innovation (or technology business) has a real world, non-digital analogy. It’s not the “nothing new is ever invented” paradigm – rather it’s the “learn from the past” paradigm.
Lots of VCs talk about their “process”, “investment thesis”, “company building model”, “value add model”, or other such cliche-ish phrase. Some of the great VCs really do have a mental model that they can articulate; the balance of the great VCs don’t have one that they can (or choose) to articulate. However, most of the not so great VCs will have “something else” that they use to frame their investing. As with everything in life, “beware of a man with a hammer as everything will look like a nail to him.”