Investing is a complex activity. It requires rational thought and cold reasoning but is also subjective and often driven at least in part by emotions. Decisions need resolve and confidence and factual support, but are never 100% certain.
Successful investors don't base their decisions on how good investments make them feel. They painstakingly research the company, its founders and management, the technology and the market. In the process they create a narrative and build conviction. Frederik Groce from Storm Ventures wrote a couple of years ago:
Developing conviction isn’t about pulling the trigger on an investment quickly, it’s about taking the time to learn. It’s about checking your assumption and building a network of people far smarter than you. As an investor, I find that it’s about not just meeting founders, it’s also about meeting civil servants, foundations, other investors, and folks who’ve developed the scar tissue from being burned before.
Investing is a learning process that never stops.
I'd add to this the ability to change one's mind when the narrative changes. The “Strong Opinions, Weakly Held” approach is relevant to investing. Conviction should be based on strong supporting evidence as much as on lack of strong counterpoints. Investors should overcome confirmation bias and other cognitive biases, look for counter-arguments, and discuss with people who have a different point of view.
Often the most important aspects in a startup are the team's ability to execute and the market vision. The rest of the pieces are built around these. To build conviction, an investor has to study the team, the product and the market, connecting the dots. New facts and opinions help refine the picture and sometimes alter the thesis completely.
Avogadro One is working on a platform that will help investors connect the dots. We also want to help users discover counterpoints easily - we believe these are more valuable than filter bubbles. Each investor should arrive at a decision independently, not driven by the fear of missing out or herd mentality. This is not easy, but will pay off through better returns.
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