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LucHow to find outstanding companies as an angel or VC
This piece is part of my intro to VC series. I wrote these short essays as a way to accelerate my learning and make this opaque world more transparent. How you source as an early-stage investor defines the quality of your outcomes. Most VCs build the top of the funnel using one or two of these techniques. Here I want to give a complete overview and point out what’s great about each of these, what’s not, and how to improve.Network drivenThe best companies often come from the edge of your netwo...
Luc(re)Building the Modern Finance Stack
Authors: Luc de Leyritz & Sam Cash, originally posted here We believe there’s a meaningful opportunity for large scale businesses to be created in the B2B fintech space by a) streamlining time-consuming workflows which are currently performed manually by the finance team and b) increasing the penetration of these tools in the European SMB market. There are about 23m SMBs in Europe, all of whom have to manage their finances. However, most don’t use specialised software. Accounting software is ...
LucThe question that can 10x your thinking and writing
Our instincts are often right. After 15 days of somewhat consecutive publishing, I realized my fears of writing poor essays were well-founded. I thought my essays would be irrelevant, uninsightful, and boring. It turns they are, like most things written online because I failed to ask myself the most important question. So what? The problem with our writing is that it often does not resonate with the people who read it, it often does not offer any insightful take because we did not dig deep en...
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LucHow to find outstanding companies as an angel or VC
This piece is part of my intro to VC series. I wrote these short essays as a way to accelerate my learning and make this opaque world more transparent. How you source as an early-stage investor defines the quality of your outcomes. Most VCs build the top of the funnel using one or two of these techniques. Here I want to give a complete overview and point out what’s great about each of these, what’s not, and how to improve.Network drivenThe best companies often come from the edge of your netwo...
Luc(re)Building the Modern Finance Stack
Authors: Luc de Leyritz & Sam Cash, originally posted here We believe there’s a meaningful opportunity for large scale businesses to be created in the B2B fintech space by a) streamlining time-consuming workflows which are currently performed manually by the finance team and b) increasing the penetration of these tools in the European SMB market. There are about 23m SMBs in Europe, all of whom have to manage their finances. However, most don’t use specialised software. Accounting software is ...
LucThe question that can 10x your thinking and writing
Our instincts are often right. After 15 days of somewhat consecutive publishing, I realized my fears of writing poor essays were well-founded. I thought my essays would be irrelevant, uninsightful, and boring. It turns they are, like most things written online because I failed to ask myself the most important question. So what? The problem with our writing is that it often does not resonate with the people who read it, it often does not offer any insightful take because we did not dig deep en...
Share Dialog
Share Dialog
The main lesson you can take from the literature on cognitive biases is that our brains evolved in ways that can be harmful to us.
The desire to be right, or aversion to loss, is one of these powerful biases that probably originated in situations like hunting in abundant, but also lion-infested regions, which meant painful death. As with most cognitive biases, it ported pretty poorly to situations where being wrong leads to losing some money or not getting retweeted, while being right exposes to essentially unlimited upside. Early-stage investing typically is a game premised on the achievement of unlikely, but potentially uncapped outcomes.
And yet, as investors we often focus on being right.
In probabilistic games, the expected value framework (outcome = probability of success * magnitude of the hit) reminds you that if you're going to invest against the odds, you'd better find opportunities with uncapped upside. The logical consequence is that being wrong is not wrong if, when you're right, you are much righter than everyone else. You want to be like Babe Ruth, the legendary baseball player who despite often hitting poorly often, would hit legendary balls once in a while.
Early-stage investing returns are not premised on the frequency of hits, but the magnitude of the payoffs of the hits.
We're in the business of investing in bad businesses, by which I mean ventures with low odds of success but immense potential, at the detriment of great businesses with strong odds but lower upside.
This small essay was written as part of my onboarding to the world of VC - I made a conscious effort to jot down what I learned, as it came.
The main lesson you can take from the literature on cognitive biases is that our brains evolved in ways that can be harmful to us.
The desire to be right, or aversion to loss, is one of these powerful biases that probably originated in situations like hunting in abundant, but also lion-infested regions, which meant painful death. As with most cognitive biases, it ported pretty poorly to situations where being wrong leads to losing some money or not getting retweeted, while being right exposes to essentially unlimited upside. Early-stage investing typically is a game premised on the achievement of unlikely, but potentially uncapped outcomes.
And yet, as investors we often focus on being right.
In probabilistic games, the expected value framework (outcome = probability of success * magnitude of the hit) reminds you that if you're going to invest against the odds, you'd better find opportunities with uncapped upside. The logical consequence is that being wrong is not wrong if, when you're right, you are much righter than everyone else. You want to be like Babe Ruth, the legendary baseball player who despite often hitting poorly often, would hit legendary balls once in a while.
Early-stage investing returns are not premised on the frequency of hits, but the magnitude of the payoffs of the hits.
We're in the business of investing in bad businesses, by which I mean ventures with low odds of success but immense potential, at the detriment of great businesses with strong odds but lower upside.
This small essay was written as part of my onboarding to the world of VC - I made a conscious effort to jot down what I learned, as it came.
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