Floyd Mayweather Jr. is not only considered the best boxer of all times, but also one of the highest paid athletes of 2012 and 2013 in the Forbes list. Known to be an invincible boxer, Mayweather won 12 world titles and was six-time winner of the Best Fighter ESPY Award, two-time winner of The Ring Magazine’s Fighter of the year, and three-time winner of the BWAA. This year, he has been ranked by ESPN as the greatest pound-to-pound boxer of the last twenty-five years.
But can there be a Mayweather among Venture Capitalists or Investments in general? When it comes to Venture Capital investments, there is no undefeated Fighter; nothing like Floyd Mayweather Jr. in boxing. A venture capitalist has to face the risk of losing his investment at some point in time. Just because they think they have taken all the right decisions, doesn’t mean they will always generate higher profits. There are a number of external factors that play a vital part in making a venture capital (VC) investment successful or unsuccessful, and none of these are avoidable.
Every investment has its ups and down, and venture capital investments are no exception. Being an investor, it is very important to have a realistic mindset; one cannot simply rule out the risk associated with that investment. However, what he can do is manage the risk. Same is the case with venture capital investment; a venture capitalist can always minimize the risk and increase the chances of success by working hard and continuously analyzing the market. If not all, it will allow him to succeed in most of them. Like Mayweather said, “To be the best, you have to work overtime.” And that is the key; a key to success.
In every sport, an athlete can improve the likelihood of success if only he trains hard for it. The loss is unavoidable, yet, it can be managed and minimized so as to reduce its overall impact. So, how can a venture capitalist minimize the risk of loss? What attributes must he possess to make a venture capital investment a success?
Understand the Market – One of the crucial elements of VC investment is to have a good understanding of the market. The markets are continually evolving and venture capitalists must have a good understanding of rapidly changing market trends in order to make the best out of their investment.
Be Optimistic about the Change – A key factor to adapt to a change is to stay positive. A co-founder of the Polaris Ventures and Emeritus Chairman of National Venture Capital Association, Terry McGuire, said, “You have to believe that the world can change; be optimistic and at the same time, be realistic and guarded, not romantic”.
Situational Awareness – A founder of Accel Partners, James R. Swartz said that a good venture capitalist possesses a trait of situational awareness, meaning he can walk into any meeting and identify the issues in just a few minutes; he can sort of cut through it and figure out what’s going on.
The CEO and fund manager of Renaissance Venture Fund, Christopher L. Rizik, has identified three qualities of a good venture capitalist. According to him, a good VC has a good sense of the world around him, and how it changes. Another quality is patience – a smart venture capitalist would never lose control or panic when the going gets tough, in fact, they make profits and eventually succeed as opposed to those who freak out and give up at an early stage. Lastly, a VC has to be fair to everyone as individuals want to work with those venture capitalists who are fair, smart and treat everyone well, and not with the ones who just think about themselves.
It is all about practicing, bringing precision and polishing your skills in order to learn and grow. Like Mayweather once said,
“Everybody is blessed with a certain talent, you have to know what your talent is; you have to maximize it and push it to the limit.”