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🔑 Key Takeaways

  1. MITIMCo's unique flat organizational structure and generalist model provides autonomy, allows for early partnership, and empowers team members to lead investments, making it an ideal platform for investors to learn and grow.
  2. Despite being a small and capital-efficient company, Roblox's potential was recognized by Altos Ventures who made a $2 million investment resulting in becoming the largest shareholder at IPO. Passionate partners and analytical thinking led to success.
  3. Successful CEOs have a singular mission and surround themselves with people who inspire and motivate them. As investors, we should learn from their approach to structure our work and surround ourselves with like-minded individuals.
  4. Investing in successful startups requires separating fund management decisions from investment decisions, prioritizing distributed capital, and having cash in the bank. Altos Ventures commits to investing in the future and working with others.
  5. LPs should trust fund managers but also take responsibility for their investments. Fund managers should consider becoming an RIA for greater flexibility, while prioritizing the progress and valuation of their investments and retaining a significant position.
  6. Altos Ventures' strategic decision to hold on to their winners longer and raise more in the private market instead of going for an initial public offering led to huge returns and validates their belief in non-consensus founders.
  7. Sometimes it's better to prioritize growth over profitability. Have confidence to take risks, adapt to changing circumstances, and consider strategic partnerships. RIA and large investments require careful consideration and a strong team.
  8. Despite facing challenges, seeking advice and taking calculated risks can lead to successful investments and diversification opportunities for venture capital funds.
  9. When investing, focus on finding entrepreneurs with a strong sense of purpose and a true calling. Prioritize investing in ventures that create something meaningful rather than just making money, and alternative assets like art can offer low-risk high returns.
  10. Focus on building a strong culture and making smart decisions during early stages of growth, to ensure scalability towards $100 million mark and long-term success.
  11. Building strong relationships with people at all levels of a company, along with continuity in management, can lead to investor rewards and opportunities for serious investment. Being creative in growth strategies, such as charging transaction fees, can also prevent business failure.
  12. Balance creativity with reasonable constraints, focus on price per share appreciation, understand the business, and invest early to build a relationship with the founders for successful early-stage investing.
  13. Subtitle: The Importance of Long-Term Investing and Building Relationships with Businesses  Investing in early-stage businesses and public companies with a long-term mindset is crucial to maximize value. Compounding over the years should be the focus instead of quick markups and offloading investments early. Building relationships and getting to know companies over time helps make informed decisions.
  14. To succeed as an investor, analyze financial statements, pay attention to debt, avoid speculating on unfamiliar businesses, recognize market misunderstandings, and identify exceptional companies.
  15. Before investing in a business, ensure it generates cash, has a path to profitability and has a protectable moat. These qualities can lead to successful long-term investments.
  16. Invest in companies with personal connections and expertise, focusing on specific portfolio constructions. Consider family businesses, but prepare to sell if necessary.
  17. Avoid investing in stocks if you don't need the money, invest in personal needs or charity, and improve your investing skills through practice. Be a risk-taker and protect the downside with a barbell strategy.
  18. Perkins Coie offers valuable services for businesses of all sizes, while Twitter can provide meaningful insights and connections through engaging in conversations and following IPO sentiment analysis.
  19. Focus on generating great returns for yourself and your family. Find people who believe in you and will back you no matter what. Remember and appreciate backers who support you in the beginning, before you have a track record.

📝 Podcast Summary

MITIMCo's Unconventional Investment Approach for Growth

MITIMCo is a global investment company that partners with leading investors who have built competitive advantages with an attractive opportunity set across the globe. They have a track record of partnering very early on and selectively adding to their investment team. With an unconventional flat organizational structure with a lot of autonomy and a bias toward every single person being a generalist. Everyone on the global investment team has the same title and the same mandate to find great investments for MIT. Their generalist model and flat structure and autonomy let new team members jump right into leading investments and making an impact from day one. MITIMCo is an amazing platform for investors to learn and grow.

Altos Ventures' Successful Investment in Roblox

Altos Ventures made an incredible investment in Roblox which became a success story. Their $2 million investment increased over time and resulted in them becoming the largest shareholder at the time of IPO. Altos Ventures was originally an $85 million fund but they still believed in the potential of Roblox and decided to invest in them despite them being scrappy and capital-efficient. This deal happened due to a recommendation from Mark Reinstra who was the general counsel for one of Altos Ventures' other portfolio companies. Altos Ventures had different partners with different passions and ideas which helped them debate and analyze ideas. The investment in Roblox made sense when the company showcased 7% compounded growth on a weekly basis for 52 weeks.

The Hedgehog Concept and Surrounding Yourself with the Right People: Lessons from Successful CEOs

Successful CEOs, like Dave Baszucki of Roblox, often have a singular mission-driven purpose, referred to as the hedgehog concept. This is in contrast to foxes who are polymaths and serial entrepreneurs. Hedgehogs are less concerned with networking and fundraising and instead focus on their work with a nose to the ground. Hedgehogs like Sam Walton and Warren Buffett never really retire. They tap dance to work every day and that's because they surround themselves with people who give them joy and motivation. As investors, we study these successful people to learn how we can structure our work and surround ourselves with the right people to be similarly inspired and motivated.

Lessons learned from investing in Roblox: Separating fund management decisions, prioritizing distributed capital, and investing in the next generation.

Altos Ventures invested heavily in Roblox over time, buying secondary shares and investing in multiple rounds. When faced with offers to sell at a lower price than they believed the company was worth, they decided to buy more shares instead. They eventually sold at a much higher price and made a significant profit for their fund. However, they learned the importance of separating decisions that serve the fund management business from investment decisions. They also emphasized the importance of distributed capital to paid-in capital (DPI) and having cash in the bank rather than just high valuations on paper. Altos Ventures is committed to investing in the next generation and working with GPs and LPs alike.

LPs' role in investments and fund managers' responsibilities

LPs trust fund managers to make sure they're investing in reputable companies, but ultimately they are responsible for their own investments. The decision to sell a portion of their Roblox position, which turned out to be a billion-dollar mistake, led the fund managers down a different path and prompted them to become a Registered Investment Advisor (RIA). As an RIA, they could do secondary purchases and avoid scrutiny by the SEC for not creating jobs. They also ran their own tender process with LPs to provide them with a chance at liquidity and roll over opportunities, without fees or carry. Progress and company valuation determine how much they're willing to sell and they always keep a big position.

Altos Ventures' Investment Strategy and Belief in Non-Consensus Founders Brings Success in the Korean Market

Altos Ventures invested in Roblox and Woowa Brothers, two companies which resulted in huge returns. By exploring different theories about the business and what kind of venture capitalists they want to be through Woowa Brothers, Altos Ventures registered to be in RIA and did their first SPV. They held on to their winners longer and decided to raise more in the private market instead of going for an initial public offering due to the artificially low price set by the bankers. The right price was validated to be at least $45 a share, which is a $30 billion market cap. Altos Ventures' investment strategy and belief in non-consensus founders brought them success in the Korean market.

Taking Risks and Embracing Growth Opportunities for Company Expansion

Sometimes it's better to bet on the growth of a company and raise more money for expansion, rather than just focusing on becoming profitable before going public. It's important to have the confidence to take risks and step on the gas when you see potential, even if it means deviating from a conservative approach. A company's worth is not always easy to determine and is often a moving target, requiring the ability to adapt and make decisions based on changing circumstances. Being open to new opportunities, such as strategic partnerships, can also lead to better outcomes. Becoming an RIA or making large investments requires careful consideration of the costs and benefits, as well as a strong team to manage the undertaking.

Overcoming Challenges and Taking Risks in SPV and Cross-Fund Investing

While the team initially faced challenges in conducting the SPV for Coupang, they eventually registered for the Woowa SPV with the help of advice from experienced people. They invested in Woowa with cross-fund investing despite being a no-go in the VC community because they started to run out of money in their US funds for Korea. They even raised a Korea-only fund due to the positive response from some LPs. However, some of their core LPs passed on that first Korea fund. The team initially invested up to 10% of their funds outside the US but later increased it to 15% and then 17% for Woowa Brothers. An incremental 2% all went into Woowa, but the team wanted more.

Prioritizing People and Purpose in Investments for Fulfillment and Success.

When making investments, it's important to focus on finding the right people with a true life's mission and a strong sense of purpose. A great entrepreneur is someone who has found their true calling and is dedicated to building something special. The goal isn't just to make money, but to work with a group of people who are motivated to create something meaningful. Investing in alternative assets like art can be a smart move given projections for low public equity returns. However, investing in markets that may be unfamiliar and unconventional can make some investors nervous. By prioritizing the people and purpose behind an investment, you can build a portfolio that is not only successful but fulfilling.

Prioritizing Culture and Smart Decisions for Long-Term Success

Venture-backed companies should focus on building a strong culture and making the right decisions, rather than just rushing towards growth. Around the time a company reaches $10-20 million in revenue, investors should start paying more attention to the business and its potential for future growth. It's important to be patient and build the right fundamentals, including hiring and developing talented people, in order to accelerate growth at the $100 million mark. Building a strong culture is crucial, but it's important to ensure that the culture can scale up as the company grows. Accelerating growth from $100 million is easier if the right decisions are made earlier in the company's development. This requires careful attention to detail and a focus on the long-term potential of the company.

The Importance of Continuity and Relationships in Management and Growth

Investors like to see continuity in a company's management team and reward those who have grown within the organization. It's important to get to know people at multiple layers within the company at all different stages of their career development. People are the heart and soul of every business, and it’s important to build relationships at every stage of their lives. While capital efficiency is important, investors are willing to step on the gas and provide serious investment for businesses if they see that there’s a great product-market fit. Companies must also get creative in their approach to growth, such as charging transaction fees, to subsidize their burn rate and slow down growth to prevent driving themselves out of business.

Keys to Successful Early-Stage Investing

Investors should focus on controlling their own destiny and protecting the founders of early-stage companies they invest in. It's important to balance creativity with reasonable constraints to avoid burning too much money. Price per share appreciation matters more than valuation. Understanding the business is crucial for making informed decisions on investment multiples. When a company starts to work, it's important to understand the components of what's working and unpack them to determine potential and valuation. Value and growth are two sides of the same coin and growth is a component of value. Investing early in a company and building a relationship with the founders is essential for success.

The Importance of Long-Term Investing and Building Relationships with Businesses Key Takeaway: Investing in early-stage businesses and public companies with a long-term mindset is crucial to maximize value. Compounding over the years should be the focus instead of quick markups and offloading investments early. Building relationships and getting to know companies over time helps make informed decisions.

Investing for the long term is crucial for success. Early stage venture deals require attention to businesses and people to discover the next big opportunity. The valuation of a business is impacted by growth potential in the future. The potential for compounding over the years is where most of the value lies. Traditional approaches of looking for markups and offloading investments early may result in missing out on significant value in the future. One can always invest and get to know companies over the years, which helps one make informed decisions. Investing in public companies requires the study of companies and their management teams, and investing in them with a long-term mindset.

Key Tips for Successful Investing

To be a successful investor, one needs to get to know a bunch of companies and take some comfort in the fact that only a very small number of companies are truly special. It is important to analyze financial statements, look at the balance sheet, and be wary of debt. A company with a good amount of debt could still present a great investment opportunity despite facing bankruptcy. During bad times, very few things go to zero overnight, so it's necessary to apply judgment and avoid speculating on businesses you don't understand. Great investors recognize the misunderstandings of the market and make an interesting bet that has asymmetric upside. Therefore, it is crucial to know the companies well and recognize great ones when they are staring you in the face.

Two key factors to consider before investing in a business.

When investing in a business, it is important to consider the company's ability to make money and have a protectable moat. The first rule of thumb is to ensure that the business generates cash or has a path to profitability or cash flow breakeven. The second rule is to have a protectable moat that is not easily replicable by competitors. This can come in many forms such as network effects, patents, or know-how. Companies that have uncovered interesting secrets and have figured out protectable strategies are the most valuable. It is not always obvious whether a company has a moat, but deep analysis and understanding of the business can reveal it. Investing in companies with these qualities can lead to successful long-term investments.

Building Strong Relationships and Personal Ideology in Investing

In investing, building a strong relationship with a company is key, as it can provide valuable insight and proprietary knowledge. However, this relationship should be deep and personal rather than just a superficial connection. Also, it is important to find portfolio constructions that fit an investor's personal ideology, focusing on specific areas of expertise rather than trying to grab every opportunity on the market. Lastly, riding on the coattails of a good family business is a viable and honest option, but such a business must be chosen carefully. While relationships are important, proprietary knowledge does decay over time, and investors should be prepared to sell their shares and move on if necessary.

Investing Tips: Stick to What You Know and Invest in Yourself through Practice

Stick to what you know and good businesses. Leave the stocks alone if you don't need the money. Use the money wisely for personal needs or charitable causes. It's essential to invest in oneself, whether it's in public or private investing, to be the best professional possible. Turning the capital over to other professionals does not make sense unless you lack the skills. Be a risk-taker, constantly practice, and have a barbell strategy to protect the downside. Public market investing provides an opportunity to practice and improve investment skills. Practicing different strategies is crucial to finding what works best for you.

Perkins Coie's strategic solutions for startups to Fortune 50 businesses and Twitter's conversational platform for valuable insights and offline connections.

Perkins Coie provides high-value strategic solutions and extraordinary client service to businesses ranging in size from startups to the Fortune 50. They advise VCs in their fund formations and investments and represent their portfolio companies throughout the entire arc of their growth. Meanwhile, Twitter can be used as a conversational platform where people engage in discussions with others. By using Twitter to follow IPO sentiment analysis, Ho engaged in conversations and discovered insights that made him appreciate the use of Twitter. He also discovered that conversations, rather than using it as a broadcast platform, can be a valuable opportunity to meet certain people offline. He uses Twitter mainly for conversations, tweetstorms, and impression boosting. It is a place for people to chime in their thoughts, ask questions and share their views.

The Advantages of Individual Investor over Institutional Investor

Individual investors have advantages over institutional investors – they can be extremely concentrated, long-term oriented, and have a higher tolerance for volatility. Institutional fund managers are driven by their imperative to protect their business, not generate the best returns. When investing for yourself and your family, generating great returns should be the priority. It is important to find people who believe in you and will back you no matter what because people make decisions based on their personal reasons. Doubters will always exist, but they no longer matter if you have confidence in your approach. Backers who support you in the beginning, before you have a track record, should always be remembered and appreciated.