November 2, 2022

Want to be a better investor? Adopt these three mindsets

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At work, we're all investors.

Even if you’re not personally providing the venture capital to get a company off the ground, you’re still making daily decisions about where you should invest your time and energy.

An investment doesn’t have to be a major strategic bet. It can be as simple as deciding which meetings to schedule or which big project to take on first.

To master these decisions, you need to adopt an investor mindset. And according to Eric Kim, the co-founder of the venture firm Goodwater Capital, that requires stepping into the shoes of three different personas: the artist, the analyst, and the skeptic.

The Artist: Thinking creatively about your vision

When you consider an investment, it’s important to envision what success would look like, then determine what it would take to make your vision a reality.

1. Establish your proposed investment

Let’s say you’re developing an alternative to Twitter that takes a hardline approach to hate speech by permanently banning any user that engages in it.

2. Describe what success would look like

Success in this instance would be capturing over half of Twitter’s current audience, generating $10 billion in annual ad revenue, and becoming the industry-leader in quality discourse.

3. Brainstorm drivers that would make or break success

Once you have that big picture in mind, it’s time to put on your artist cap and start thinking creatively about how you get there.

Deconstruct your vision into individual components.

  • How will you convert Twitter’s audience?
  • Why will you appeal to big-name advertisers?
  • What does being the industry leader actually look like?

Once you’ve broken your goals down, get imaginative by brainstorming at least three key drivers that would help make each portion of your big picture feasible.

With driving advertisement revenue, key drivers could be:

  • Attracting influencers that are tired of having trolls dogpile on all of their posts
  • Positioning yourself as an option for political campaigns that don’t want to be associated with Twitter
  • Charging companies a premium to advertise to a more specific user base

As a final step, narrow down your key drivers to the major ones that will make or break your investment.

The Analyst: Putting numbers behind your vision

Now that you’ve gone through a creative exercise, you’ll need metrics to support your ideas. That’s where the analyst steps in.

Odds are, your team is tracking a number of metrics, from revenue growth to click-through rates to net promoter scores.

Part of being a good analyst, however, is deciding which metrics you should pay closest attention to. And to discover that, you can turn to the key drivers you identified in the artist stage.

5. Identify metrics that support or refute your drivers

Let’s look at our example. If one of your primary drivers is attracting influencers to your platform, you’ll need to prove that you can deliver the kind of audience they’re used to.

This would mean looking at your metrics around new user growth and CAC, to determine whether you can sustainably build a large enough audience to attract heavy hitters.

If you notice that the metrics related to your key drivers aren’t trending positively, then it’s time to take a step back and reexamine your key drivers. If your metrics are pointing to success, then you know you’re on the right track and ready to step into the next persona: the skeptic.

The Skeptic: Second-guess your work

Taking a critical eye to your work is tough, but identifying the risks behind your goals is an essential step for any investor.

Second-guess yourself. Get paranoid. Look at your key drivers and determine what could threaten them in the long-run.

Let’s go back to the original key drivers we identified in the artist stage.

  • Drawing in influencers that are tired of having trolls dogpile on all of their posts

The skeptic would ask:

What if the negative attention actually helped drive their overall engagement, since it gave their supporters an opportunity to rally to their defense?

  • Positioning yourself as an option for political campaigns that don’t want to be associated with Twitter.

The skeptic would ask:

What if Twitter’s larger audience proves more attractive to politicians than a platform without hate speech?

  • Charging companies a premium to advertise to a more specific user base

The skeptic would ask:

What if the user base doesn’t convert at the level that our advertisers expect for a premium price?

Identifying these risks early can provide long-term benefits. They give you an opportunity to confront them head on to minimize the concerns, answer the concerns of any would-be stakeholders, and perhaps most importantly, help you understand what risks you would be willing to underwrite if you continue to remain invested in the core idea.

To recap, here are the three personas you need to adopt in order to achieve the investor mindset.

Greg Shove
Section Staff