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The Zone of Deployment: How Can You Know When to Invest?
Jan 29, 2024
Learn about investing wisely and the rarity of successful startups. Explore the need for a shift in venture capital and founder mindsets in the tech industry.
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Quick takeaways
- When making an investment, it is important to consider business quality, asset price, and portfolio construction.
- There has been an excessive focus on business quality, leading to an artificial inflation in the value and volume of startups.
Deep dives
The Three Criteria for Investment
When deciding to invest, it is crucial to consider three factors: business quality, asset price, and portfolio construction. Business quality is not solely determined by a company's ability to scale quickly, but by factors like long-term defensibility and profitability. Asset price must make sense, taking into account the overall quality of the business. Lastly, portfolio construction should weigh the opportunity cost against the potential return. It is only when these three criteria are fully understood that one can enter the 'zone of deployment' for successful investment.
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