What do you invest in if you don’t know what to invest in? Perhaps you heard that buying a whole basket of randomly chosen companies may not do well as it’s going to get you average results. You have an interest in choosing companies individually because you are already in a risky asset class and therefore want to try and maximize even more your returns possible, because you don’t want to be getting average returns and living an average (aka mediocre) life, waiting for a pension and social security that may or may not be there and may or may not be eroded away from inflation. But with so many equity crowdfunding platforms available, and so many companies, with limited time and money, how would you go about choosing? We all want to take the path of least resistance, and so it would be nice if there was a shortcut filter of sorts that could allow us to easily eliminate potential investments within seconds. What better way to do this than to evoke the concept of cloning, aka copying, and just look at the investments that the top VCs get into?
By investing alongside the top investors, that includes a pre-determined filter of due diligence done by reputable people in reputable firms. This doesn’t mean that the pros always get it right; startup investing has shown that 75% of VC backed startups still go bankrupt. But, it certainly helps you sleep better knowing the best in the world are in the same companies.
Here’s a list of arguably the top venture capital firms, tier 1 firms in the world (and arguably more than what’s listed here):
-Sequoia Capital
-Andreessen Horowitz (a16z)
-Accel
-Kleiner Perkins
-Beesemer Venture Partners
-Intel Capital
-New Enterprise Associates
-Khosla Ventures
-Benchmark
-Canaan Partners
-RRE Ventures
-TCV
-Founders Fund
-Index Ventures
-Mindset Ventures
-GGV Capital
-Menlo Ventures
-Greylock Partners
-Lightspeed Venture Partners
-Social Capital
-Initialized Capital
-Y Combinator
And arguably the best angel investors, potentially including (but not limited to):
-Marc Andreessen, Andreessen Horowitz
-Ben Horowitz, Andreessen Horowitz
-Garry Tan, Initialized Capital
-Naval Ravikant, founder of AngelList
-Jason Calacanis, The Syndicate
-Reid Hoffman, founder of Linkedin, Greylock Partners
-Vinod Khosla, Khosla Ventures
-Sam Altman, former President of Y combinator, now ChatGPT CEO
-Roelof Botha, Sequoia Capital
-Doug Leone, Sequoia Capital
-Michael Moritz, Sequoia Capital
-Jim Breyer, Breyer Capital
-John Doerr, Kleiner Perkins
-Peter Fenton, Benchmark
-Chamath Palihapitiya, Social Capital
-Peter Thiel, Founders Fund
You know what would be better than investing alongside the top investors? Multiple reputable investors. What if you filter companies that contain a top firm or investor, but then within that list, look for companies with 2, 3, or even more top investors. Now what would that do for your conviction? Obviously, this doesn’t preclude doing real due diligence or just blindly going all-in on these companies. But doing due diligence in a pre-filtered list sure seems more promising. After all, these VC firms have the network and power to touch pretty much every company potentially. If no top firm or investor is in a company, most likely, they would have seen the company, and likely passed. What would that say about the future prospects of said company? Some startups will have been passed over by the best and turn into an exception to the rule, or were hidden gems in a small, uncovered geography/market. But now that would be looking for the exception to the exception. Finding the needle in the haystack is hard enough, let alone the needle within the haystack of haystacks. That’s just too daunting. At least with a reputable VC in (and preferably for a significant stake), we’ve reduced the odds to just finding the needle within the haystack.
Take for example, Sequoia Capital, arguably the best venture capital firm in the whole world. They historically are estimated to have invested in 1200 companies. And of those 1200, an astounding 300 have gone public with IPOs! That is a baffling high rate of success. If that were to be true going forward, that would imply that each company you invest in alongside Sequoia Capital, you have a 1 in 4 chance of a small startup striking it rich in the best possible way. I am not sure about you, but I’m not nearly as well connected, intelligent, or wise enough in intuition or discernment to be able to be better than them. In that case, it seems like a no brainer to find a few top firms that you like the philosophy of their decision making, and just do the same thing. I am not sure of a reason NOT to do this.
Disclaimer
This is not Financial Advice. This article is meant only for educational and perhaps entertainment purposes.