February 2, 2011
It’s one thing to know what type of startup you are looking to invest in. It’s another thing entirely to know what type of investor you are and why you are compelled to invest in those startups. That understanding however isn’t something that just occurs, it requires a fair amount of self awareness to fully understand the type of investor you are.
The terms “Good Investor” and “Smart Investor” seem to get thrown around quite a bit when determining what type of investor someone is. We hear things like “Good Investors like…” or “Smart Investors favour…” and while those may very well be true, we like to categorize them to better understand exactly what is a “good” or “smart” investor.
– A “Good” Investor: These are investors that are focused on the idea. The product or service that is going to revolutionize the world. Beyond and behind the idea aren’t important, or aren’t as important as the idea itself and as such are secondary concerns at best. This is what makes them good, they get the picture more than some people, but they don’t get all of it are miss out on some key factors.
– A “Smart” Investor: These investors know that the idea will changes, and that ideas are just not that important. It’s what is behind the idea that matters. For “Smart” Investors they understand that the people are what drive the startup they are investing in.,
– An “Enlightened” Investor: These investors take the “Smart” Investor one significant step further and realize that it is about the people in a startup, but more importantly it’s about the story. This is what truly defines “Englightened” Investors, they see where the story of the startup begins, where it ends and how they fit into the story. As an investor this requires a fair amount of self-awareness and the ability to keep one’s ego in check.
By knowing these categories investors are able to begin to see where their tendencies lie and how they are pulled toward investments. When it comes to startups, investing is about knowing yourself as much as it is knowing where your money is going.