Wednesday, August 6, 2014

Investing Patiently

By Allen H. Kupetz, COO of the early-stage investment fund, venVelo.
The views expressed may not reflect the opinions of venVelo’s board or its investors.

I heard two different stories on the radio today. Even if I get some of the facts wrong (since I chose not to take notes while driving), I thought the similarities were worth sharing.

The first story was about Warren Buffet’s idea of fat pitch investing. He reportedly said that while baseball has a strike count, investing does not. You don’t need to swing at any of the first six pitches. Or the first 600. You can never strike out. With over a $1 billion in cash to invest, Buffet’s Berkshire Hathaway could afford to swing at some pitches outside of the strike zone. But he chooses to wait for a fat pitch. Patience.

The second story on NPR’s “Marketplace” was an interview with the founder of Yelp. After 10 years – virtually all of the Web 2.0 era – Yelp turned a small profit. It had turned down a nine-figure offer from Google years ago and was only now profitable. Yelp closed today with almost a $5 billion market cap, though way down from its 52-week high. Selling in March would have made you a lot more money. Too patient?

What is the lesson for early-stage companies? Are you more or less patient than your investors? Perhaps that is a question both sides should ask during due diligence. A difference of opinion is certainly going to be problematic later.

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