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Be Your Own Venture Capitalist And Build A Broad Portfolio

Updated: 09/24/2018 by Financial Samurai 6 Comments

By the time Baidu, the “Google of China” went public, Venture Capital firm Draper Fisher’s 28% stake was worth over $1 billion dollars by the end of the trading day. Not a bad return considering their likely sub-$50 million investment just years ago! In a world full of strikeouts, it just takes one home run to win a ball game.

The Financial Samurai reader is savvy enough to know that strong work ethnic and good morals are key pieces of the success puzzle. Sometimes you just need to be in the right place at the right time. When Venture Capital firms fund startups, they are looking to take equity stakes in companies in a robust industry, lead by visionaries who can execute towards enormous profit potential. The majority of investments go bust, and the successes often take years and tons of selfless involvement before returns are seen. Eventually, the exit strategy is for their investment to get acquired or IPO.

We have the opportunity to be our very own individual venture capitalists everyday. Many of us may take for granted the people we meet, but not you. After all, all it takes is one billionaire to give you one million dollars before you’re rich right? Receiving an opportunity is what it’s all about. You’re reading this post essentially because like me, you want to be financially independent sooner, rather than later. The ability to be financially independent by 40 is the reason why we work so hard now. If the deadline was 20 years longer, where’s the fun and challenge in that?
Starting today, whether you are employed or unemployed, treat every person you meet as if they were a potential investment. Some may be obvious no-brainers such as the CEO of a firm you’d like to work for, and some may seem uninvestable because you feel you’ll never run into them again and they have nothing apparent to offer. No matter. Treat everyone as if they were the most important person in the world simply because you never know.

FIVE THINGS TO CONSIDER AS YOUR OWN VC/FUND MANAGER

1) Business Cycle: Are they early in their careers, or late in their careers with significant influence? Remember, even the most powerful person started with little. Never look down on someone younger and less experienced.

2) Industry: What is their industry focus and does this industry appeal to me?

3) Investment: How much time should I spend with this person and how much in resources? Will I have continuous opportunities to meet this person and build a long term viable relationship with?

4) Return: What is the expected return on this person? Does this person have the power to hire me, refer me to the right people, or simply hand me that $1 million dollar check? Obviously the higher the return the better, but even if the return is a simply smile and a hello every time you walk into your office, that needs to be good enough.

5) Involvement: How much do I need to prod and poke before I start bugging the heck out of her? Will she need guidance from me on what I want, or will she just know?

After you’ve thought of these five things, quickly shelve them in the very back of your mind. Is it good karma to give because you want more good karma? Probably, but not so much if you were to just give freely. I think it’s very important to expect nothing business related in any relationship you build. The best relationships are built with NO INTENTION e.g. you met as college sweethearts when both of you had very little money for example.

Whereas professional VC’s lose millions of dollars everyday backing the wrong horse, the only thing you’ll lose when you aren’t fully engaged with someone are opportunities. If you don’t have time for someone, that someone won’t have time for you. It may sound cold to treat everybody you meet as an “investment”, but this is just a metaphor for the reality of business. From the very basics, your parents are investments because you wish to have their love and support. If everybody loved and supported you, don’t you think you’d be happier and more successful in life?

A successful individual venture capitalist, earns a healthy return, be it a new lead, job offer, or friendship. As a personal VC, you also benefit knowing that even if you’ve invested in a dud, you’ve helped someone out and have an acquaintance who may one day be able to return the favor. Check in on these relationships at least every 6 months, because I guarantee you there will come a point where you will need all the help you can get.

Recommendation To Build Wealth

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After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms. Definitely run your numbers to see how you’re doing. I’ve been using Personal Capital since 2012 and have seen my net worth skyrocket during this time thanks to better money management.

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Updated for 2019. Let the bull market continue with stocks at all-time highs!

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Filed Under: Investments

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Order a hardcopy of my new WSJ bestselling book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will you build more wealth by reading my book, you’ll also make better choices when faced with some of life’s biggest decisions.

Current Recommendations:

1) Check out Fundrise, my favorite real estate investing platform. I’ve personally invested $810,000 in private real estate to take advantage of lower valuations and higher cap rates in the Sunbelt. Roughly $160,000 of my annual passive income comes from real estate. And passive income is the key to being free.

2) If you have debt and/or children, life insurance is a must. PolicyGenius is the easiest way to find affordable life insurance in minutes. My wife was able to double her life insurance coverage for less with PolicyGenius. I also just got a new affordable 20-year term policy with them.

Financial Samurai has a partnership with Fundrise and is an investor in private real estate. Financial Samurai earns a commission for each sign up at no cost to you. 

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Comments

  1. RB @ RichBy30RetireBy40 says

    August 8, 2009 at 8:01 am

    Morning LovingKind – Thanks for sharing your story! It just goes to show that you never know who can help you out, as you pointed in your friendship with someone in a different bureau. You sound like a very nice person, and your new boss was lucky to have you!

    Have a great weekend yourself!

    Rgds,

    RB
    RB30RB40

    Reply
  2. Anonymous says

    August 8, 2009 at 6:16 am

    RB, I can't write, but I love to read. I love to read real life stories, especially stories about human relations and experiences. You wrote: "If you don't have time for someone, that someone won't have time for you." It is so true and the opposite is true, too.

    The first job I got, after I moved to Washington area, was a very stressful one. The office had personnel troubles and I was beginning to develop some health problems after a while. One day when I was walking in the hallway, I saw someone I had met before but didn't know well. I greeted her and stopped to talk her. During conversation I found there was a job opening in a different bureau. I applied… and I got the job! It was a better job and my new boss was great!

    You also wrote: "the best relationships are built with NO INTENTION." I agree with you 100%! Interesting that you mentioned karma, as it was something that I had learned and practiced for many years. At the end, I became a firm believer of the Natural Law of Cause and Effect. Every situation in life became easier for me to comprehend. (BTW, karma means volitional deed and karma force, the force created by one's own thought, speech and action.)

    Thank you for sharing your thoughts and experiences. Have a good weekend! Lovingkind

    Reply
  3. RB @ RichBy30RetireBy40 says

    August 6, 2009 at 9:54 pm

    Rachel – I HATE flakers. They are the worst. Next time you get flaked on, notice how this person is and where they are in their life. You may start feeling sorry for them after that. Certainly, don't waste your time on them Rachel! RB

    Reply
  4. Anonymous says

    August 6, 2009 at 8:25 pm

    time is valuable… priceless actually. I've learned not to waste time with people who constantly flake or take, take, take and never give. Rachel

    Reply

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