For a day the nation stops to bet millions on the races, but every day VC and angel investors around Autralia are laying down millions on high stake startups. In reality, betting on a horse and betting on a young tech business aren’t all that different. Sure, a shiny coat and bright eyes aren’t quite as important for one as the other, but there are a number of a factors that are eerily alike. After all…wasn’t the Innovation Island at Tech23 just a little bit like a parade ring before seeing the startups going head to head? Hopefully this year you win all your Melbourne Cup bets and hopefully all your startups have fruitful exits. So, betting on horse is like investing in a startup because:
1. Don’t just bet on the horse, bet on the team. There are a lot of factors that go into making that horse a winner such as the jockey and the trainer. Investors should look at the team behind a startup and their previous experience and success in order to pick a winner.
2. Bet within your budget. If you are at the tracks and are just out to have fun or are a retired business person investing for the excitement of being involved with a young company, then stick within your budget. Don’t put all your cash on one horse, and don’t put your life savings into one part of your portfolio
3. Do your research. You wouldn’t bet on a horse without first browsing through the form and you shouldn’t bet on a startup without first doing due diligence.
4. That said, if you are depending upon luck, then by all means go with your hunches. Sometimes a hunch is really your subconscious mind telling you something that you missed consciously. When using intuition rather than intelligence, hunches are your best bet. Though it’s probably not advisable to lay millions on a gut feeling alone.
5. A horse has to last the distance, they’re no good if they start out strong but don’t make the whole 3,200 meters. It’s the same with a startup, you need someone who isn’t just going to speed out of the gate and not be able to have the same energy on the day they register the business as they do when it comes time to deal with growth, expansion, employees and more.
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This post was mentioned on Twitter by IPitchAU: In preparation for #MelbourneCup, here’s how investing in startups is like betting on horses: http://bit.ly/63yfU...
Plenty of other analogies with racing including risk and reward and the ability for both to be able to quantify, perception versus reality, information and impact on market dynamics. End of the day you have to back your own judgement
On the topic of betting…
Depending on how you look at it, you could say that VCs actually bet *against* you with >10:1 odds.
On the topic of races… building a sustainable successful business is possibly not at all like a horse race, if it’s like any race it might be like a marathon. But, it depends on the objective. If the objective it to get acquired (or IPO), with VC funding, then it *can* be a race.