Anna Vital | Inc42

If there is any investor who successfully explained how investors think, it is Paul Graham. In this essay from 2009. The startup world changed a lot since then, but this essay is still valid.

Investors think differently. Armed with an intuition about people, they make ultra risky decisions even by a founder’s standards. If you understand how investors think, though, you can negotiate with them.

Investors seem mysterious. They only approach you if you are already making it big. You can’t talk to them through their website. They don’t answer emails. To the average person, though, even their existence is somewhat of a mystery. Why do they put a lot of money into young companies when they could just be investing in the stock market?

Investors exist to make money. Venture capitalists and angel investors exist to make money orders of magnitude bigger than the money to be made elsewhere, legally. So why doesn’t everyone do it? Because venture capital and angel investing is extremely risky. As Graham mentioned in another one of his essays, only 50 from about a thousand VC firms in the U.S. actually make money.

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Source: Understanding The Mysterious Investors: The Hacker’s Guide To Investors – Inc42 Media


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