Monthly Archives: November 2013

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I Win By Losing

WinnerI spent several years of my life writing software for hedge funds, and one of the most interesting things I learned was that some of the most profitable trading strategies actually lose money on more than 60% of their trades. The managers pick losers far more often than they pick winners, but still make a lot of money.

They pull this off by being extremely disciplined about selling a position that is going bad and staying in or adding to those that are  turning out well. Also, it turns out that performance can almost never be improved by trying to make fewer mistakes upfront by trying to pick fewer losers. Such efforts usually lower returns. Performance is improved by fine tuning how much money to invest and learning how to identify bad trades sooner.

The winners are not the master stock-pickers, but the master risk-managers.

Entrepreneurs could learn a lot from this. Put your ego aside and don’t worry about being “right.” The key to success is figuring out a way to test a new product or sales channel without putting too much time or money at risk, and having the disciple to cut your losses quickly if your idea does not work as expected. Then, it’s time to try another low-cost, low-risk approach.

I find it comforting to know that you can be a big winner by being wrong most of the time.

Hidden Fundraising Secrets

Top Secret FundraisingThe big secret is that there is no secret.

I have done quite a bit of successful fundraising over the years, and founders frequently ask my advice about it. Few first-time founders believe me, but raising funds is by far the easiest part of growing a start-up.

Recently a plethora of seminars and courses have popped up offering to train founders in how to pitch their ideas to investors.  While practice is certainly a good thing, focusing on the pitch can be a distraction.  Some of the advice given in these seminars is ridiculously detailed and covers things like the correct number of people to bring to the meetings, which other companies to mention, what colors are most effective in the presentation slides, and even the best day of the week on which to pitch.

Over-thinking the pitch to that extent is distracting nonsense at best and harmful at worst.

Good VCs have heard thousands of pitches, and they pride themselves on being able to “see though” the pitch to evaluate the team’s actual chance of success. They far more experience at this kind of evaluation than both you and the people offering to teach you how to pitch for a fee.

Investors will not be swayed by the color of your powerpoint slides.

By all means attend one of the many free events that offer a chance to practice you pitch before meeting investors, but don’t over-analyse it. Focus on growing your business. Being able to tell a VC that you have a growing number of paying customers, has far more impact than a well-polished pitch.

Your Fingerprint is Not a Password

FIngerprintsI like my new iPhone. The fingerprint authentication is cool, but it’s important to realize that it’s only a toy.

Although fingerprint authentication gets a huge amount of positive press coverage, it is a horrible form of security at it’s most basic level. Put aside for a moment the crazy stories of gangs cutting off people’s fingers in order to fool fingerprint scanners, the flaw is much simpler and less dramatic.

Within days of the the release of the new iPhone, it was cracked so that it could be unlocked using a copy of someone’s fingerprint. Naturally, biometric advocates claim that the current security flaw will be fixed with better scanning hardware or improved recognition software, but this misses to core issue.

Fingerprints will always be a horrible form of security. The fundamental problem is that we leave our fingerprints everywhere. We can’t keep them secret and we can’t change them if they fall into the wrong hands.