In an age of unicorns, quick wins, and instant gratification, it's easy to believe that success is the only measure of an entrepreneur's worth.
Yet, there's a powerful voice in the investment world challenging this narrative: David Cohen, the Co-Founder and Chairman of Techstars, a global leader in the startup ecosystem and arguably one of the most prolific angel investors in the world.
Beyond his accolades, his philosophy on investing and supporting entrepreneurs offers a refreshingly contrarian take on how to view success, failure, and risk.
Before we dive into today's story, be sure to catch the full episode of Contrarian with David Cohen here:
The Value of "Failure"
According to David, an entrepreneur's past failure is not just an asset; it's a competitive edge.
Such entrepreneurs have tasted success, endured defeat, and are hungry for redemption. They're driven, not just by ambition, but by a profound desire to prove their detractors wrong.
This philosophy breaks the mold of traditional investor thinking. But it underscores a deeper truth: the journey of entrepreneurship is laden with failures. And those who have navigated this treacherous path once are often better equipped for subsequent ventures.
Nurturing Relationships Beyond Business
David’s approach to supporting entrepreneurs in their moment of need is testament to the fact that venture capital isn't just about numbers; it's about relationships.
Whether it's embarking on a spontaneous trip to Tokyo with an entrepreneur post a business failure or celebrating a startup's journey despite its unfortunate end, David emphasizes the human connection.
This long-term perspective underscores the fact that real relationships can transcend the lifespan of a single company.
Disrupting Conventional Venture Capital Wisdom
Venture Capital, as an asset class, is intrinsically risky. The conventional VC playbook often involves making high-stakes bets on a handful of startups, hoping one will become the next billion-dollar exit.
Yet, David's approach at Techstars has been different, and data-driven.
Venture capital, as David explains, doesn't have to be a game of high stakes poker. Through diversification and data analytics, one can determine potential investment trends, such as VCs being more likely to invest in a certain geographical area based on their prior investments. With access to cap table data from thousands of companies, Techstars is in a unique position to mine insights that others can't.
Being Contrarian with Data
When it comes to making investment decisions, David stresses the value of having a diversified portfolio. In a captivating display of Monte Carlo simulations applied to their portfolio, the findings were counterintuitive: a larger portfolio, contrary to conventional wisdom, offers not only a reduction in risk but also improved returns.
But why does this contrarian approach work? By having a more expansive portfolio, you increase the odds of having that outlier – the one startup that defies all expectations and delivers exponential returns.
The Real ROI of Mentorship
Mentorship is more than just a transactional relationship. As David points out, the real value for mentors isn't necessarily in a dollar-for-dollar return.
It's in the intangible joy of giving back, of helping shape another's journey, of contributing to a bigger vision. Being a delight to mentor, being appreciative, and recognizing the value of that guidance is pivotal.
Riding Through Economic Uncertainties
While market dynamics can be unpredictable, David’s philosophy is clear: consistency in investment strategy is key.
Techstars' growth during economic downturns and global events like the pandemic reflects this belief. When others may see risks, David sees opportunities and believes in doubling down on proven models.
The Art of Asking the Right Questions
Perhaps one of the most profound takeaways from David’s insights is the power of the right questions. As a contrarian, one of his favorites is: "What's the worst thing that could happen?" This question isn't a nod to pessimism.
Instead, it's an invitation to truly understand risk and make informed decisions. For entrepreneurs, it's a way to evaluate the true cost of venturing into the unknown, and often, it's not as daunting as one might think.
In a world that often equates risk with recklessness and failure with inadequacy, David Cohen's contrarian views offer a refreshing perspective. His emphasis on relationships, consistent investment strategies, and a data-driven approach, all while challenging the conventional wisdom, sets a new blueprint for investors and entrepreneurs.
The path to innovation isn't linear, nor is it predictable. But with the right mindset, nurtured relationships, and the courage to challenge prevailing norms, the journey, irrespective of its outcome, promises to be one of profound learning and growth.
