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I've been reflecting on ten years of privates investing & my first 18 months at Coatue. 11 thoughts:
1/ Idea size > everything: Lots of funds talk about “big swings” but few operationalize it. I'm of the mind that idea sizing should be the atomic unit of consideration for every fund/stage.
2/ Think about the Trends: Transcendent companies ride massive secular shifts. Internet; Mobile; Cloud; LLMs. Great investments often sit at a convergence of multiple trends: the further out you zoom, the clearer trends become.
3/ the Path to Platform: the greatest source of privates alpha is identifying a platform company *before it's a platform. Every investment thesis is really just "the path to this being a Platform"... what’s wild is how compressed the timeline has become: platforms used to take a decade to emerge, but now signals show up in just a few years (why some Series B valuations are so high!)
4/ Avoid Losing: You don’t need to win deals -- you just need to not lose! In the interest of winning deals, not going to share more on how to avoid losing with peers on X (:
5/ Privates are far more zero-sum than publics: There's a tech narrative that we’re all in it together. Like Teletubbies, with Ramp cards. In reality, privates are much more zero-sum than Wall Street. But you can still choose to be nice! It helps you avoid losing (:
6/ Great founders share a trait, rate of learning: the best founders are, without exception, learning machines. They just keep getting better in a way that almost runs away from you (especially if you're a schmuck investor like me)
This is the one signal effectively impossible to fake -- and why investors actually want to meet CEOs well ahead of a fundraise; “we just want to get to know you” ;p
7/ You cannot make money on a spreadsheet: the alpha in spreadsheet investing was competed away years ago. People understand gross dollar retention now. To understand the Platform-anatomy of a company: help you, excel spreadsheets will not (Yoda)
8/ "Pattern Matching" is overused, but underrated: Investing is an exercise in reducing complexity: "the best models have fewer rows" .. Pattern matching is an overused term -- but the act of "seeing simplicity" is evergreen underrated.
9/ Diversification is a tax: concentrate winners! Diversification is not your friend: this is a known fact in venture (and increasingly true in publics)
10/ Decision Quality > everything: for all the hustle culture, busy calendars and "value add resources" at funds .. all the leverage is in decision quality. Great decisions compound. Avoiding losing compounds. It feels bad (but is correct) to say 95-99% of "passes" don't matter in power law investing. Know when you're around a BFI and get the decisions right!
11/ the Future is built by weird people, doing things that are obvious (in hindsight): if you’re not at least a little weirded out, it’s probably bad, actually!
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