Curious about why investors often follow the same trends when investing in startups? Join us as Aman Raj engages in an enlightening discussion with Tony Sheldon, the founder of AY Ventures. In this conversation, we explore the strategic reasons behind these investment patterns, the risks involved, and how just a few successful bets can make a significant difference in a portfolio’s performance.
Why do investors follow the same trend while investing?
Tony Sheldon (Founder, AY Ventures): More or less, if an investor is following a trend, there must be some good reason behind it, right? Even if there isn’t a clear reason, it might fit into their thesis or some long-term strategy they have. They might have internal communication or strategizing going on for 10 to 20 years, and based on that, they invest. Sometimes, even if they’re investing in the wrong company, that’s part of the risk. In most investment companies, there’s a 90% chance of negligible return, and about 50-60% of investments may yield negative returns. There’s only a small chance, maybe 5-10%, that a company will give a positive return. Out of the whole portfolio, only one or two companies might deliver the actual return that makes up for the entire portfolio. When you hear about 50x, 100x, or 500x returns, that’s usually just one or two companies in the portfolio. The main thing is to make calculated bets. If they gain from just one or two investments, it’s still a win. Even if they miss out, they can justify it by saying they knew the risks. Investors have their own strategies, and they’re following them because we have a free economy.
