I have been involved in a number of meetings where I have been required to participate in an investment discussion. I have focused on early and mid stage companies throughout my career. One of the talents I developed was the ability to convince people to invest. Over my career I am a whopping 7–5–1. That means I have 7 successful ventures, 5 losses and 1 tie. All entrepreneurial deals are basically classified as “Venture Capital” deals in my book. Venture deals are high risk with high return. When meeting with investors I have always taken the time to highlight my “loses”. I take the time to highlight my failures for a specific purpose. I explain the “loses” are how I am able to accurately judge against doing the “wrong” thing. “Loses” are some of the most valuable lessons you can draw upon.
The New York Giants in 2011 won Super Bowl XLVI with a 9–7 season record. That means the New York Giants were one game above .500. I am .583 if you count divide my wins by loses.
Does this sound like market leading performance? Let’s analyze one of my favorite statistics. According to a Quartz article, where Bill Gates stated VC Firm performance was dismal at best (www.qz.com), the Kauffman Foundation was cited for its investment in VC Firms over a 20 year period. In 2012, Kauffman looked at the returns and found in the long run VC firms returned on average only 1.31 times what was invested (throughout this 20 year period). According to Kauffman what does what I do mean? It means that the leading experts, that accepted billions of dollars from 1992–2012 to allocate to my type of asset class, sported a whopping 25% success rate.
Champions do not need to win every single game. Champions do not need to have flawless records. Champions do not need to see every transaction be an exemplary performance. Champions simply “win” more than they “lose”.
Investors that I sat with always appreciated my honest nature. Investors always appreciated my straight forward candor. I find it shocking to learn that every pitch is usually structured around how the deal will always “win”. I don’t do that. I explain how we can “lose” and what I do to address the issue. Then I tell the investor there is no guarantee it will work. People are always shocked by the fact I tell investors they can “lose” their money and investors invest anyways.
One of my favorite lines with an investor is “Don’t get sold, get convinced.”
It has been this demeanor that has allowed me to get over 100mm committed to various companies throughout my career.
An example of learning from a “loss” would be to understand my single “tie”.
I categorize a particular deal as a tie because my investor did not lose money; however my investor’s target was way under its goal. A high yield $180,000 investment opportunity turned into a $216,000 gross “Cash in Cash Out” return (over 24 months). That’s not what an Entrepreneur shoots for when they walk into a deal. Then there was still my time. My investor still had to pay for my services on separate items. There was also $112,000 in profits that were left on the table that the Issuer never paid. There was a legal case against the person that accepted the money — and inevitably a bankruptcy. So depending on where you are this deal is not really that positive.
What is the positive?
The positive is that we were the only party in a 20mm investment syndicate to fully recover their principal.
I was the only person to structure my deal in a way where the full principal was returned.
My structure for recovery beat out 1bn USD fund managers and 10mm USD net worth individuals with the best attorneys.
That is the lesson you get from learning from your “losses”. I would not have this lesson or this Knowledge without embracing my “loses”. Education and credentials will never replace wit, prudence, and experience. Remember that.
It is for this reason why my investor came back to me and further invested on another separate deal within 12 months of this “tie”. It is for this reason why this particular investor will pick up the dinner bill when I am asking for money.
Not every entrepreneurial deal you do will work out favorable. If anyone tells you that the proposal you are reviewing is more than 50/50 at best — I would say walk away. No one wants to confront the odds of what entrepreneurs do for a living. People want to believe that everything they touch will turn to gold. The reality is far from constant success.
There is a saying utilized by many people from Robert Kiyosaki (Rich Dad Poor Dad) to Dolf De Roos PhD (52 Homes in 52 Weeks) that I do not think is an accurate depiction of any deal. The saying is, “Do a Win-Win Deal”.
In reality there is something I call a “Win-Win-Lose”.
In a finite system there can be no solution where resources are awarded to every participant. A system that gives everyone an equitable “win” is by definition a “Socialist” economy. We live in a “Capitalistic” economy. We base our system on counter parties. Counter parties mean that if I “buy” you “sell”. If I “take” you “give”. That means that if I want to “gain” money someone has to “decrease” their money.
The concept is not complicated the concept is just common sense.
Show your investor there is an “Us” and there is a “Them”. Explain that if the investor accepts the deal the investor becomes the “Us”. The competition is the “Them”. Accurately explain how the members of “Them” can win. Explain how the members of “Us” can lose. Explain how your lessons from the past allow you to anticipate the reasons for losing. Explain what you will do to address the issues that cause loses. Convince your investor don’t sell your investor. If your investor is “convinced” the investor will pick up the bill. If the investor is sold the investor will wait around for you to pay the bill.
It’s a good test to do to see if you hooked someone for your deal. Try it next time you’re getting a deal going and see the conversion rate. Remember “Win-Win-Lose”. You win, the investor wins and the competition loses.
About Christopher: Christopher Knight Lopez is a Professional Entrepreneur. Christopher has opened over 7 businesses in his 14-year career. Christopher’s purpose is to take advantage of various market-driven opportunities. Christopher is a certified Master Project Manager (MPM) and Accredited Financial Analyst (AFA). Christopher previously held his Series 65 securities license. Christopher also has his General Lines — Life, Accident, Health & HMO. Christopher has managed a combined 286mm USD in reported Assets Under Management & Assets Under Advisement. Christopher has work experience in 29 countries, raised over 50mm USD for various businesses, and grossed over 7.5mm in his personal career. Christopher worked in the highly technical industries of: biotechnology, finance, securities, manufacturing, real estate, and residential mortgages. Christopher is a United States Air Force Veteran. Christopher has a passion for family, competitive sports, fishing, martial arts and advocacy for entrepreneurs. Christopher provides self-help classes for up-and-coming entrepreneurs. Christopher’s passion to mentor comes from belief that entrepreneurs need guidance. The world is full of conflicting information about entrepreneur identity. See more at www.christopherklopez.com