Short Description:
- An investment strategy, where you pursue lower-risk/lower reward investments. In baseball, the analogy is not to “swing for the fences” with a lower probability chance of making a lot of money, rather have a high probability of making money on each investment. It can impact the investment sectors, business plans, financing strategy, valuations, and stage that you invest in.
Benefits:
- A focus on fundamentals of business may help you avoid companies with a high-spend strategy.
- If you are able to succeed in this strategy, it is claimed to offer more consistency/repeatability which may be more attractive to LPs
- If consistency can be established, perhaps it will be easier to replicate and/or train others on?
Trade-offs:
- Some argue that if you are investing in startups, you are inherently buying into a power law distribution of returns. If so, it is misguided to pursue a lower risk strategy as you may succeed in capping your upside but are unlikely to limit your downside.
- Too much focus on the downside, the relatively safer or known, may cause you to avoid new markets and opportunities.
Examples:
- Some angel investors
Further Reading: