The value of future potential

One of the very cool things that makes San Francisco stand out from nearly any other city in the world is the culture of investing into future potential.

It’s a bit crazy when you step into it for the first time and most people don’t believe the stories of smart kids meeting smart money and it equalling billion dollar valuations. You have thousands of talented professionals, a whole bunch of cashed up funds and an emerging group of wealthy individuals who just want to invest their time, money and effort into creating ‘something’.

Here you have companies that have no revenue stream but have millions of users and the massive potential future value. What the actual specific value is remains to be defined in many of these companies but the logic is that action and activity is better than no action and no activity.

I admire the number of people I’ve met from both sides of the startup fence from the wide-eyed hacker to the smooth VC partner and one thing is unanimous, the discussion is always about the bigger picture. Sure the details of scale and distribution are always covered but it’s not the end of the world if you haven’t worked it out yet. If you have an idea that could potentially disrupt the status quo, you’ve got a foot in the door.

In fact a few of my VC friends quipped to me that investors get nervous when you start talking about building a sensible company to exit it within a defined period of time. In Australia, building a disruptive company with no revenue model and no exit strategy would see you laughed out the door, but in San Francisco it just adds to the culture of ‘ok so lets talk about how we’d do this’.

The bolder the idea, the more likely it has the chance to become a $1b valuation, a big IPO and the ability to attach their name to a smart investment.

When you consider that people are trading the three most prized possessions in the modern western world: their time, money and identity, it’s invigorating to see companies raising huge amounts of money because the founders have an inkling. The irony is, these inklings go on to enable huge innovation and it only happens because people encourage and enable them to play.

Sure there are plenty of failures but the victories are of epic proportion and that just keeps everyone here that little bit motivated.

I think it’s interesting that when people talk about business, they understand ‘it takes money to make money’ and that it just takes time to build a solid foundation and add long term value. It’s easy to build a fly-by-night company to fulfil a need on a short term basis (think an umbrella stand) but to build a competitive and sustainable company, it requires a bigger investment – faith. And many times, it’s largely blind.

But people fear failure and so they live mediocre lives choosing the security of the cow rather than the potential of the magic beans. The cow is a known quantity, the beans are not.

I’ve been faced with many decisions in the last twelve months of my year of re-discovery and rebuilding. I’ve made friends, lost friends, spent plenty of time and money trying new things and it hasn’t always given me the result I imagined it would. I can say however that I’ve found absolute treasure along the way and I wouldn’t have ever found it had I decided to keep my chips tucked away in my pocket.

Ironically many people have told me that they envy my courage and confided in me that they’d never be able to do the same – and that saddens me tremendously. They are astounded that I sold everything and moved on a belief. The joke is, I’m astounded that they have strong beliefs but won’t do anything about it.

Sure there’s betting all your money on red at the casino, then there’s betting your future on your own judgement. The venture firms and angels of San Francisco don’t bet recklessly on frivolous ideas – they bet on the brilliant and creative minds that are constantly questioning, evaluating, modifying and thinking about making it count. They bet on the judgement of people not just a statistical chance and there’s a big difference.

Wherever you look, you’ll find people who will validate your views (whether pro or against) so stop asking around.

Instead, do what you feel in your heart, back what you believe and invest heavily without doubt into the most valuable business of all – you.

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