The Investing Mindshift & Minimizing Risk with Marcia Dawood
“Are you really solving a big problem, or do you have a solution that’s in search of a problem?” – Marcia Dawood
Have you ever been curious about what goes into angel investing? I had the opportunity to speak with Marcia Dawood, an investor in over 200 early-stage private companies, a Venture Partner with the international firm Mindshift Capital (focused on the US and MENA regions), and part of the investment committee for Next Wave Impact Fund.
Marcia had more than a few tips to share on how to get funding and what it looks like behind the curtain of investing.
- Minimizing the risk in startups
- Mindsets of a successful leader
- How advice and money interweave
Minimizing the risk in startups
Investing in young companies and startups is not for the faint of heart. It takes a true passion for helping others and a willingness to learn, alongside teaching.
Marcia knew she wanted to be in the investment game long-term after her first taste of angel investing.
“The only way to really do that [commit to investing long-term] is to try to de-risk this asset class as much as you can.” Marcia explains, “And the way that I did that was to take a small amount of money and spread it over multiple companies.”
Investing those contributions across a vast array of companies through a fund helps diversify the risk.
“With our one investment, we could get exposure to 10 or 15 companies. And that way, we can keep our risk at a minimum, because if one or two of those companies don't do well, or even five of them, you still have the other ones that could make it up.” she continues.
For anyone new to the investing world: angels are investors who write checks out of their own checkbook, and venture capitalists are investors with sizable funds who typically acquire institutional money from companies or pension funds.
Spreading out your investments comes back to the classic phrase, “don’t put all your eggs in one basket.” By diversifying investments, you increase the possibility of a return on your investment.
Mindsets of a successful leader
When you're looking at a company for investment, there are copious amounts of information that you're trying to attain.
“You're trying to gather the reasons why you are going to invest. There's plenty of reasons out there for you not to invest, these are small companies, there's always going to be something.” Marcia explains, “You could name 100 things. But you're looking for the things that you think are going to make this company go far, and what big problem they’re solving.”
If a company isn’t solving a big enough problem, a lot of times, they aren't going to work out. People are resourceful and will figure out how to solve their own problems. It takes a viable solution to a messy pain point to encourage people to adopt new solutions.
Marcia shared some insights on what makes a successful leader:
- Building as much as they possibly can on fumes—the more they can show an investor how much they can do by stretching a dime, the more likely they are to earn funding
- Holding onto as much of their equity as possible to ensure they have a credible chunk to offer when it matters most—5% and 10% pieces add up fast
- Surrounding themselves with people who have the level of expertise they’re missing themselves in diverse areas of the business before taking on full-time employees—the best founders know what they don’t know
“Be flexible and know that there are going to be times that it's going to get tougher, things are not going to go the way that you want them to. And that's okay.” Marcia shares, “It's all about how you handle it. It's not so much what's happening to you, it's how you're dealing with it.”
Embracing the messiness of the startup process is an essential part of entrepreneurship. One might say rolling with the punches is a trademark experience in most ventures related to building something from nothing. The strength lies in adapting to the mess, making successful pivots, and spinning the negative into the positive.
How advice and money interweave
If a founder asks for money, in many cases, they may get advice. But if they ask for advice, they may earn money.
Marcia shares the thought process behind this reverse approach, “I've seen founders who have this really cool idea, and they're not ready for investment yet, but they start talking to some investors, saying, ‘hey, what do you think I should do about X, Y, and Z?’ and the investor will get interested.”
Asking for advice instead of money right out of the gate relieves some of the pressure investors feel when considering supporting a company, and can instead let both parties focus on building the relationship.
Investing—like any connection in life—works best with equal investment from all involved. Cultivating a genuine professional relationship between founders/investors supports success and opens more doors than jumping from pot to pot provides.
Are you on the founder or investor side of the coin? What are some areas in your life you want to invest in, financially or otherwise?