Know Who You’re Investing With

TruePoint Capital

We live in an age of influence, where charisma and charm trump ability or competence and where hype often clouds over flaws and red flags.

​​It’s a cult of more, where the measure of a person and the size of their bank accounts are a function of social media followers, subscribers, or likes. If you only have 20 Instagram followers, ten subscribers on your YouTube channel? You’re a nobody.

The age of influence permeates the world of social media and investing as well. It’s how fraudsters and hacks like Elizabeth Holmes and Adam Neumann of Theranos and WeWork respectively raised millions of dollars for their startups and pumped up their companies to billions of dollars in valuation ($7B for Theranos, $47B for WeWork). Both Theranos and WeWork crashed spectacularly. Rising solely on the charismatic shoulders of their founders, both companies eventually fell on their founders’ fraud (Holmes) and incompetence (Neumann).

That’s the problem with the age of the Internet and social media. It can hide a lot of warts. ​​Posers can pass as “knowledgeable” experts solely based on appearance, presentation, or marketing – without the knowledge or experience to back it up.

When investing for income, wealth, and future generations, don’t stake your fortunes or your future heirs’ fortunes on influence and hype.

​​Check the data, run the background checks, and do the math. I bet if the investors of Theranos WeWork had looked at the data, done the math, or looked in the founders’ backgrounds and track records, they would have thought twice about investing.

How do savvy investors ignore the hype?

​​One, they leave the room. In other words, they don’t play in the same sandbox as other investors who are more easily swayed by hype and buzz generated by social media and memes. While today’s investor is more likely to dabble in the stock and crypto markets where investment decisions are based on hunches, hype, and speculation, seasoned and smart investors are more likely to invest in private alternatives – with a preference for cash flowing tangible assets.

Why private markets?

Why cash flowing tangible assets?

Smart investors prefer the intimacy of private markets – away from Wall Street and away from the hype and buzz of the Internet. Moreover, the long lockup periods of private investments shield assets from the rashness of crowds – preventing the selloffs seen in volatile public markets.

Private investments are also more transparent. Officers and Directors are less likely to hide behind a public wall. Small startups where the founders are typically directly involved in capital raising are more accessible to potential investors. This allows prospective investors to question and evaluate the team they’ll be entrusting their money with and then base their decisions on track record and not charisma.

Smart investors also prefer cash-flowing tangible assets because the numbers don’t lie. Projections can be fact-checked, and assumptions can be verified. In addition, past performance can be analyzed, and thorough due diligence can be performed with an asset you can touch and feel.

When investing, KNOW who you’re investing with. Check the track record, not the number of followers. Analyze the numbers and not the number of cars in the driveway.

​​Just because we live in an age of influence, smart investors choose not to play by its rules. You don’t have to either.