On Insight

How do we evaluate potential?

At Wavemaker, our mission is to create value for our investors by investing in high-potential technology companies and helping them realize their potential. The challenge is that the early stage companies we invest in are still more potential than reality.

So how do we evaluate potential? Have we found the silver bullet?

Unfortunately, we haven’t. We’ve determined that all we can really do is to try to increase our chances for success. We try to identify what variables are present in our most successful companies and find more companies like them. Obviously, our most successful companies will be led by some of our best entrepreneurs.

We haven’t found the template for the perfect founder but we have noticed qualities that are usually there. One of our favorite ones is insight.

We believe that the best entrepreneurs built their businesses based on unique, personal and relevant insights. They are pursuing an opportunity that others don’t appreciate and/or in a way that is different from and significantly better than what is out there today. Perhaps as crucial as the insight itself, is how they got to the insight.

Charlie Munger, Warren Buffet’s partner likes to distinguish between real knowledge and pretend knowledge.

Entrepreneurs can come up with good insights when they’ve built real knowledge. They did the work. They took time to observe and reflect. They can tell you what they know and what they don’t know. They don’t need hype or buzzwords or catch phrases. They go beyond what is obvious, down to the brass tacks.

We’d like you to meet some of our entrepreneurs who will share their insights. They’ve gone beyond the obvious to spot the opportunities they’ve decided to pursue. Time will tell whether they will make a return or not, but we were moved enough to believe that they and their insights were worth backing.

We back founders who can succeed, with or without us. This is the first in a series of essays on the qualities that we have noticed in the founders who are part of the Wavemaker tribe.