Upfront cliché’ : Being a good (Investor), is the enemy of being a great (Investor)! BOOM!

The source of the investment logic adapted below, is primarily from legendary investor Howard Marks (as penned in his “Dare to be Great” 1 & 11 notes) , but the application of this world-view is entirely ours, let’s go!

 Non-consensus (unconventional) ideas are lonely, and often appear imprudent. But, if and when they work out, they produce superior returns, as described in the top right block within Marks’ 2 x 2 matrix:

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 The 2 x 2 matrix explained further: 

 If your behaviour is conventional, you’re likely to get conventional results – either good or bad. Only if your behaviour is unconventional, can your performance likely to be unconventional – and only if the judgements are superior, will your performance likely to be above average. (Note to reader: more understanding in the short video that follows here: 

https://www.dropbox.com/s/on88iadnt1cgds1/TMARA%20Investor%20Conflict%20v1.1.mp4?dl=0

From experience, many of the most successful investments entailed being early. That’s half the reason why Marks considers the greatest of all investment adages to be: “What the wise man does in the beginning, the fool does in the end”, and “while there’s no surefire route to investment success, he believes one of the easiest ways to make money is by buying things whose merits others haven’t yet discovered”.

John Maynard Keynes made the point more poignantly by observing “Worldly wisdom teaches that it is better for reputation to fail conventionally, than to succeed unconventionally”. 

The bottom line on thriving for superior performance, has a lot to do with daring to be great. Especially in terms of asset allocation, ”can’t lose” usually goes hand-in-hand with “can’t win”, or as the note in the fortune cookie says: “The cautious seldom err or write good poetry”. Caution can help us avoid mistakes, but it can also keep us from great accomplishments.

Now lets get closer to our specific application:

The first thing we need, if we’re to become superior investors, says Howard, is an explicit investing creed. What do we believe in? What principles will underpin our process? He suggests that we ask ourselves questions, like:

  • Will we emphasise risk control or return maximisation, or do we think it’s possible to achieve both simultaneously? ( See above video)
  • Do we rely on prediction, or command the ability to literally create successes?
  • What are the first principles that govern the early-stage venturing and investment space.
  • Is early-stage investing only for the elite or can it be democratised through the application of a science?
  • Can you dare to look wrong?
  • What is the role of luck?

If we’re going to be great, Howard asserts, we have to dare to be different.

Charlie Munger was right, about it not being easy: “I’m convinced that everything that’s important in investing is counter-intuitive, and everything that’s obvious is wrong! Unconventional behavior is the only road to superior investment results, but it isn’t for everyone. In addition to superior skills, successful investing requires the ability to look wrong for a while and survive some mistakes. It’s those who believe, that can and should take a chance on being great. 

Larry Ellison observed, “when you go out into the real world, it’s when you find errors in conventional wisdom – when everyone says A is true, and A is actually not true – that you gain your competitive advantage. 

Peter Thiel frames this same challenge in “ZERO TO ONE” as, “what important truth do very few people agree with you on?”, and devotes chapter 8 to “secrets”, which opens with the following paragraph: “Every one of today’s most famous and familiar ideas was once unknown and unsuspected. The mathematical relationship between a triangle’s sides, for example, was secret for millenia. Pythagoras had to think hard to discover it. Today, his geometry has become a convention – a simple truth we teach to grade schoolers. A conventional truth can be important – it’s essential to learn elementary mathematics, for example – but today, it won’t give you an edge. It’s now not a secret”.

Welcome to the Market Category Generator (MCG) the place of secrets, when select investors gain access to the (non-consensus information relating to the) future adoptability of innovative start-ups new products…. 

https://www.linkedin.com/pulse/introducing-market-category-generator-mcg-anthony-nathan/

Other topics by TMARA, include :

The rewards of an early-stage LEAD investor

https://www.linkedin.com/pulse/rewards-early-stage-lead-investor-anthony-nathan/

Stop turning friends and family into fools!

https://www.linkedin.com/pulse/stop-turning-friends-family-fools-anthony-nathan/

HOW to know, IF and WHEN a startup will reach Product-Market Fit:

https://www.linkedin.com/pulse/know-when-you-could-reach-product-market-fit-pmf-anthony-nathan/?published=t

The primary cause of startup failure:

https://www.linkedin.com/pulse/simply-true-anthony-nathan/

Most, if not all, of the great startup successes (home runs) did not solve a BIG PROBLEM for a big market!

https://www.linkedin.com/pulse/non-consensus-piece-info-changes-game-early-stage-venturing-nathan/

 www.tmaragroup.com for more conversations

(c) Copyright protected by TMARA 2019

Essentially the (Market Category generator) MCG is a MUST-HAVE investment vehicle, and makes it seemingly inevitable for early-stage investors

WHY?

Today, the best way (coping way) to make money investing in Start Ups, is to invest in a large enough portfolio of great entrepreneurs. Returns will follow a power law (an accepted fundamental principle) –in other words,  invest in 20 and if you lucky 1 or 2 will return the entire fund. This is the reality today! A few funds have recorded spectacular returns, most have failed. Why? Nobody, knows IF and WHEN a start Up will take-off and become a home run. 

To give yourself (an investor) a better chance, you have to carefully select a portfolio of the best entrepreneurs with ideas that can become home runs. As a result, the successful funds also follow a power law. Betting on this type of uncertainty (not knowing ‘IF and WHEN’) will always result in returns that follow a power law. 

Conclusion = As long as you are focusing on the START UP, you cannot escape the impact of the POWER LAW.

We (TMARA) are trying to transform this space. We don’t want to just try and pick the winners more accurately, we want to drastically reduce the impact of the power law. At the source of the power law, is the type of “uncertainty” we are dealing with.

The limitation is the “uncertainty” associated with the “IF and When”. In science it is called a “disorganised-complexity” problem – only suitable for probability analysis. This is not just your simple two or three variable problem. There are too many variables, and the only way to deal with it, is through statistical analysis. Bet on the average, not the specific. 

To transform this space, we need to diminish this limitation – the specific “uncertainty” associated with “IF and When”. In scientific terms, moving from a “disorganised-complexity” problem, to an “organised-complexity” problem. “Organised-Complexity” is governed by first principles – suitable for root-cause analysis.

To do that, we decided to change the focus from the Start Up, to the Market. More specifically, Innovation (invention) can create value, if and only if, it diminishes a limitation for the market (first principle). Instead of focusing on finding and funding great Start Ups (entrepreneurs), we are looking for, co-creating and funding great new markets (value). 

Every successful start up will go through 3 phases: The Fountain of Hope (Just build the tech / product and they will come); The Valley of Death (No Market / No traction / No Future); The Promised Land (Product-Market Fit / Scale at will)

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In the valley of death ( the middle phase), every start up faces a massive market constraint (ie: no market). Most entrepreneurs still think, that if they can just build the product, the market will come – big mistake! They tend to be preoccupied with inventing products, and not creating value (markets). This becomes absolutely apparent, the moment the start up enters the valley of death, and they face the inevitable – death!

TMARA MCG = Market Category Generator.

in the MCG, we care less about the Start Up’s product or tech. We just want to know if the Start Up has discovered something, that can diminish a significant limitation for a big enough market. The Start Up will then have to change its tech / product to fit the new market category.

The difference = You found a great entrepreneur versus you found a great new market category. Which one is more viable? We know the promised land is reached only when you achieved product-category fit!

In today’s language, this is called – find a great big problem, that you can solve, to create a great big market. Love the problem (market) not the solution (tech/product). There is just one problem – what is a great problem? Which type of problem, by default, will create a great new market category? This is where TMARA has an edge – Diminishing a significant limitation for a market, by default, enables creating a new market category. For the first time we can enter a world, that operates BY DEFAULT (more than 50% chance), and not by a POWER LAW (very small chance).

Today –

Investing in start-ups, and your return WILL

follow a power law

Tomorrow –

Invest in new Market Categories, and returns will NOT 

follow a power law (by default). Returns will be ‘by default’. By Default = more than 50% of the time.

Essentially the MCG is a MUST-HAVE investment vehicle, and inevitable for early-stage investors

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Other topics by TMARA, include :

The rewards of an early-stage LEAD investor

https://www.linkedin.com/pulse/rewards-early-stage-lead-investor-anthony-nathan/

Stop turning friends and family into fools!

https://www.linkedin.com/pulse/stop-turning-friends-family-fools-anthony-nathan/

HOW to know, IF and WHEN a startup will reach Product-Market Fit:

https://www.linkedin.com/pulse/know-when-you-could-reach-product-market-fit-pmf-anthony-nathan/?published=t

The primary cause of startup failure:

https://www.linkedin.com/pulse/simply-true-anthony-nathan/

Most, if not all, of the great startup successes (home runs) did not solve a BIG PROBLEM for a big market!

https://www.linkedin.com/pulse/non-consensus-piece-info-changes-game-early-stage-venturing-nathan/

 www.tmaragroup.com for more conversations

(c) Copyright protected by TMARA 2019

Early-stage investors in Israel, can now take options in the home-runs generated inside Israel’s first Market Category Generator (MCG)

Context:

The power law governing early-stage venturing and investment, implies that PREDICTING home-runs will yield (on average) no more than a 1 in 20 home-run wins.

In other words, PREDICTING the winners, will always follow the power law.

New rule:

STOP predicting (you won’t beat the power law), and START creating home-runs where the odds improve to 1 in 3.

Israel’s first Market Category Generator (MCG) contains a scientific Product-Category Fit (PCF) process, that creates market MUST-HAVEs, by default.

This allows early-stage investors to STOP needing to predict, and to rather enable the CREATION of home-runs, then invest only in the winners coming through the process…

HERE'S HOW:

Passing these 8 Product-Category Fit (PCF) tests in sequence, creates start-up home-runs, by default.

Viable Market:

1. Removing a significant limitation for a market, by default, results in the creation of a new market category (Why = it opens up uncontested market space)

Test = Show a common clear way of how the market is currently coping with the limitation you intend to remove. Lack of a strong coping way will be a showstopper here.

2. If the market adopts the new rule then by default it makes your invention a market MUST-HAVE (Why = your invention is the only one that can enable the new rule)

Test = Can the market easily adopt the new way (rule) or is it going to take a long time? Is adoption within the control of the market or not? We are looking for rule adoption showstoppers here.

Viable Product:

3. Being able to remove the limitation technically for the market, by default, satisfies the objective of the old rule sufficiently

Test = A sample of customers experiencing the new way must confirm that after what they have experienced the old objective & old rule serve no further purpose. Any further need for the old objective and old rule will be a showstopper here.

4. By adopting the new rule the market will realise value by default

Test = A sample of customers indicate how much value they realise by just adopting the new rule (the default value). Lack of default value will be a showstopper here!

Viable Offer:

5. Where the cost of coping (penalties) is greater than the price of the new solution, the market is already paying for it, by default

Test = Confirm with the market that the cost of coping is greater than the cost of the new solution. A higher solution price tag will be a showstopper here.

6. Having serious skin in the game by default attracts more buyers. 

Test = Does the value guarantee counts? Achieving a below par sales conversion rate will be a showstopper here.

Viable Traction:

7. A lightning strike event is, by default a category defining event.

Test = Emerging category king – The new way must be associated with the company. Lack of recognition of ownership of the new way will be a showstopper here.

8. Achieving more than 40% market relevance (the PCF or growth hacker test), by default, cause market push to become market pull (ready to scale)

Test = Conduct the growth hacker test. Anything below 40% will be a showstopper here.

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www.tmaragroup.com for more on the Market Category Generator (MCG Israel)

Other topics by TMARA, include :

Stop turning friends and family into fools:

https://www.linkedin.com/pulse/stop-turning-friends-family-fools-anthony-nathan/

Fewer start-up failures, does not mean more winners:

https://www.linkedin.com/pulse/fewer-failures-do-mean-more-winners-start-ups-anthony-nathan/

HOW to know, IF and WHEN a startup will reach Product-Market Fit:

https://www.linkedin.com/pulse/know-when-you-could-reach-product-market-fit-pmf-anthony-nathan/?published=t

The primary cause of startup failure:

https://www.linkedin.com/pulse/simply-true-anthony-nathan/

Most, if not all, of the great startup successes (home runs) did not solve a BIG PROBLEM for a big market!

https://www.linkedin.com/pulse/non-consensus-piece-info-changes-game-early-stage-venturing-nathan/

TMARA has formally transitioned from being the world’s leading Product-Market Fit (PMF) scientists, to the bleeding-edge Product-Category Fit (PCF) ‘home-run’ generator & investment enabler.

Why?

….because, whilst PMF remains priority #1 for all

 start-ups, 

PCF is the ultimate

 expression of entrepreneurial success.

 Further explained…

  • Reaching PMF in an existing market, still means competing with the market’s dominant king,

whereas…

  •  Reaching PCF, enables the new venture to become the king in uncontested space.

Therefore 2 interrelated new

 early-stage venturing and investment categories 

have been created,

one that delivers PCF for start-ups

,

and one that links these home-runs to investment

The new category for Start-ups, called the Market Category Generator (MCG):

The MCG is the missing link in the start-up system, now sitting between the incubator and accelerator, generating demand in new market categories through a market-validating scientific PCF process, to produce what we call, Emerging New Market Category Kings.

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The MCG guarantee to start-ups:

  • An agreed min. Series-A valuation, on condition all PCF tests are passed.
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The new category for early-stage Investors, called Investment Options:

The second new market category that the MCG enables, is where investors can now take investment options on the home-runs produced by the MCG

This new investment option category, sits between traditional Seed and VC, and is expected to attract up to 15% of all global start-up funds within 10 years. 

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The MCG guarantee for investors:

Home-runs are produced for a pre-determined max. cost.

www.tmaragroup.com is currently repositioning its PCF messaging, and in the meantime invite:

  • Truly innovative start-ups, a.k.a aspiring New Market Category Kings to apply to a local MCG,

and

  • Early-stage LEAD investors seeking to learn more about the MCG investment home-run options model.