10x returns

Understanding TMARA



Early-Stage Investments’ Biggest Secret


Superior investors recognise that early-stage investment success follows a power law distribution, meaning the bulk of returns come from very few of the investments/start-ups in a portfolio, rather than a normal distribution, where the returns from many of the start-ups in a portfolio contribute to the overall return.





Example of Success with a Portfolio of 20 Investments:

One investment may return 100x, while the next best returns 5x and the rest struggled or died – the best investment returns more than the sum of the returns of the rest.


A few iconic early-stage investors are much more successful than others, because they had found ways to leverage the power law.


If only 1 out of 20 could be a big success, but nobody knows which one, then every investment must have the potential to return the entire fund.


Make sure your luck counts!

It is devastating to take a very small stake in a start-up that ended up returning 100x, but the return is far from returning the entire fund.


For example: Mark Andreessen invested $250k in Instagram in 2010, when Facebook bought Instagram 2 years later for $1billion, Andreessen netted $78m – a 312x return.  Unfortunately for Andreessen, his fund was $1,5 billion, meaning he needs 19 “Instagrams” just to break even.



For iconic early-stage investors, the winning rule is counter-intuitive:  Make sure that every investment can singlehandedly give you your required return on the Full Fund




Investments with a 100X plus potential, can return the value of the entire fund

Most will not make the cut.


OBSTACLE: Finding 5 is a struggle – forget about finding 10

  • Forget finding them all in one vertical
  • Forget finding them where everybody agrees (market consensus) – low risk-low return
  • Forget finding them as ‘more of the same’ – the red ocean of competition
  • Forget finding them as a tech trend – they tend to be more a new market trend


Find a potential new market category king in a big enough market (0 to 1)

Perfect Execution Mindset

OBSTACLE: Sitting on a winner and only to see it fail, when something could have been done, like causing a cash constraint through inaction

  • Buffer for Success
  • Find the potential new market category kings, and back them with every resource.



FINDING 3-5X INVESTMENTS (the sum of all the returns)

For most early-stage investors’ their rule is more a natural tendency; The required return on the Fund comes from the sum of all the investments (make sure your luck counts).


Many will make the cut, at least 1 out of every 10

OBSTACLE: picking the best from the pack

  • Hot Verticals
  • Traction
  • Jockey/Team
  • Avoid being the lead investor


Perfect Execution Mindset

To avoid failure,  limit exposure.

OBSTACLE: Losses are unavoidable

  • Buffer against potential failure
  • Risk avoidance
  • Don’t put in too much (run lean)




Use the TMARA Market Category Generator (MCG) to identify potential new market category kings in big enough zero-to-one markets


Select, Test, Invest

  • Select only the unique type of problem, that by default, leads to new market categories
  • Test to see if the start-up can reach Product/Market Fit in the new category
  • Invest by taking an option (pay for the testing) to enjoy a discount on equity placements at product-market fit, to scale the business (Series A).


Perfect Execution

  • Buffer for Success
  • Pipeline of four concurrent start-ups with a buffer of new ones to replace any that fail
  • Go/No Go tests that set the bar high enough to ensure success or force early failure
  • Test Cash – seed
  • Growth Cash – late seed
  • Scaling Cash – series A