How do you invest in startups across diverse markets?

Investing in startups across diverse markets can be a rewarding but challenging strategy for venture capitalists. You need to understand the different opportunities, risks, and nuances of each market, as well as how to adapt your approach and criteria to suit them. In this article, you will learn some tips and best practices on how to invest in startups across diverse markets, based on the experience and insights of successful venture capitalists.

1 Know your markets

The first step to invest in startups across diverse markets is to know your markets well. You need to research the market size, growth potential, competitive landscape, customer behavior, regulatory environment, and cultural factors of each market you are interested in. You also need to identify the gaps, problems, and trends that create opportunities for innovation and disruption. By knowing your markets, you can better evaluate the market fit, scalability, and differentiation of the startups you are considering.

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Michael Deem

CEO and Founder | Venture Capitalist | Life Sciences | AI
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There is interesting research from Harvard Business school about funds with main offices (in San Francisco, Boston, or New York), such funds that also have branch offices, and funds based outside the three main cities. Investments from main offices into companies based outside their cities have 1.5% alpha. And investments from branch offices have 2.5% alpha.

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2 Build your network

The second step to invest in startups across diverse markets is to build your network in those markets. You need to connect with local founders, investors, mentors, experts, and influencers who can provide you with valuable insights, referrals, feedback, and support. You also need to establish trust and credibility with them, as well as understand their expectations and preferences. By building your network, you can access more deal flow, due diligence, and post-investment assistance.

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Jayaram K Iyer

Entrepreneur | Angel Investor | Artificial Intelligence, Computer Vision, Analytics, Marketing Automation - Saas Products
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I think the perspective of the network is more to help one assess the founding team. Above all else, the integrity of founding members, is paramount. Their interest in balancing customer value, employee value, investor value and their value needs to be elicited and evaluated. However good investors research of the markets is, however great the clarity of business plan of the founding team is... Everything pales if the founding team has a suspect reputation.

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3 Adapt your criteria

The third step to invest in startups across diverse markets is to adapt your criteria to each market. You need to recognize that the same metrics, benchmarks, and standards may not apply to different markets, and that you may need to adjust your expectations and assumptions accordingly. You also need to consider the specific challenges and opportunities that each market presents, such as the level of competition, the stage of development, the availability of talent and capital, and the potential exit paths. By adapting your criteria, you can make more informed and realistic decisions.

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Levi Reed

Founder at Twig Ventures | Adjunct professor at UW Foster | Material Change Fellow | Director, Founder Institute-Seattle
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This is a critical point. Many of the conventional methods for evaluating deals actually introduce substantial bias and distort assessment. Research has demonstrated, for example, large disparities in the probability of receiving funding depending on whether a pitch is delivered by a male or female voice; one study found that male presenters were 60% more likely to receive investment than a female presenter with the exact same pitch. Consider also the challenges a founder may have overcome to reach their current situation. Achieving success and funding without the benefit of a strong network through a prestigious school or employer is more meaningful that the same achievement with the benefit of strong family connections, for example.

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4 Diversify your portfolio

The fourth step to invest in startups across diverse markets is to diversify your portfolio. You need to balance your risk and return by investing in a mix of markets, sectors, stages, and models. You also need to allocate your resources and attention wisely, by focusing on the most promising and strategic opportunities, and by avoiding overcommitting or spreading yourself too thin. By diversifying your portfolio, you can optimize your performance and resilience.

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5 Learn from your mistakes

The fifth step to invest in startups across diverse markets is to learn from your mistakes. You need to accept that investing in diverse markets is not easy, and that you will inevitably face failures, setbacks, and surprises. You also need to analyze and reflect on your mistakes, by identifying the root causes, the lessons learned, and the corrective actions. By learning from your mistakes, you can improve your skills and judgment.

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6 Keep an open mind

The sixth and final step to invest in startups across diverse markets is to keep an open mind. You need to be curious, flexible, and humble, by constantly seeking new knowledge, perspectives, and opportunities. You also need to be respectful, empathetic, and inclusive, by appreciating the diversity and uniqueness of each market, founder, and startup. By keeping an open mind, you can discover and support more innovation and disruption across diverse markets.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you invest in startups across diverse markets?

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2

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4

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1 Know your markets

2 Build your network

3 Adapt your criteria

4 Diversify your portfolio

5 Learn from your mistakes

6 Keep an open mind

7 Here’s what else to consider

Venture Capital

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How do you invest in startups across diverse markets?

1

2

3

4

5

6

7

1 Know your markets

2 Build your network

3 Adapt your criteria

4 Diversify your portfolio

5 Learn from your mistakes

6 Keep an open mind

7 Here’s what else to consider

Venture Capital

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