17. Actually, not everyone can do early stage…

One-sided thinking is the common fault of all “leeks”. If you don’t believe me, just wait and see.

It’s very difficult to do early stage investing! It’s just that the vast majority of people don’t know this. They only see the legend that early stage investors make a lot of money, but they don’t know the truth at all.

First, there are many times more failed early stage projects than there are successful ones…

You may have heard that LI Xiaolai started buying bitcoin in 2011; at the end of 2015, after Ethereum came out, even though Li Xiaolai wasn’t optimistic about it, his partner Lao Mao grabbed the opportunity; in 2017, even though Li Xiaolai didn’t know about the seed round of EOS, he invested in the angel round… Aside from this, Li Xiaolai also invested in QTUM, ZCash, SIA, GXS, XIN, MOB…

I’ve read Lao Mao’s book Blockchain Investing Notes many times myself…

Li Xiaolai lives publicly online, so he won’t deliberately hide the failed projects that he has invested in. If you listed out all of the projects that Li Xiaolai has invested in (even though I don’t hide them, I’d find it embarrassing to publicly list them all over the place), the conclusion is clear: there are more than ten times as many failed projects as successful ones!

Second, you actually can’t invest much money in early stage projects…

This is a problem that most people haven’t thought about. When Peter Thiel invested in Facebook he was the earliest angel investor, but how much did he invest? Only 500,000 USD. He also wanted to “take a large position”, but he actually couldn’t invest more! If you invest too much in startup companies they will turn bad. Do you believe it? If you give too much money, then you have to own too high of a percentage, and investors don’t want to do it and don’t dare. Do you believe it?

And there’s something even more important! Because they are “early stage”, early stage investors can only become long term investors…

In the long period before Facebook went public, Peter Thiel’s stock was “completely illiquid”. Gains and losses on illiquid assets are nothing more than “book value”.

I bought a lot of bitcoin in the second half of 2011 and the first half of 2012. By April 1, 2013, bitcoin had gone from a low of less than 1 USD to 100 USD in just a few months! You must think I earned a lot! But actually? In the trading markets at the time, transaction volume was very low. A lot of exchanges were flooded with orders from the exchanges themselves, which people jokingly called “ghost orders”… So with that level of transaction volume there’s no way I could have gotten out. If I wanted to sell some , it would “crashed the market”, and it really would have crashed it to a scary place. So that “floating profit” was at most a number I could look at and feel happy about; it wasn’t real at all. It wasn’t until 2017 that the transaction volume for the whole market got to a place where one could freely enter and exit — but for me there was already no point to it, since my I don’t spend much money anyway.

Imagine again when Facebook went public on February 2, 2012. On the next day its stock dropped below the issuance price, “crashing 11%”! Even if you bought before the “crash” and “had your leeks cut”, how multiples would your return have been if you had held until today?

But here is the key:

When Facebook went public, it definitely was no longer “early-stage investing”, and there was such a large market that it had much better liquidity…

So you could invest as much as you wanted to, and there wasn’t an upper limit of “just 500,000 USD”…

“Leek’s” thinking is one-sided. They only looking at the “unit price” and conclude that “it’s already to expensive now”! So they always look for “cheaper”, and always look for “earlier opportunities”… Little do they know that this one-sided thinking is an “invisible sickle” that reaps them again and again.

Early-stage investing really isn’t something that everyone can do. Even if you don’t consider the necessary personal relationships, for most people their capital composition just isn’t right. Investing at an early stage is extremely risky, and most projects will fail, so you need to be able to invest in 50 to 100 projects. That means if you invest 500,000 in one project, you need to prepare 50 million. Even if you’re confident that your judgment is twice as good as others, you still need to have 20 million to try out with 500,000 per project, right?

Obviously, leeks don’t satisfy these conditions. They are not qualified, but they do it anyway, which means that the risk is infinitely greater.

Investing in early stage projects is absolutely not something that leeks should do. You must amass a certain amount of resources before you touch these types of opportunities, or else you will be cut again and again.