We're sure some of you have plans of launching your own start-up, becoming your own man and getting rich (if not the first two, then surely the last one). And when you do, you just might want to start investing in other start-ups, especially if you've gotten your racks through opening your own small business.
It's easy to think that the mindsets you need to be good at both entrepreneurship and investing are similar. After all, it's about making money and everyone whose made money has been tenacious, bold and confident, right?
Well, not quite, at least not according to Bill Harris. He's the entrepreneur that wrote in Inc. Magazine's May issue about why businessmen can make for terrible investors. And, to be fair, he brings up a few good points.
"I have yet to hear a Silicon Valley start-up founder confess to a lack of belief in his or her own company or skill set," Harris said. "The confidence that propels your entrepreneurial drive can create problems in managing your investments."
It's a sentiment that, when examined, makes a lot of sense. The greatest of millionaires had the type of resolve and unwavering belief in their ability that drove them to make unconventional decisions.
Daymond John took out a $100,000 loan to fund his FUBU operations. T. Boone Pickens quit his job when he had a wife, two kids at home and another on the way. But when your money is on the line, you can't afford to make such impulse decisions, Harris argues.
"The problem is that your confidence in your abilities and your business can spill over into your investing habits," he said. Emotions push you to do the wrong thing at the wrong time."
Investors are advised to be more calculated with their ventures, as opposed to being driven by the types of feelings that motivate entrepreneurs to spend sleepless nights chasing after their dreams. As opposed to CEOs of young start-ups who need that adrenaline that keeps them working insane hours to get things right, investors need to be more meticulous, paying attention to details behind the desk.
Investing is more about planning for the future than worrying about the day-to-day grind.
"It doesn't help that as an entrepreneur, you're trained to focus on the here and now," Harris said. Long term is next year. Believe me, I get it. But that short-term mindset makes for a lousy investor who chases hot trends in rising markets and bails in bad ones."
Now the only thing to figure out: what type of money-maker are you?