I’m fascinated by growth.
As a financial industry entrepreneur and investor, in many ways, growth is my stock-in-trade.
Whether they’re small start-ups in Silicon Valley or huge public companies, the best companies experience very high growth.
I have an 8 to 80 investing philosophy, which basically means that I’m looking for high-growth companies that appeal to people between 8-years-old and 80-years-old.
If you mention brands like Visa, Google, Amazon, and Netflix to an 8-year-old and an 80-year-old, both people are going to immediately know the company.
That brand awareness is important when the economy is doing well, but it’s even more important when the economy is doing terribly. These are the types of brands that you want to own when things are bad.
When things are good, anybody can make money in the markets. But when the economy is bad, everything moves back to those well-known, high-growth brands that you want to own.
When I’m buying or selling stocks, I don’t care about the bottom 10% or the top 10%.
I don’t care if I sell at the top or buy at the bottom.
I’m just trying to find trends that are very meaty.
I’m willing to sell when profits are on the way up because most companies and most economies continually go through cycles.
There’s no perfect rule, of course, but I generally like to sell when stocks are going up. With great brands, these 8 to 80 brands, I like to buy on the way down—meaning down 25%.
So that’s a little insight into my approach to investing. Let’s dig a little deeper into the markets, ecommerce, and investments.
Private Markets Are the New Public Markets
Public markets are fun because there’s a scoreboard, so you can always look at your account and see what it’s worth if you wanted to sell.
But to be a great investor, it helps to not look at your account every day.
And what an easier way to not look at your account than to invest in a private company?
I prefer to invest in young, early-stage start-ups where a lot can go wrong.
But in the public market, I’m very comfortable owning the most expensive, fast-growing companies because I can sell them the next day.
I don’t have any edge other than my strategy. In the private market, I have a feel for what industries to be interested in by watching the public market.
I’m closely watching the commerce industry right now, which is by far the hottest sector.
Ecommerce software companies, customer support software companies, and others are growing rapidly in the public sector, and you can watch it play out in the start-up market as well.
Whether private company founders know it or not, they’re being attracted to the sectors that are doing well in the public market.
There are hundreds of companies being started in the enterprise support and software space right now, and this is the area where Amazon, BigCommerce, and other commerce companies are looking to do acquisitions.
The enterprise software industry is interesting because it’s like a game and I’m trying to figure out which way the money is flowing.
Looking at the public markets gives me an edge on the private markets.
Start-ups fascinate me, and I’m always on the lookout for the next big thing.
The Emergence of Micro-brands
I’m bullish on micro-brands.
Small brands are nothing new, of course, but they historically remained small companies.
Now many micro-brands are generating $10+ million in sales with high-profit margins and are having a much bigger impact than most people think.
All of these micro-brands need software. After all, if their customer experience isn’t as good as Amazon’s, they’re dead.
If you’re going to compete at Amazon’s level, the table stakes are the support and software it takes to deliver an Amazon-like customer experience.
I want to invest in those high-growth software companies that are powering a micro-brand’s customer experience so they can be at Amazon’s level from day one.
Examples of High-Growth Ecommerce Companies
I founded a company called StockTwits in 2008 with a vision to create the largest online community of traders and investors.
Every month, over two million people log in to talk about stocks, share ideas, and even trade using an app integration called Robinhood—the fastest growing financial app of all time and a company I was eager to help fund when I discovered them in 2013.
Robinhood’s no-fee app has reimagined stock trading and investing for the mobile app era.
It’s the ecommerce backend for StockTwits and became a $5 billion company in just four years.
Another interesting ecommerce company I’ve invested in is Rally Road, which enables people to buy and sell equity in classic cars.
Collector cars are perfect investments for the new generation of millennial investors.
They don’t want to own 10 cars and have all of the overhead, but they want to own pieces of things.
If you tell them they can own a piece of those 10 cars and be diversified across an index, they’re interested.
Rally Road’s idea was to prove that there are tens of millions of people who watch car auctions, but only hundreds or thousands of people that can actually buy the car. And then they have to store the car and pay for expensive insurance.
Their vision was to give people a fractional ownership of these great collector cars, so they go out and buy one and do an IPO for it.
So far they’ve done seven IPOs and they’ve sold them out.
Invest in What You Use
If you’re paying attention when you walk around any large city, you see a lot of Nikes on people’s feet, Apple EarPods in their ears, and a handful of other very common brands.
We wear these brands every day, and whether it’s an Apple product or a micro brand, we see them with our eyes.
And our eyes, if used properly, are AI.
I have 52 years of knowledge in my eyes, and so I pick up on things.
It’s not because I’m a genius; it’s because my eyes are working, my ears are working, and I have conversations with my kids about what’s popular in their generation.
Then I investigate trends, research brands, and watch prices.
It’s obviously a little more complicated than that, but successful investing is really just a combination of these things.
Your eyes, your ears, your instinct, and risk management differentiate good traders from bad traders.
These are the things that play a big role with early-stage start-ups.
As you get into the middle, investing really becomes about spreadsheets, evaluating the team, and digging into the business model. And that’s really messy.
The middle is for all of the people that I don’t want to compete with.
On the other end of the spectrum, in the public markets where I like to trade, everything’s overvalued. And if everything’s overvalued and we all agree that it’s overvalued, then I have an edge because I have a risk management profile.
My whole investment strategy is basically to avoid the middle.
I love micro-brands and I love humongous companies like Nike and Apple that are still misunderstood by the masses.
I shop at their stores, I wear their products, and I watch people interact with these brands.
I call them 8 to 80 brands not because I want to own them when everybody else owns them. I want to own them when everybody’s panicking because nothing’s really changed except people’s mood around the products.
Invest in You
If you want to start investing in ecommerce, and I strongly encourage you to do so, the first thing you should do is follow smart people.
We all need mentors, so find a few to help guide you in the right direction.
Seek people out who are experts in their space.
They’re all on Twitter or Snapchat or Instagram.
Follow them. Be nice to them.
The internet is a place to be mean, but do the opposite. Be nice to people. You’ll be surprised how far you can get.
If you have to pay for mentors, pay for them. And if you have to fire a mentor, fire one.
You’re in control. You’re running your own company, which is you.
If it’s stock advice, find people that are good at what they do. If they’re charging $80 a month, invest. Speed up the process. Don’t do it all yourself.