Follow The Money

If you jump into a fast-flowing stream, and can stay afloat, you can become rich.

During a course on small-business strategy at a well-known business school, the lecturer pointed out it wasn’t management genius, or a clever strategy, that had been the biggest driver of wealth in the preceding 10 years as much as “putting your boat into a fast-flowing stream”. As long as you can stay afloat, you are likely to make some money. Although this may seem a rather simple idea, they are often the best.

It is then of some interest to see what folks who got into Facebook and Twitter a while back are putting their money into now. It should come as little surprise to anyone who follows this blog that it’s online retail. Yuri Milner’s internet investment firm Digital Sky Technologies (DST) and the Samwer bothers, who have both done rather well out of Facebook, have now invested in Zalando, a German online clothing retailer. Zalando is a little like Asos in the UK.

“Zalando has a professional management team, an impressive growth record and great potential to capitalise on the fast-growing European e-commerce market,” said Alexander Tamas, partner at DST. (I’d love to misquote him as saying “fast-flowing”)

Tamas used to work for Goldman Sachs, as did most of the partners at DST, which emerged out of the Mail.ru group. These days it is independent of Russia’s largest internet company Mail.ru; and has investments in Facebook, social network game developer Zynga and deal-of-the-day site Groupon. DST is actively following the top 50 “social web companies” and intends to invest a further $1 billion in this sector by 2016.

DST is quite expert at investing in this sort of firm and tends to buy both preferred stock from the company and common stock from employees, so much so that this sort of deal is known by some as a “DST deal”.

My guess is that if you want to make this sort of speculative investment you could do a lot worse than follow these guys by investing in secondary venture-capital funds that mirror what they do.

Many people have become rich by jumping into a fast-flowing stream after the guy with the money. Just make sure you have a life-jacket on too.

Mark

 

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