Poker Strategy Could Be Used To Teach Financial Investing
Novice poker players or those who have never played poker might be quick to tell you that poker is a game of chance as it is based on luck.
Professional poker players with beg to differ as they invest time and effort in developing their skills as they believe their success at the poker table depends on their poker strategy.
For new venture capitalists, early investments can be similar in many ways as they are not very sure or confident of what they are doing and if the investment they are backing will pay off for them. They ride an element of luck because they are new to the field and in many ways take a gamble.
Many venture capitalists have decided to just throw their money at what they find interesting and just hope that it becomes successful. The weakness of that approach is just ‘hoping’ that a company will succeed will not ensure that the money invested in it will be earned back.
There is a better way for venture capitalists to be more certain of their investments. They can learn a few important tips for poker players and use that in their business ventures.
Poker Strategy For Venture Capitalists
This is why it is recommended by two experts, Kamal Hassan and Claudia Zeisberger, to try and emulate the strategy that a lot of poker players use when playing poker games such as Texas hold’em. Hassan is a founding partner of venture capitalist firm while Zeisberger is a Senior Affiliate Professor of Decision Sciences and Entrepreneurship and Family Enterprise. Both of them have pointed out that venture capitalists can learn quite a few interesting lessons from observing poker players.
The ‘poker player’ strategy would involve investing small at the start. This is similar to how a poker player tests the waters in the initial part of the flop. The small bet keeps them in the game. The next step is to wait for further developments.
When the next ‘card’ flops, investors can then decide whether to ‘fold’ which is to back out of the investment or to "raise" their investment. ‘Raising’ investments should be 50 to 100 times the original investment. The plan is to continue on slowly investing in the firm or to sell out an opportune time.
The goal is to keep on investing in big winners and selling out on the losers. This ensures that profit is maximized, while losses are minimized. This approach is very time-consuming, but with small initial investments, venture capitalists would have access to good internal info on whether to continue putting money into the company or not. This is a lot better than just going ‘all-in’ at the outset.
Successful poker players get to be successful by cutting their losses early and by putting money in good hands as they develop. This investment strategy is a good one to emulate for venture capitalists.