10 Reasons Why Startups Are Like Hedge Funds

Something I came up with yesterday, as I worked on BuzzPal recruiting documents.

Startups and hedge funds both:

  1. Assemble and utilize small teams of smart people.
  2. Operate in constantly changing and risky environments.
  3. Make rapid-fire decisions with incomplete, and sometimes faulty, information.
  4. Form and test hypotheses in the marketplace, incorporating new information as it emerges.
  5. Make “in flight” adjustments as situations develop and change.
  6. Invest in their winning ideas and morph or kill their bad ones (pure survival of the fittest).
  7. Make a lot of mistakes, but admit them quickly.
  8. Cut their losses quickly.
  9. Constantly improve and evolve.
  10. If they are successful, can make their employees and investors quite wealthy.

PS: Some of you may be wondering how/why I came up with this. The reason is that, besides startups, economics, sociology, and psychology are three of my passions. One of the best ways to study those topics is through global financial markets, which can’t be discussed without mentioning hedge funds. Another hedge-fund-related tidbit, which many of you already know, is that one of the most successful startup founders in America — Peter Thiel — combines startups, hedge funds, and venture capital. He is quite successful!

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