Investing in the Personal Fitness Industry

Amit Raizada

August 19, 2020

Over the years, I’ve come to view the gym as something of a sanctuary. After a long day at the office, it always feels liberating to lift some weights, take a spin class, or go for a run.

 

But like many fitness enthusiasts, my daily workout routine changed drastically in mid-March, when gyms and workout facilities across much of the country were ordered to close amid COVID-19 stay-at-home orders. For the most part, gyms—which make up a $30 billion annual industry in the US—have remained shuttered, and individuals have been forced to devise new ways to get their daily workouts.

 

With thousands of gyms around the country closed for the indefinite future, there exists a significant opportunity to disrupt the personal fitness industry. As an investor, I’ve always been an advocate for creative destruction—the process of discovering innovative, new ventures that revolutionize and inexorably change well-established markets. As consumers increasingly turn to personal exercise equipment and supplements as substitutes for traditional gym experiences, aspiring investors should consider how they can enter this burgeoning new market.

 

From fitness tech to nutrition products, these case studies will help aspiring venture capitalists think critically about where to seek innovative opportunities in this new vertical.  

 

Fitness Tech

 

I’ve always maintained that effective investors should look for ways to revolutionize and existing markets—and that’s exactly the effect that the proliferation of tech has had on the fitness industry over the last decade.

 

Take Peloton, for example. Stationary bikes are nothing new—they have been a gym staple for decades. But Peloton has devised a way to marry this time-honored piece of equipment with the latest technology. Pairing their stationary bikes with Wi-Fi and LED monitors, Peloton offers hundreds of live-streamed fitness classes in which users can interface with trainers and compete with other athletes from around the world—all without having to leave their homes.

 

This model propelled the company to a nearly $1 billion revenue haul in 2019.

 

Peloton—literally speaking—did not have to reinvent the wheel to achieve such success, it merely had to reformulate an extant product for a changing market. I advise investors to look for firms that integrate up-to-date tech into fitness products that can easily and efficiently be deployed from home.

 

Refueling

 

Proper nutrition is essential to staying fit, and as Americans increasingly turn to exercise as a method to cure quarantine boredom, demand for high-quality nutrition products will almost certainly increase.

 

Aspiring venture capitalists should consider ways to tailor this demand to better meet the preferences of young people, an especially health-conscious cohort that generally avoids products high in sugar, carbs, and fat. Ventures that makes inroads with Millennials and Gen Z—the consumers of the future—could well be the firms that will define the direction of the economy in ten or twenty years.

 

With this in mind, I invested in TuMe Water a couple of years ago. TuMe offers a range of hydration products that inject turmeric into water, offering consumers an easy, appealing way to incorporate the herb into their daily diets.

 

Venture capitalists should look for similar opportunities that leverage the ever-growing demand for post-workout refueling products and nascent consumption trends to develop a winning product.

 

Space

 

With the protracted closure of gyms, many Americans have taken matters into their own hands, purchasing weights, bench presses, and even Pelotons for their own personal gyms. But many taking this approach have run into a similar problem—space.

 

Those who live in high-density, urban areas often lack the requisite square footage in their apartments or condos to store their home gym equipment. This often becomes a limiting factor.

 

Aspiring investors should seek out about strategic ventures aimed at mitigating this issue. With myriad new technologies at hand and a corresponding demand now sweeping the country, innovative entrepreneurs will likely seek out high-quality models to store equipment and maximize exercise space. Will you be there to help?

Lessons Learned from a Highly Speculative Stock Market

Amit Raizada

July 24, 2020

Lessons Learned from a Highly Speculative Stock Market

The recent price movements in the stock market emphasize the growing relevance of disruptive market investments for savvy investors. These investments have become essential for navigating the global economy's dramatic shifts, offering a unique lens to uncover long-term opportunities through innovation.

Understanding the Shift Toward Disruptive Market Investments

The huge swings up or down can be enticing—even intoxicating—for new investors. Promises of fast money on exaggerated market moves have led to a surge of reckless investing. However, this type of speculative trading often lacks the long-term potential found in disruptive market investments. The difference lies in identifying trends that cater to changing consumer needs, enabling investors to bank on sustainable innovations.

The Age of Robinhood and Immediate Gratification

The popular investing app Robinhood has democratized market access, encouraging a wave of new traders. While this has led to some impressive short-term gains, it has also sparked troubling trends. The allure of options trading and penny stocks often eclipses the long-term value of disruptive market investments. By focusing on companies that innovate and fill market gaps, investors can avoid the pitfalls of speculation and instead build sustainable portfolios.

Case Studies of Disruption: Hertz and Nikola

At the end of May, Hertz declared bankruptcy, but its stock price inexplicably soared by 900 percent due to speculative trading. Similarly, Nikola’s rise and abrupt fall highlight the dangers of jumping onto short-term trends without understanding the fundamentals of disruptive innovation. Investors looking to capitalize on the transformative power of disruptive market investments should focus on ventures that address real-world needs and offer groundbreaking solutions.

The Future of Investing: Focus on Disruption

Investment is more than just a numbers game. By emphasizing disruptive market investments, aspiring investors can tap into ventures that revolutionize industries and provide long-term value. Whether it’s filling voids in the market created by younger generations or delivering cutting-edge technologies, the future belongs to those who can identify and support innovation. Disruption doesn’t just transform industries—it creates opportunities for life-changing returns while positively impacting the world. You can read more about Investment Philosophy here 

Millennials and Markets, Part III: Investing in the Source

Amit Raizada

July 6, 2020

In the second article in this series, we looked at how millennials prefer to search for investment opportunities that match their own lived experiences. Likely a consequence of the adverse economic conditions in which they were raised, younger generations have looked to cryptocurrencies as a solution to alleviate some of their economic fears, like inflation and bank failures.

In an economy where cradle-to-grave employment is all but gone and individuals have become accustomed to switching jobs every few years, brand loyalty has been deeply eroded among younger generations. Millennials and Gen Zers tend to support “the little guy,” over the blue-chip, name brands. Eschewing the rigidity inherent in many of these brands, they prefer to work, and invest, on their own time – supporting gig economy firms like Uber and Postmates.

In the final installment of this series, I wanted to face the cornerstone of the millennial capital paradigm – using investment to create social change – head-on. Many young investors have sought out ventures that directly address the societal inequities they hope to redress.

Directly Investing in Social Change

Millennials have long been known to directly invest in social change. Perhaps the most striking example of this was found during the movement for justice after George Floyd’s death. We witnessed the powerful impact of crowdfunding and social organization, allowing young people to leverage their money for social causes they cared about. ActBlue, the Democratic National Committee’s main fundraising wing, saw one of its largest fundraising hauls in the days after the initial protests. Young investors are becoming significant benefactors of nonprofits and advocacy groups, choosing to place their money not into corporations, but into institutions that will drive the change they wish to see in the world.

As a vocal proponent of tolerance, I am incredibly optimistic about the trends in giving that we are witnessing among the younger generations. We are seeing that they are not afraid to give directly to the social causes they care about; And, as technology continues to make the giving process even simpler, we will see millennial support for charitable causes grow exponentially.

Millennials are truly revolutionizing the investment landscape, leading with their values and eschewing all companies, commodities, and causes that don’t align with those values. As I have always said, the secret to investing is really no secret at all: Always keep your finger on the pulse of younger generations’ tendencies and the trends that emerge from them. By keeping this in mind as you make your next investment decision, the upside will be forever in your favor.

Many millennials and young people fell they were dealt a poor hand. To be honest, I can’t say I blame them. But they were also born into a period when consumer technology has taken off, when green energy has challenged the traditional oil barons, and when society has begun to value social awareness over capital gains.

Whether we choose to understand their preferences or not, they are the future of the US economy, and their propensities will dictate whether firms take off or sink for the next fifty years. These preferences, while different from my generation’s, are no mystery. With shrewd observation, venture capitalists can identify these preferences and invest in firms that advance them. The millennial investment wave is coming – it’s up to us whether we get left behind.

If you enjoyed our book series then please check out our Millennials and Markets Parts 1 and 2.

Millennials and Markets, Part II: Currencies and Gigs

Amit Raizada

July 6, 2020

In the first installment of my series on young people and their changing investment habits, we looked at how their “millennial outlook” on investment had been shaped by adverse economic conditions in which many were raised and by a desire to use investment as a strategic tool to drive social change. In that article, we discussed how sustainability is a significant concern among millennial investors, as many seek to patronize innovative green firms like Tesla in lieu of the traditional fossil fuel giants.

But it’s no surprise that climate change and sustainability are important to young people. In this article, I wanted to examine some millennial preferences that are less intuitive to outside investors. In many ways, this mirrors one of my favorite investment strategies – closely observing the preferences of young consumers to gain a foothold in the markets of the future.

Cryptocurrency

Cryptocurrencies like bitcoin, Ethereum, and Litecoin are continuing to gain popularity with millennials. But I believe a deeper, psychological shift is underlying the younger generations’ move to crypto. Many young people experienced the Great Recession in their teens and the COVID-19 pandemic in their twenties, is it any wonder that they’re circumspect about banks?

As the Federal Reserve enacts protocols of “unlimited” quantitative easing – a process where America’s central bank buys assets to pump money into the economy – there is a profound concern about the state of inflation, the dollar, and fiat money in general. If the Fed has the ability to essentially create money out of thin air, what does it mean for the value of our greater economy?

By investing in blockchain technology, investors are putting their money behind a valuable innovation with advantages that look quite enticing against the backdrop of today’s economic woes. By allocating a portion of their portfolio to cryptocurrency, the next generation is essentially hedging against the failings of the global economic system. If economic policy or global unrest causes the collapse of fiat currencies, what will be there to take its place? Cryptocurrency.

It’s important to note that the situation I’m describing is closer to a doomsday scenario than reality, and I wouldn’t necessarily recommend allocating a large sum of money to cryptocurrency. However, as a proponent of diversification, I side with millennials in my belief that crypto has its place in any well-diversified portfolio.

Solo Entrepreneurship / Self-Employment Technologies

Some larger corporations view their employees as expendable, which leads employees to take flight in search of better benefits and pay (I personally think companies need to incorporate a people-first approach into their business model).

With more tools available to nascent entrepreneurs than ever, the next generation of investors is turning to companies that empower the “little guy.” Shopify—an e-commerce platform that offers extensive resources for budding businesses—has seen an incredible resurgence since the crash in March, signaling that investors expect retail stores to increase their online presence (and sales) in the years to come. As barriers to entry are lifted and overhead expenses minimized, small business finds a space to thrive, making Shopify and related services like Square (a mobile payment company) incredibly enticing investment opportunities to the young investor.

As we see millennials make the jump from corporate jobs into self-employment, the gig economy is in full swing. Technological innovation—by way of Uber, Lyft, Grubhub, Instacart, etc.—has afforded people the opportunity to dictate their own hours, pay, and freedom. Younger generations are serious about freedom, and their investments show that.

If you enjoyed our book series then please check out our Millennials and Markets Parts 1 and 3.

Four Books to Read As The Economy Continues to Fluctuate

Amit Raizada

June 22, 2020

Having spent more than two decades as a venture capital executive, many of my friends in other industries often ask me if there are any books on investment and economics that I would recommend to aspiring investors or career professionals looking to spruce up their investment portfolios.

Reading is an excellent way to learn about books on investment and economics. One doesn’t need a Harvard MBA to start observing market trends and placing investments. Reading the right books can often equip an aspiring investor just as well as a course at a leading university.

As we near our fourth month of quarantine and I find myself with more down-time than ever, I decided to compile a list of the books on investment and economics that I find particularly appropriate for those looking to learn about investment.

Here are four selections from my bookshelf that I would recommend to anyone interested in venture capital, business, or even just economics in general.

The Intelligent Investor, by Benjamin Graham

Published in 1949 by Columbia Business School professor Benjamin Graham, The Intelligent Investor is the seminal work on value investing—the investment philosophy that emphasizes purchasing shares in companies that are undervalued by the market.

Value investing involves buying stocks in companies that, while sound in practice and in leadership, are experiencing some kind of downswing.

Patience is the key to successfully integrating value investing into your portfolio. Successful value investors look for undervalued companies with a plethora of upside, buy stock, and hold onto that stock until things begin to turn around.

Value investing is one of Warren Buffet’s key strategies, and he often credits Benjamin Graham for having developed the theory. This is why it is among the top books on investment and economics for any serious investor.

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, by Nassim Taleb

Finance is complex; and the best way to become a shrewd investor is to consider the myriad different academic disciplines and theories that the field encompasses. Fooled by Randomness, which concerns primarily the statistical and psychological facets of randomness, is a great example.

Taleb argues that the world is far more random than we perceive it to be. Sometimes the models and data upon which many investors depend can be impugned by little more than pure random chance.

I like to consider this when thinking about my signature investment strategy – looking toward the markets of the future. By closely watching emerging market trends and the preferences of young investors, I can help insulate my portfolio against randomness not accounted for in many forecasts.

Taleb’s work forces investors to consider the roles data science and psychology play in investment – critical for finding success in this field. It’s one of the must-read books on investment and economics for its insight into market unpredictability.

The Little Book of Common Sense Investing, by John C. Bogle

Written by John Bogle, the late founder and CEO of Vanguard, The Little Book of Common Sense urges aspiring investors to place their money into index funds.

Index funds, he says, are low risk, low cost, and track with the markets writ large. By investing in an index fund, your returns will mirror those of the index as a whole, rather than falling victim to the booms and busts of one unique stock.

Picking individual stocks can be arduous and time-consuming. Choosing an index fund means you won’t have to worry about shorting the market – just invest your money and let the S&P do all the work.

In many ways, this is an ideal strategy for a first-time investor or a recent college student. That’s what makes it one of the easiest-to-understand books on investment and economics for beginners.

Capitalism, Socialism, and Democracy, by Joseph Schumpeter

Another post-war investment classic, this book resonates with me for a different reason than what the title suggests. An economist and political scientist, Schumpeter devotes portions to explaining the differences between capitalism and socialism, but I prefer the second half, where he introduces his famed theory of creative destruction.

Creative destruction, he argues, is all about what we today call, “disruption.” Schumpeter holds that technological innovation stemming from entrepreneurs disrupts markets and destroys traditional monopolies, giving way to new firms that take over and reshape the field.

Some of today’s major tech firms, like Google, Amazon, and Netflix, began as startups with an innovative new idea that transformed the tech industry, forcing out the established firms like AOL or Blockbuster, and giving life to new verticals like streaming and on-demand online shopping.

 

This fits perfectly with my investment strategy of seeking cutting-edge ventures that offer footholds in the future of the economy. Investors should keep Schumpeter’s wisdom in mind when looking for opportunities. Which firms will be the one to dethrone some of today’s industry leaders?

Millennials and Markets, Part I: Introduction and Sustainability

Amit Raizada

June 9, 2020

2020 has been unlike anything our country has seen in a generation. Between a global pandemic and unprecedented economic uncertainty, this year has been a dismaying and disillusioning time for our younger generations, who are now tasked with building a life and achieving financial stability amidst great insecurity.

Despite these difficulties, young people are still choosing to invest their money – and their faith – in the market. But some of the ways they’ve chosen to do so, undoubtedly informed by their experiences, have been markedly different from those exhibited by generations past. For younger investors, it’s no longer just about the monetary return. Young people today see investment as a tool to induce societal change. 

Gordon Gekko’s famous "greed is good" doctrine is out, replaced by an investment mantra that privileges social impact over raw returns.

In this series of three articles, I look at ways young people, who came up amid the economic uncertainty of two major recessions and a global war on terror, choose to invest their money, and what these changes mean for the venture capital industry.

For the last few years, we’ve seen report after report about millennials’ reluctance to jump into the market, with many young Americans opting to hide their extra cash in the sofa and savings accounts. Yet, others have been holding out for the right moment, citing an overvalued market and an eagerness to "buy low." Well, for those who have been holding out, their time came this March as the stock market crashed nearly 30 percent due to the worsening reality of the coronavirus pandemic. As fearless millennials began to flood the market with investments, we were finally able to get some insight into their investing habits—what they value, and just as interestingly, what they don’t.

As CEO of Spectrum Business Ventures, I saw that, as the market bottomed out, there was an opportunity to place new strategic ventures at a time when others saw fiscal collapse. And, to my surprise, many millennials did too. But unlike generations past, millennials don’t choose their investments based purely on ROI; the invest in the firms and ventures that will help shape the world in accordance with their social and political preferences. In this first article, we look at one of the primary ways that millennials have “put their money where their mouth is” and made social statements with their wallets during this volatile period: sustainability.

Sustainability

Young people value sustainability to such a degree that green living has become an indelible component of the millennial experience.

As I’ve noted before, following emerging trends is one of the most important things an investor can do when searching for the next big company. It’s no surprise that some of the biggest winners over the last year have been millennial favorites like Tesla and Beyond Meat. Their financial success is a prime indicator that market sentiment is swaying toward sustainable, eco-friendly products and services. And millennials are leading that surge: SoFi Invest (a millennial-specific financial firm) noted that Tesla has been the most purchased stock on its platform for significant periods at a time.

On the flip side, we also witnessed the price of crude oil take a severe dive as falling demand and oversupply hit the once-dominant energy commodity (remember when crude was trading at -$37 a barrel?). In my opinion, this didn’t just come about because a slowdown in global activity—this was a culmination of investors’ fears of changing spending habits among the next generation. Millennials are rightly asking themselves why it’s necessary to fund ecologically harmful fuels when sustainable alternatives are viable and increasingly available. This is exactly why sustainable funds have outperformed their less sustainable peers during the pandemic.

It’s time to diversify your investments

Amit Raizada

May 20, 2020

The novel coronavirus has given way to some unusual business and economic headlines over the last two months. A rollercoaster couple of months for the stock market. Speculation of an impending housing or rent crisis. The possibility that Jeff Bezos may become the first trillionaire due to Amazon’s surge in revenue.

 

Yet, perhaps nothing was more unexpected than last month’s precipitous drop in oil prices. In late April, overproduction and decreased demand caused the per barrel price of crude oil (for contracts to be delivered in May) to slip below $0. Investors on both the macro and micro-scale, from the governments of Saudi Arabia and Russia to small local capitalists, were left reeling as their petroleum assets lost literally all their value overnight.

 

While prices somewhat recovered in May, this episode illustrated a crucial concept in investment that all prospective venture capitalists should consider: diversification.  

 

Diversifying your portfolio and investing in a plurality of industries can be an effective insurance policy against wholesale financial ruin when the economy begins to contract. When your money is spread across a multitude of sectors, rather than concentrated in one narrow market, odds are that at least some of your assets will stay above water when a recession hits. The more diverse your portfolio, the greater the odds your assets will continue to perform.

 

A shrewd investor should never, as the old saying goes, place all your eggs in one basket. I spend a lot of time considering many scenarios, but I had not factored in a global pandemic. Diversification helps protect against both the known and unknown.

 

Here are some of my strategies to help you diversify your portfolio.

 

1. Follow emerging trends, they’ll lead you in new directions

 

Diversifying your portfolio can often be a difficult task. While every investor wants a diversified set of assets, finding new industries in which to place your resources is often challenging.

 

An innovative way to go about this, though, is to follow emerging market trends. In my case, I often look toward the consumer products and experiences in which my kids demonstrate an interest. I use their preferences to help craft long-term investment strategies that pursue the products and experiences that will dominate the market in the coming decades.

 

This approach leads me in directions I would’ve never expected. A decade ago, I never imagined that I would have been invested in online video gaming or in fast-casual restaurants like Tocaya Organica. But by following nascent investment trends – and the things kids like to do or eat – I was led to two lucrative ventures that helped further spread out my portfolio.

 

You can follow suit simply by closely watching consumer trends – particularly those of future generations.

 

2. Take risks in pursuit of bold ideas

 

Investors can always diversify their portfolios by taking some calculated risks.

 

This could mean investing in a startup with an innovative new product that may not be profitable in the short-run. It could mean looking for investment opportunities overseas or in products that may face regulatory hurdles.

 

At my firm Spectrum Business Ventures, we strive to see the world differently. We look for investments in ventures that others overlook, we look for opportunity where others see none. And to do so we take risks – calculated risks.

 

When it comes to diversity, these risks often take us into uncharted territory. They’ve propelled us into rocket and satellite technology firms, biomedical R&D companies, novel restaurant and entertainment models, innovative consumer shopping technologies and improbable real estate acquisitions. Above all, though, our pursuit of cutting-edge innovation has broadened SBV’s portfolio.

 

Aspiring investors should do the same. Take smart risks in pursuit of bold new products or industries. You’ll end up with a well-rounded, diverse portfolio that has invested your money across a spectrum of industries, ensuring that you’ll have some cushion the next time we hit an economic bump in the road.

How I Helped Fund The Creation of a Whole New Gift Card Genre

Amit Raizada

May 6, 2020

It’s hard to understate just how drastically gift cards changed the retail industry. Portable, easy to mail, and easy to give, gift cards gave consumers an unprecedented level of flexibility. Once gift cards were introduced, shoppers no longer had to guess which shirt someone wants from Nordstrom or which handbag would be considered “perfect” from Bloomingdale’s. Gift-givers had to simply pick the store, buy the card, and voila: the perfect gift.

For consumers, it’s that simple. But for the businesses themselves, it’s a little more complicated.

When the gift card industry emerged in the early 90s, it brought a range of benefits to consumers and retailers alike: new shoppers, new marketing, flexibility, and a ton of cash. At first, customers were happy with store-specific gift cards. But like every industry, the gift card industry needed to evolve. That’s when Visa and other credit card providers jumped into the industry to provide widely accepted “gift cards” that looked like credit cards. While these cards provided the ultimate flexibility for shoppers,  they also came with a significant drawback: exorbitant fees.

Around 2003, I was approached by an entrepreneur who had a novel idea. He suggested setting up a system in which gift cards could be used at any store within a given mall. That way, a recipient could choose a store from the dozens or hundreds of stores housed within a specific mall. 

Intrigued by the entrepreneur’s Kansas City-based startup, Store Financial, I provided an early investment in the hopes of helping this start-up take-off. Quickly, an ace team of industry experts developed the necessary structure to allow individual malls to implement this kind of system, allowing individual stores to accept both their own gift cards as well as mall-specific gift cards through the same credit card processing system.  

Quickly after its launch, Store Financial became the largest mall gift-card provider in North America—eventually growing to several hundred mall locations in the United States and across Europe.  Eventually, the Store Financial model evolved into a larger general purpose reloadable (GPR) prepaid card market, considerably increasing its market reach. The company was eventually acquired by another private equity group, which brought Store Financial’s business model to a broader global audience.

As an investor, I am always focused on how my dollars can make a lasting impact and help lift emerging markets off the ground. That was undoubtedly the case with Store Financial, which provided a substantial return and revolutionized the mall gift card industry, moving well beyond the paper gift-certificates that were cumbersome for everyone involved. My experience with the gift card market illuminates two principles that I urge aspiring venture capitalists to consider.

First, invest in emerging markets. Observe the products, experiences, and venues that interest young people and discover opportunities to monetize these interests.

Second, once you identify new markets, look for peripheral opportunities within these markets. My investment with Store Financial did not directly change the basic model of gift certificates. But it provided a novel service that the gift certificate industry needed to survive and thrive. While not directly at the center of the action, peripheral investments like Store Financial can create a ripple of changes across the industry, revolutionizing an industry and providing long-term returns on a risky investment.

Young investors today should look for these qualities in new markets. A venture that sounds outlandish today may very well create a change that echoes across generations.

Learning From Failure

Amit Raizada

April 17, 2020

There hasn’t been a lot of positive economics or business news lately. Between the millions filing for unemployment and the jaw-dropping daily losses on the Dow, many of hard-working Americans are ailing.

As a venture capitalist who’s spent much of my career investing in innovative startup ventures, what pains me most about this situation is knowing that the COVID-19-born economic downturn will prove fatal to many small businesses and newly minted firms. Innovative entrepreneurs who’ve worked hard and played by the rules will fail at the hands of the epidemic and its recessionary wake.

Yet, I urge entrepreneurs not to give up hope. After two decades in the VC business, I’ve come to realize that, in the eyes of an investor, past failures act more like prerequisites than disqualifiers. While I’d never encourage entrepreneurs to take uncalculated risks, every successful businessman has failed at some point. In many ways, failure is inseparable from the process of innovation.

There are ways, however, to fail and how not to fail. Be graceful, acknowledge defeat and look toward the future. Don’t chastise business partners or burn bridges.

Here are some of my tips on how to fail right and how to parlay failure into future success.

Own it and Learn from It

People often react to failure by simply shutting down. They block it out of their heads, refusing to think about what happened or to analyze what went wrong.

But a successful entrepreneur looks for the opportunity in failure. While losing a business is always heartbreaking, stepping away and refusing to conduct a postmortem will just make the situation worse. If you’re going to fail, you might as well own it and use it as an opportunity to examine what went wrong, what you did well, and how you can adjust your model for the future.

Owning failure is also key to preserving relationships with business partners and investors. Sure, it didn’t work out this time; but that doesn’t mean you’re consigned to failure in all future ventures. Your partners today could be your partners or investors down the line. Never unnecessarily burn a bridge.

Don’t Hide it from Future Investors

Just as you should be forgiving of your current partners, you should be forthcoming about your failed venture with future investors.

The conventional wisdom is that failure is a good way to get yourself blacklisted with venture capitalists. Reality, though, couldn’t be further from the truth.

While venture capitalists always engage innovators with proven track records of success, that true innovation is a process and the best strategic partners are those who have experienced—and learned from—past failures.

Think about it this way:

All entrepreneurs have failed at some point. But if you’ve failed in the past and have learned from your mistakes, the odds are slim that you’ll repeat those same missteps should I invest in your company – which puts my mind at ease.

What you shouldn’t do is cover up your failed former venture. Just be honest. You won’t scare investors away, rather, you may just attract them.