Entrepreneur or Investor?

If you wanted to make a lot of money, and you had the opportunity to be an entrepreneur or an investor, which would you choose?

If we’re talking about an investor like a venture capitalist, the venture capitalist has a higher expected value of return. The reason why is simple: you get to make more than one investment.

As an entrepreneur, you “invest” your time on your company and that’s it. There’s no alternative deal. There’s no second company. There’s no hedge.

As an investor, however, you can invest in multiple companies. Not only that, but you can invest in multiple companies in the same space. There’s a conflict of interest if these companies directly compete, but if your belief is that the space as a whole will grow, then why not index the space by making simultaneous bets?

Additionally, as an investor you can make bets on different industries even if you have a single conjecture about the future. Let’s say you believe that new FinTech technologies like easy credit/debit card issuing, checking account access, and overall banking as a service are going to create opportunities for viable businesses where there used to not be any. What can you invest in?

Well, a platform that has a large user base of say, pizzerias, can leverage these new revenue channels but so can a platform that offers these services to a user base of warehouses. As an investor you can invest in both of these. As an entrepreneur, you need to pick one or the other.

Of course, there’s plenty of entrepreneurs that invest in companies. However, these investments usually come with little in terms of control. They tend to be more like angel investments than venture capital. Often in the form of “here’s a check and I’m happy to intro you to people I know, but I’m not going to your board meeting.”

Most of the time, you won’t have this choice since what you’ll bring to the table is either sweat equity or capital. Rarely does someone bring both. Why work hard when you can get someone else to work hard for you?