In the world of tech and investing FOMO is a dominant theme that drives much of investment decision-making at the early stage. Ben Lerer, Managing Partner at Lerer Hippeau Ventures, goes as far as stating, “FOMO is an inevitable part of life as an investor,” in our latest interview. However, there are methods and processes that can be used to mitigate the effects of FOMO.
1. Recognition Is The First Step To Recovery
Similar to that of an addiction, the acceptance of the presence of FOMO is the crucial first step. As Lerer states, ‘being aware of it is how you do not fall victim to it.” So with every prospective investment, sit back and appreciate the power of FOMO. This will be your first step to managing it.
2.) Confidence Through Co-Investors
A fundamental element of the investment decision making process for investors it to look at their potential co-investors on an opportunity. As Jessica Livingstone at Y Combinator suggests, ‘they want to invest only if other people are investing.’ This herd mentality acts to reduce the potential social denunciation if the deal does not work. Lerer deliberately attempts to avoid this by not looking at the cap table of co-investors. As Lerer stated in our interview, “the less I know the better.” This decision making isolation allows the investor to view the investment in it’s purest form, without societal biases.
3.) Thinking Fast Not Slow
The speed of your investment decision making can largely mitigate the effects of FOMO. Investors fall prey to characteristics of FOMO when they deliberate for a long time and then look to external factors other than the company, on whether to invest. These could be co-investors, macro-economic cycles, market predictions etc. So the power of thinking fast, not slow, is crucial. Be decisive, act with conviction, based on the product and team alone.
Ultimately, FOMO is an immortal element of early stage investing. However, the ability to accept it, focus on the product and company alone and then act with speed, will stand you in good stead to remain FOMO free! But always remember Lerer’s words, “the day you no longer are scared of FOMO, is the day you succumb to it.”
