Wednesday, August 30, 2006

Investment of time

I've been thinking about investment opportunities, seeing how companies in Silicon Valley waste their money on the ideas that come up, etc... For investment people, what it boils down to is the knowledge that the money they spend is recuperated later somehow and in what timeframe this is supposed to happen. The next rant is about software in particular.

For investment to be successful, a certain amount of confidence and what is called in Dutch "koffiedik kijken" (looking at the coffee residue left in a cup of coffee) is necessary. This confidence is created through market research, you need to know how the product will be perceived in the market, the value that the product will generate for the consumers and how the company expects to extract some part of that value for itself, mostly. Other important aspects are capable management that is focused on making profit (not on the product) and of course the skills to bring the product out in the first place.

The investment in Brazil seems of a different nature. Money isn't exactly lying around on the streets, plus there do not seem to be any private investment funds here and there that have money to offer for good ideas.

But next to money investments, there exist other types of investments. One of those is the investment of time. Time investments are personal commitments to pursue a particular product with the belief that later on, this product is going to be perceived very well in the market. Rather than actually requiring money and hiring people, you use a "risk-job market" approach where you request people to spend time on some product implementation with the promise that if the product does take off, they will be renumerated later on. If not, bad luck (but the experience will teach you a lot, if you get into the why's and nots)

In this model, the requirements for market assessment still hold and this makes the contributors for a project personally responsible for knowing how a market works, psychology factors, etc... Because if you don't, you might just spend your time (your personal investment) on the wrong project.

So, the question in this model for investment lies in the way how you get the market information (talk to whom? learn about economics?) and the question of which idea is going to be successful and how you think you are going to use your current skills (or learn new ones) for contributing to that project. Eventually, you might find that you're constantly chasing up on new opportunities, once you have found a way to make this a repeatable successful process and previous risks taken have generated recurrent revenue for yourselves (becomes your job to take risks in normal worktime).

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