Austin Lieberman is one of the 11 emerging fund managers class of 2021 at Chamath Palihapitiya’s Social Capital, who were allocated $50m earlier this year with the goal of achieving abnormal returns.
Before joining Social Capital, Lieberman was in the US Air Force. After a hiatus, he met a senior officer who had made a fortune on investing in Netflix [NFLX] and introduced Lieberman to financial planning. Throughout his time in finance, he has found that investing really is for any and everyone. Indeed, financial institutions are welcoming diversity beyond the ‘A’-grade business schools.
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A key strategy in Lieberman’s investments is using a “founder’s mentality”. “When I’m investing in these companies, I’m looking at it as a company, not a name or a ticker as something that I just want to own temporarily and then trade out of,” he explained on Opto Sessions.
As such, ownership by the founder or promoter of the company is important because it implies that the company leaders have incentives that are aligned with those of shareholders. A company Lieberman cites is Elasticsearch, in which executives own over 20% of shares. “Founders being involved is a great filter, in my opinion, for a lot of things,” he said.
“When I’m investing in these companies, I’m looking at it as a company, not a name or a ticker as something that I just want to own temporarily and then trade out of”
When founders still hold a large proportion of shares, their companies still tend to be smaller in size and, therefore, not yet fully valued, he explains. This is a buying opportunity, Lieberman says, adding that teams are small and driven to deliver. “[Founders are] essentially starting a company because they’re ultra-passionate about an unmet [need, or it is] a completely new category that they’re creating.”
The ownership data is easy to mine from public filings of companies with the US Securities and Exchange Commission or its counterparts in Europe, such as Companies House in the UK.
Once Lieberman is satisfied with the promoter’s ownership, there are a few other items to be ascertained before making an investment. “On my checklist are financials, the business model. How do they go to market? How do they grow?” Whether the product is easy to use and has adequate self-service tools is also a key factor.
“On my checklist are financials, the business model. How do they go to market? How do they grow?”
Most importantly, Lieberman said it is important to overlook short-term volatility and invest with a one-to-three-year horizon in mind. In Lieberman’s books, any investment shorter than one year is a trade, not an investment. Inari Medical, which creates devices to treat venous thromboembolism, is just one such investment Lieberman has made.
To hear more from Lieberman on more picks with prominent founders, including Spotify [SPOT], listen to the full episode of Opto Sessions.
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