My wife and I got a wonderful offer the other day.

A friend of ours, someone who has built a half-dozen successful companies in his career, wanted to give us a chance to invest in his next venture.

Because I signed an NDA, I can't give you too many details. But I can say this. It is extremely clever; it plays to his strengths and it is going to extremely difficult for someone to attack his position, once he is out in the marketplace.

In other words, I think he going to extremely successful and his investors, especially those who buy stock in the start-up phase, are going to make a lot of money.

So are we writing a check so we can get in on the ground floor?

Alas, no.

Why?

My-wife-the-entrepreneur put it perfectly: "We are already over-indexed on risk."

She was referring to her company, the one she founded, the one where she is the largest shareholder.

Now, she is being modest. After being in business for a long-time, I don't think anyone would say that owning her firm is risky these days--at least not compared to all the other entrepreneurial ventures out there. Her company has a track record most firm would envy; her client list is impressive and even her banker--a woman who demands collateral before giving her nine-year-old an advance on his allowance--is smiling these days.

But compared to own stock in Berkshire Hathaway or Target, having the majority of our net worth tied up in her company is indeed risky.

And that is why we said no to the wonderful investment opportunity.

While it is lovely to think that entrepreneurs invest every dollar possible in their business, and if there anything left over buy pieces of the businesses owned by their friends, the reality is far different.

The best ones are extremely conservative with their money and, indeed, as the headline suggests, have an investment portfolio that resembles that of one owned by a 85-year-old grandmother. Bonds and cash are disproportionately represented--and that's how it should be.

You business--wonderful though it may be--is risky enough. Keep your portfolio conservative.

 

 

Published on: Feb 22, 2015