Diversification is one of the key difference between entrepreneurship and investing. When you create and run your project, you need to spend most of your time focusing on it if you want to succeed. There are so many elements to be managed that you don’t really have the time to think about something else. On one hand, this is a good thing as you channel all your energy building something that you are passionate about. On the other hand, you might never stop to think, take a step back and constantly reassess the situation. It is important to have the capacity to take a break from time to time.
Investing is completely another ball game. The risk of falling in love with a company or a project is great. Even the best ideas can fail. The best teams can fail and past success is not always the best indicator of future success. It is important to diversificate. One of the reason for that is luck. Sometimes, even with all the efforts in the world, a company will fail because it had no luck. Having the capacity to understand that not every parameter can be controlled is important to avoid the trap of putting all your eggs in the same basket.
Now when you have the chance to run your own project and at the same time invest in others, then you need to leverage this opportunity to learn from the companies you back and then also provide your experience to others of what you are learning in your own project. You need to be able to switch between the role of entrepreneur and the one of investor constantly. You need to know which hat you are wearing to avoid making wrong decisions on both sides. It is a challenging but a thrilling adventure.
At the end, even if entrepreneurs need to be totally focused on their business, diversification plays an important role. This might not be financial diversification as we commonly know but a mental one: “mindification”.