Venture capitalist Saul Klein says investors should aim to spot the 'right surfers' instead of just trying to 'ride the wave'
Speaking to Business Insider ahead of his latest investment, an Estonian startup called Jobbatical that was founded by a pair of siblings and their friend, Klein said it's important to spot talented entrepreneurs building companies in areas where there is market potential.
"It's not just about spotting waves," said Klein, pointing to verticals such as cloud, mobile, fintech, and artificial intelligence. "It's about finding the right surfers."
He added: "Pick your wave. There will always be 30 plus companies on it. Our job [as investors] is to pick the surfers. It's about focusing in on the big market opportunities within these waves and finding the right teams."
Klein - who cofounded movie streaming service LoveFilm, startup accelerator Seedcamp, and computer building startup Kano - left Index Ventures last year to set up a new venture capital fund with his father, Robin Klein.
Klein's company, LocalGlobe, has poached two former Index employees and raised £45 million for its first fund from a variety of sources including university endowments, strategic investors, and corporates. It is based in London's King's Cross neighbourhood, which is also home to an increasing number of Google buildings and Index rival Balderton Capital.
LocalGlobe has also backed a startup that helps people find mortgages called Trussle. "The UK market for mortgages is in the hundreds of billions and it's highly fragmented," he said Klein. "The largest player has 3-4% of the market so you can potentially make an enormous company in the UK alone."
Klein highlighted how investing is an extremely risky business.
"You have to believe in every investment you're making." Ultimately, however, the vast majority of investments fail to make any money for the investor. Klein said only 5-10% of the capital that venture capitalists invest "gets the returns."