Serial entrepreneur Chris Bakke recently shared what he considers the "best investment advice" he has ever received: to "look at where your company spends money every month and invest in those companies (private or public)." This advice, posted on social media, suggests a strategy of identifying and investing in the key suppliers and partners of a fast-growing company. The approach highlights a unique perspective on identifying promising investment opportunities within a company's operational ecosystem.
Bakke, known for his successful ventures, including the sale of Laskie to X (formerly Twitter) in 2023 and Interviewed to Indeed in 2017, brings significant entrepreneurial credibility to his observations. His career trajectory, marked by building and exiting multiple companies for over $100 million, positions him as a seasoned observer of business growth and market dynamics. His advice stems from a practical understanding of how successful businesses operate and allocate resources.
The investment strategy proposed by Bakke aligns with the broader concept of supply chain investing, where investors focus on companies integral to the operations of larger, often publicly traded, entities. This can include logistics providers, component manufacturers, technology vendors, or raw material suppliers. Such companies often experience growth tied directly to the success and expansion of their major clients, offering potential for diversification and stability within an investment portfolio.
Market analysts frequently examine the financial reports of supplier companies to project the performance of their larger clients, underscoring the interconnectedness of these businesses. Investing in supply chain resilience has also gained prominence, especially after recent global disruptions, leading to increased demand for robust supply chain solutions. This trend further validates the potential of identifying and backing essential partners within a growing company's network.
However, investors must exercise caution to ensure adherence to legal and ethical standards, particularly concerning insider trading regulations. Illegal insider trading involves using "material non-public information" to make investment decisions. While observing a company's general spending patterns might offer informed insights, it is crucial that any investment decisions are based solely on publicly available information and independent research, rather than confidential internal data. Consulting with a legal professional is advisable for any uncertainties regarding information usage.
Ultimately, Bakke's advice encourages a diligent and informed approach to investing, suggesting that understanding a company's operational expenditures can reveal valuable, often overlooked, investment prospects. This strategy emphasizes deep market research and an understanding of business interdependencies, potentially leading to significant portfolio growth for those who navigate its nuances responsibly.