How Ashton Kutcher turned $30m into $250m in 6 years | Fin24

How Ashton Kutcher turned $30m into $250m in 6 years

Aug 29 2016 11:53
Anneli Groenewald

One became famous playing Michael Kelso in the TV series That 70s Show, and the other is manager to Madonna.

But together Ashton Kutcher and Guy Oseary built an investment portfolio of $250m (from $30m) in just over six years. Initially independently, then together, and later with support from billionaire Ron Burkle, the duo seems to have mastered the art of spotting good investments.

“I just started investing in various companies and learnt by failing a lot,” said Kutcher in front of a 15 000-strong audience during a discussion on tech start-ups at the Sage Summit for entrepreneurs in Chicago recently.

“I was learning by sitting in rooms where I was the dumbest person and keeping my mouth shut and listening. And by asking as many questions as I could and finding interesting people and interesting companies. I just found it exhilarating.”

After a while he realised that he had something to offer that could be of value to start-up companies.

That was a few years ago. (His first investment, according to Forbes magazine, was in 2009 when he put $1m into Skype. Within 18 months Microsoft bought Skype, and Kutcher got four times his money back.)

Speaking at the event, he said he now has about 150 private companies in his investment portfolio.

While many might shrug off Kutcher’s success on account of him being just another rich Hollywood star throwing money about, Forbes magazine’s decision to put him on the cover of its Midas List issue in April (identifying the 100 top tech investors), was just another endorsement for him.

The real nod in Kutcher and Oseary’s direction came earlier this year, when they were appointed by Liberty Media Corp to run its $100m investment vehicle.

Speaking at the summit, Kutcher said the tech environment first caught his interest while he was running his own production company (which he started when he was about 20; he is now 38). He noticed that buffering speeds on social media platforms were getting faster and faster. “So I started to look at that as a new platform for distribution of content.”

He then started looking into analytics companies to track and measure the efficiency of the distribution of their content. “The more I looked at those companies, the more I realised how…just base technology …was going to have to be in basically every business, and how basic it was going to ultimately end up being in our lives.”

How to pick an investment

The man who got it right on Uber, Spotify, Airbnb and Skype, to name but a few, said the minute that you think you know exactly how to pick a company, “you start seeing things and patterns that change the way that you approach it”.

There are, however, “two basic tenets that are undeniable” when deciding on investing in a tech start-up.

“First, it’s the founder,” Kutcher said. “Are they a gritty person? Are they a problem solver? Are they going to overcome obstacles that come their way? Do they have domain expertise in whatever it is that they’re building? Are they the kind of person I want to work for? Can they sell their product?”

Secondly, you need to look at the product, he said. “Is there a clear understanding of what the product is? Is it a disruptive product or is there a disruptive business model? Is it something that’s different? Is there competition in that space? And what does [the competition] look like? It’s probably not any different to any other investment. What does the market look like? You know – you sort of look at all those things.”

Spotting a disrupter

Kutcher believes that “really successful businesses challenge some intuition that we all have”.

He used the analogy of a multiple choice question paper – where people who do not know the answer choose a specific box to tick – to explain how disrupters operate.

“If you don’t know [the answer] you fill in ‘C’ all the way down… Trust me, there were a lot of Cs on my paper,” he joked.

The problem is, however, that “all the Cs” create “false data nodes”.

Since “we create these false data nodes that we assume are reality”, instinct and intuition often fails us because people end up “connecting dots that don’t actually exist”.

“Great businesses usually challenge one of those data nodes. Somewhere where someone used their intuition and we assume that that intuition was just so happens that that intuition was wrong and somebody usually builds a business in that void. And those are probably the most exciting [companies]”.

He said Kickstarter is a perfect example: “Why in the hell would people be willing to give other people money to build their businesses without getting any equity in the company?! As an investor?! This is unfathomable!”

The same is true for Airbnb. “Why would people open up their homes and let strangers stay with them? Why?!”

But when companies are built within those challenged intuitions, they usually play in a grey space where there are no competitors. 

“Then they get so big that it is really hard to compete with them,” he adds.

So what will the next Uber look like?

“The next Uber will look nothing like Uber,” said Kutcher. “The space I am looking at the most now is cyber security. It’s something that everyone know…that we need to focus on cyber security…and then we go and hire some IT person to do that for us.

“I think [cyber security] will become more valuable for people over time as they realise the value of their privacy.”

While there are a couple of companies operating in this space, he mentions Sentinel One, which “sort of replaces your anti-virus software”.

He said anti-virus software is a bit like putting up a picture of someone who has already robbed a bank, in a bank. This means the virus will only be identified once inside – when it is too late.

Rather, Sentinel One creates criminal profiles of viruses and aims to prevent security breaches altogether. “So it looks at what a virus generally looks like, some of the behaviours of it, and then it stops it at the gate.”

He also mentions “some really interesting stuff in the biotech space”. They recently invested in a company called Emerald Cloud Lab that operates a lab in the cloud. “So if an experiment has already been done, it doesn’t have to be done again.” He said the company is growing exponentially, and in future it can be expected that more similar projects will be seen.

Mentorship and being able to say that you do not know

One of the most important mentors in Kutcher’s career as investor has been “legendary angel investor” Ron Conway.

Other mentors were often founders of companies. “And mentors that are older than me and mentors that are younger than me,” he added.

Another mentor has been Joshua Kushner (son of property magnate Charles Kushner) who is almost 10 years his junior and runs a fund called Thrive. “I think being willing to be mentored by anyone that you respect – it doesn’t matter what their age or experience is – just creates ultimate vehicles for success.”

His feeling is that the people who are “generally the most successful […] have the capacity to contain their emotions. And a general open generosity that is so large that it almost takes you aback when you deal with it”.

He pointed out that those entrepreneurs and founders who have “the humility to ask for help, and are willing to not know” will benefit hugely, as really great mentors are willing to share “virtually everything”.

Kutcher has been investing for about 10 years. And in this time, one of his investment friends, had, for example, shared his open investment platform with him and said “maybe you want to take it and use it, and use it for yourself”.

“People are just willing to give you stuff as long as you are willing to say, ‘I don’t know’,” he said.

Anneli Groenewald travelled to the Sage Summit as a guest of Sage.

This is a shortened version of an article that originally appeared in the 25 August edition of finweek. Buy and download the magazine here.