In 1965, a college kid named Fred turned in a paper for his economics class.
His idea was simple: as the American economy modernized, it would need a dedicated air-based delivery network capable of moving packages overnight.
His professor wasn’t impressed. After all, shipping companies already moved freight by truck or by commercial air. No one needed a dedicated overnight network. And even if they did, how would a college kid know how to build one?
Fred received a “C” on his paper.
Fast-forward a few years, and that term paper became Federal Express (NYSE: FDX), a logistics empire worth more than $50 billion. Fred (full name, Fred Smith) soon became a billionaire as he transformed global commerce and permanently changed how the world moves goods.
The thing is, Fred’s professor wasn’t the first person to overlook a massive opportunity.
And he sure wasn’t the last.
It’s Hard To Pick Winners Early
Every breakthrough company looks a little ridiculous at first. Its timing is off. Its business model looks weird. It doesn’t resemble anything that came before it.
That’s what protects these opportunities — and it’s also what confuses people.
When Fred Smith pitched his “overnight package delivery” concept to bankers and investors, they waved him off. Too capital-intensive. Too risky. Too complicated. The incumbents already had it covered.
But incumbents never have it covered.
That’s why disruptors are always underestimated. Until it’s too late.
The same thing happened decades later with other category-defining startups…
“Strangers Sleeping in My House? No Thanks!”
Airbnb first raised the capital it needed by selling novelty cereal boxes — “Obama O’s” and “Cap’n McCain” — because real investors wouldn’t take the company seriously.
The pitch made no sense to them:
“Let me get this straight. I’m going to let a stranger into my house? To sleep there?”
Skeptics assumed regulation would kill it. Or they had concerns about liability. Or they believed that people simply wouldn’t do something so strange.
Today, Airbnb’s market cap (NASDAQ: ABNB) is about $100 billion.
The idea didn’t change. It’s just that the world caught up.
“A Taxi App with No Cars? That’s Not a Business.”
When it was just getting started, Uber looked equally nuts.
A taxi company with no fleet of cars, no medallions, no legacy infrastructure — and yet it wanted to take on one of the most regulated industries in the country?
To most investors, it sounded like more trouble than it was worth.
Today, Uber (NYSE: UBER) is one of the most valuable companies in the world.
The Lesson for Private Investors
It’s not that you’ll miss out on investing in the next FedEx, Uber, or Airbnb because you’re not clever enough or connected enough.
It’s that no one can reliably spot big winners at their earliest stages — not professors, not industry analysts, not even professional investors.
Even the world’s best venture capitalists are wrong most of the time.
Early-stage investing success isn’t about being a genius or having clairvoyance. It’s about using a system. A proven framework for risk management that puts the odds in your favor.
The Three Core Principles of That System
At Crowdability, our framework for early-stage risk management starts with three simple principles:
1. The Team
Early-stage success, especially in tech, comes down to the founders. Look for:
- Multiple founders.
- Domain experience.
- A “balanced” team that has one founder with tech experience, and one founder with business experience.
A balanced, well-qualified founding team is one of the strongest statistical predictors of startup outcomes.
2. The Price
If you pay too high of a price to get in, great companies can make terrible investments.
Early-stage investors only win big when they get in low — before the big valuation step-ups. In other words: you need to “buy low” if you expect to “sell high.”
Valuation discipline is risk management.
3. Diversification
This is the part most people underestimate.
Early-stage outcomes follow a power-law curve. A tiny handful of investments create nearly all the gains. Since you don’t know which handful they’ll be, you’ll need broad exposure.
Generally speaking, this means two or three dozen startups over time.
You can’t beat the uncertainty of picking the winners, so you solve this challenge through diversification.
The Takeaway
Fred Smith’s professor wasn’t dumb. He was just doing what most humans do when confronted with something unfamiliar: he used his existing mental model to judge a new one.
That almost always produces the wrong answer.
Which is why, if you’re going to invest in early-stage deals, you can’t rely on instinct or intuition. You need a system — a framework that acknowledges uncertainty and works with it rather than against it.
That’s one of the big principles we focus on at Crowdability. And that’s why, in future articles, we’ll unpack each of these principles in more detail — so you can start building a portfolio that gives you a real shot at venture-style returns.
Because the next “C-grade” idea that turns into a billion-dollar winner could be sitting right in front of you.
Best Regards,
Founder
Crowdability.com
