When it comes to investing in SMEs, the process is a bit different because they usually have a limited track record and often don’t have a strong moat. But you can spot early signs that a moat might be forming. My approach is pretty straightforward: I look for ambitious management, a big opportunity size, and proof that they can execute. I think of SME investing a lot like startup investing — there’s a chance for big, asymmetric returns, but I also know that many of these bets might not pay off. The big difference is, with SMEs, I have the flexibility to exit when I feel my original thesis isn’t holding up, unlike in startups where you’re often locked in.
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