From Airbnb to Uber to Tesla, here's top VCs talking about why they passed or missed out on some of today's best-known tech companies.
VCs are always on the hunt for the next 10x company, but even the most experienced investor can fail to see the amazing potential in a company that’s just getting started. Maybe the marketplace or model looks uncertain, the potential upside doesn’t appear big enough, or the company’s valuation is just too high.
Whatever the reasons are, many VCs are loath to discuss the deals they didn’t make. But talking about missed investments can help VCs remember to stay humble and stay true to their investment theses and accumulated experience. Bessemer Venture Capital, OVP, and Mark Bivens, for example, have all posted their “anti-portfolios,” round-ups of the missed investments that sting the most. For us, these stories are learning opportunities and reminders that no one gets it right every time.
Below we highlight quotes from interviews and VCs’ own blogs where they share stories of “the ones that got away,” along with the valuations reached by these missed investments.
Valuation at exit: $104.2B
Jeremy Levine spent a weekend at a corporate retreat in the summer of 2004 dodging persistent Harvard undergrad Eduardo Saverin’s rabid pitch. Finally, cornered in a lunch line, Jeremy delivered some sage advice:
“Kid, haven’t you heard of Friendster? Move on. It’s over!”
Current Valuation: $68B
One reason I was not excited about Uber was because its success was predicated on creating a two-sided marketplace of drivers and riders. [Without a large enough supply of drivers on the service,] riders would have shunned [it]. Likewise, [if there had been] a dearth of riders, drivers wouldn’t have been incentivized to sit idle [on Uber], waiting for fares.
Current Valuation: $29B
At that time, Airbnb was a marketplace for air mattresses on the floors of people’s apartments. Thus the name. They had ideas for taking on other listings but they had not yet made much progress on them … We couldn’t wrap our heads around air mattresses on the living room floors as the next hotel room and did not chase the deal. Others saw the amazing team that we saw, funded them, and the rest is history. Airbnb is well on its way to building the “eBay of spaces.” I’m pretty sure it will be a billion dollar business in time.
Chris Sacca, Lowercase capital
…I passed on Airbnb because renting a room in a house while the owners were still home was “too dangerous.”
Bill Gurley, Benchmark Capital
Valuation at exit: $23.1B
[When we passed on Google, the] product usage was already starting to happen. We were all using it in our office. It was a better product, so we can’t blame that. And we were already talking about, “Oh you just do what GoTo did.” So the business [model] really wasn’t a question either. Everyone was already saying that. I think it came down to the price at the time was remarkably high, and the team was remarkably self-confident in a way that would cause you to question whether they could pull it off. But they did. And I go back, I think the learning is that if you have remarkably asymmetric returns, you have to ask yourself, “How high could up be?” And then that “what could go right?” question. Because it’s not a 50/50 thing on the judgment call. Like, if you thought it was a 20 percent chance at doing it, you should still do it, because the upside is so high.
Current valuation: $18B
I didn’t respond to an invitation to meet with the founders of Snapchat because I wasn’t sure that it could evolve past d*ck pics.
David Pakman, Venrock
Valuation at exit: $14.2B
I had just started at Venrock and took a good look at Twitter’s C round. I don’t want to flatter myself and say that we could have won the deal (it went to Benchmark and IVP), but we took a good, hard look at it and we did not move aggressively enough to try to win the deal. That was a huge mistake. I was still getting my sea legs in venture (I actually still feel that way more than 2 years later!) and was a bit gun shy in my partnership making my first deal a round priced at $225M-pre, but live and learn…
Kevin Rose, Google Ventures
Current Valuation: $11B
Three … four years ago , when I first sat down with Pinterest, Ben [Silbermann] the founder and CEO, offered … they had some really decent traction … and he gave me a term sheet at a $5M valuation and … at the time I thought “Wow! That’s really high!” … and I passed on Pinterest. That’ll be the one that will forever have gotten away.
David Tisch, Box Group
Valuation at exit: $7B
I passed on Zynga when I was 26. Mark Pincus had grown up with a family friend of mine and I talked to Mark when Zynga was Facebook poker. I was playing professional poker at the time and it didn’t make sense to me. There were so many other free poker sites where you could win real money, and this was for virtual goods. So I moved on.
Byron Deeter, Bessemer Venture Partners
Valuation at exit: $1.6B
In 2006 Byron Deeter met the team and test-drove a roadster. He put a deposit on the car, but passed on the negative margin company telling his partners “It’s a win-win. I get a great car and some other VC pays for it!” The company passed $30B in market cap in 2014. Byron recently paid full price for his Model X.
[Missing out on that investment] stings every day I drive my (full priced) [Tesla model] X to work!
There were no unicorns in sight on April 14th, 2008 when Kevin O’Connor, my Partner Jim Andelman and I met Twilio’s Founder and CEO, Jeff Lawson … I recall being impressed with Jeff, but I was concerned that he was creating a platform, which often requires a significant amount of capital, takes an extended amount of time to establish and can be subject to margin pressure as the enabling technologies become commoditized. It also wasn’t clear at the time what types of apps would be built on top of the platform, other than cheaper IVR systems … Little did I know that it was Jeff’s first pitch of Twilio to a VC.
Valuation at exit: $1.11B
[We passed on] Salesforce because the $30 million valuation seemed too high at the time!
TransferWise valuation: $1.1B
SoundCloud valuation: $700M
The two “passes” which I regret the most are SoundCloud and TransferWise. The reason why these two ones stand out is that I had the opportunity to invest in them (at an early stage and at reasonable terms), spent some time looking at them and decided to pass. Since then, both SoundCloud and TransferWise have become “unicorns” or are on their way getting there.
Mark Bivens, Truffle Capital
Valuation at exit: $493M
Michel Akkermans and Jurgen Ingels [had] already brought their company to a multi-million euro revenue stage with ambition to reach the hundreds of millions, C2Pay was one of the first deals I worked on during my tenure at Truffle. We could have invested in 2006 if we met their valuation expectations. We were penny-wise and pound-foolish. Acquired by FIS in Oct 2014 for 375M€ [$US475M].
OVP Venture Partners
Valuation at exit: $381.8M
The Internet boom was just beginning. Amazon had sales of $4M a year. We had a handshake on a term sheet with the CEO to put $2M into Amazon for 20% of the company (a $10M post money value). At the eleventh hour, some guy named John Doerr flew up and offered $8M going in for 20% of the company (a $40M post money value).
Handshake? What handshake?
To get even, we buy all our books at Barnes & Noble. We don’t think Amazon has noticed.
Rob Go, NextView Ventures
Current valuation: Undisclosed
I met Michael of Skillshare in November 2010 … At the time, he had a vision for creating a learning revolution through in-person classes … I loved the idea, and am a big fan of the democratization of education. But although Michael was well regarded, I only really knew him by reputation. He didn’t have that much to show – product ideas were mainly thesis that needed to be tested. He was also raising a very small amount, and I was concerned that the team may not reach enough value-accretive milestones given the modest raise. We were also in the process of doing a close on our fund, so I was distracted. I declined to invest, thinking that we’d have another bite at the apple at a larger institutional seed round … Fast forward a few months, and the Skillshare team has executed brilliantly. Lessons learned – follow your hunches, especially about people.
Did we miss any great stories that VCs have shared about their biggest missed investments? Let us know in the comments. Get in-depth accounts of every startup investment by logging into the CB Insights platform or sign up for free.