We often hear stories from VCs that smartly invested in an unknown start-up for it to go on and become a darling of Silicon Valley and the tech world; those legendary Unicorns.Unicorn. But what of those ones that got away? The big-hits that they missed. Like Dick Rowe of Decca who passed on the opportunity to sign up the Beatles; publishers that consigned to the waste paper bin a manuscript by Joanne Rowling about a young wizard called Harry; or William Orton of Western Union who told a despondent Alexander Graham Bell that his new gadget, the telephone, “while it is a very interesting novelty, has no commercial possibilities.”
So what great business opportunities have been missed by investors? Here are our top-5 misjudged passes!
In 2008 Airbnb founder Brian Chesky was introduced to 7 investors in Silicon Valley. They were looking to raise just $150,000 at a valuation of $1.5m. Two investors didn’t bother to reply, the other 5 rejected Airbnb. Chesky has a great blog post about this – his mantra is if you get a rejection email (or many!) don’t worry. Keep going and have faith in what you’re doing.
John Greathouse of Rincon Venture Partners goes one better than simply passing on Uber’s seed round. Despite having been repeatedly offered the chance to listen to a pitch from Travis Kalanick, Uber’s founder and CEO, he passed on not only did the $250k seed round, but on Uber’s A Round as well. Today Uber has an implied valuation of around $66B.
Greathouse has written a similarly great post, this time from the VC perspective, on why he chose to pass on the Uber opportunity and the mistakes he made. His takeaway thought – “Listen to trusted sources and take the freakin’ meeting”
Okay so it’s not one company that this leading VC firm passed on but a whole portfolio of the great and the good including eBay, Facebook, Google, PayPal, and Tesla. In 2006 Bryon Deeter, partner in Bessemer’s Menlo Park office passed on Tesla. He drove the Tesla Roadster, and even put a deposit down on the car but didn’t go for the investment. “It’s a win-win. I get a great car and some other VC pays for it!” he told his partners. Today Tesla’s market cap is $31.08B.
Also worth reading is “Angel VC” Christoper Janz of Point Nine Capital on his own anti-portfolio – “A Toast to all the One We’ve Missed” – his passes including FanDuel, and Intercom.
Steve Jobs and Steve Wozniak used borrowed parts from Atari to create their first Apple home computer. Although they offered the design of their computer to Atari founder Nolan Bushnell, he was focused instead on arcade machines and the developing home console market. In 1976 Jobs approached Bushnell again – “Steve asked me if I would put $50,000 in and he would give me a third of the company. I was so smart, I said no. It’s kind of fun to think about that, when I’m not crying.” Today Apple has a market cap of $545.22B
Last but by no means least there are several stories of VCs who have passed on Google. Bessemer’s partner David Cowan for instance has his own place in BVP’s Anti-Portfolio with his failure to meet with two guys called Sergey Brin and Larry Page who had rented a garage from his college friend Susan Wojcicki.
But for a really good read on “The Worst Decision in VC History” is James Altucher’s blog post on how he turned down a little known company called Oingo that went on to be bought by Google. Having been told they could most likely acquire 20% of Oingo for $1m, the company subsequently changed its name to Applied Semantics and was was bought by Google for 1% of Google stock. Alphabet Inc, is now listed on the NASDAQ with a market capitalisation of $498B. So that $1m investment in Applied Semantics if held today would now be worth almost $1B.