The Missed Deals of Venture Capitalists

Venture Capitalists are always proud to mention which companies they successfully backed. It is because of their success stories that Sequoia and Kleiner Perkins are so famous in this industry. But the deals the VCs decline are much less famous. In my book, I had mentioned some examples by some pioneers of venture capital:

Investor Missed deal
Arthur Rock Rolm then Compaq
Bill Draper Apple
Burt McMurtry Tandem
Tom Perkins Apple
Don Valentine Sun Microsystems
This is coming from the “Pioneers Lecture” 2002, Computer History Museum – archive.computerhistory.org.

A few VCs use the humour to tell their biggest mistakes. A colleague of mine (thanks Amin 🙂 ) recently mentioned to me that Bessemer has a full list on their anti-portfolio: A123, Apollo, Apple, Check Point, eBay, Federal Express, Google, Ikanos, Intel, Intuit, Lotus and Compaq,
PayPal, Stratacom.

The most striking miss is probably Google: “[One of Bessemer’s partner] Cowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine”. Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?

But then what about OVP’s ironic style in their Missed Deals including

Starbucks.

“A guy walks into your office in the late 1980’s and says he wants to open a chain of retail shops selling a commodity product you can get anywhere for 25 cents, but he will charge 2 dollars. Of course, you listen politely, and then fall off your chair laughing when he leaves. Howard Shultz didn’t see this as humorous. And we didn’t make 500 times our money.

To get even (wasn’t our not making money enough?) years later, Howard opened his own venture capital firm right down the street. “

Amazon.

“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.”

Just a few lessons about the difficulty in reading the future. If you have other links, please comment.

3 thoughts on “The Missed Deals of Venture Capitalists

  1. kourosh

    I just happen to find out there is a book from harvard business press with the name of Done Deals: Venture Capitalists tell their stories (Case studies) / َAuthor: Gupta, Udayan. I am so excited to find some time to take a look at it. As i know you’re a big fan of case studies, so please could you let me know how you find the book. is it worth reading?

    Reply
  2. Roberto

    Yes, anti-portfolio is really a funny idea. But they are only allowed to have this sense of humour because VC’s don’t need to have a marketing deparment…

    Reply

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