> David 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?”
> 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!”
It was possible to write a search engine in the year 2000? Or any software at all for that matter? And writing a software application is much different from writing a mere academic research paper. By being harder and more technical. It, writing software, is engineering actually. Writing software is engineering, backed by computer science knowledge.
So, the point is, that has there been a growth of resources and capabilities—opportunities—for motivated individuals to write software apps that are much stronger and capable than their 1990s predecessors? Common sense says "Yes, of course!" But a comprehensive look says no one who is social nor someone who is educated is doing anything like what Sergey and Larry have done for their pre-Google generation. No one is writing anything, no one is building, and least of all is anyone who does the college education thing building anything remotely close to the next Facebook or Google.
There are no engineers today. Just drones doing financially compensated development. No passion for building. Instead just doing what is told to do and for to be done.
They could build because they were left alone and had to prove themselves over time. Now? The split second you have any sort of potential of profitability, you’re surrounded by vultures before you had a chance to grow. You’re bought out, brand changed, and the behemoths get even bigger.
Despite all the fuss over passion, even Sergey and Larry would have abandoned it all for the type of money being thrown around in recent years.
1. This list is tiny. They have pass on 10000 more companies than the ones on this list. Most of that passing was done correctly
2. VCs rightly over-index on the big winners. The Facebooks and Airbnbs of the world are completely outsized in terms of one key thing: how much money they make for the GPs and LPs. However, as builders, we should not focus on these because they are few and far in between and you don't need to be a founder of one of these to have a life changing event. You just need a good 7 or 8 figure exit. VCs don't make money on an 8 figure exit so they train us to go big or go home. This webpage is another piece of that propaganda.
The honest portfolio of bad passes should include plenty of companies that they would happily include as "good exits" that they passed on. It should also include a number of companies that they effectively killed by not investing, when the company would otherwise have been a successful entry in their portfolio.
To me, this is a way to brag about them being so selective that they rejected Google, so you can be excited when they offer you a deal at Acme AI.
Everything about this page underscores the importance of access to deals. Bessemer can afford to pass on Google because the quality of deals they get is so high that it's not too bad to pass on winners.
1. Apple: Bessemer had the opportunity to invest in pre-IPO secondary stock in Apple at a $60M valuation. Neill Brownstein called it “outrageously expensive.”
2. Coinbase: Ethan’s pithy response would go on to earn Brian and Coinbase a spot in the Anti-Portfolio for life: “There’s really no questions you could answer that would cause me to invest!” Almost nine years later, Coinbase would go public in a direct listing valuing the leading crypto exchange at $85.8 billion – or just a mere 8,580x the price Brian had eagerly offered up!
Wonderful idea. It strikes me that anyone in the selection / allocation / decision business becomes more credible by illustrating the anti-selection like this. Kudos to BVP.
Interesting that all but two of the listed startups were software companies (FedEx, Tesla). I imagine the costs of fixed investments required to scale a company not based on software can reduce the potential max returns quite substantially. Can a non-software company achieve the kind of returns a software company can?
I would say mostly no, which is exactly why software gets so much investment and has seen so much growth, especially 15-10 years ago when it suddenly became possible to address the entire world with very few regulations.
The runner up darling child (outside of questionable financial products) seems to be biotech, whose heavy regulation and complex supply chain issues are offset by almost everyone in the world's desire to not die.
> 2011 Jeremy Levine arrived at LAX three hours late, thanks to flight delays, with enough time for only one of the two meetings on his calendar. He literally tossed a quarter and phoned Evan Spiegel with his regrets. SNAP was the largest IPO in 2017.
Ok, so what's your criteria for saying that someone sucks at investing?
If you go "oh shucks i fumbled some %" that will excuse anything and everything.
If you give me a list of the times you fumbled and they're all the most amazing opportunities ever, what that tells me is that you're taking the obviously good opportunities, and missing the counter-intuitively amazing opportunities.
Buffet has a statement to the effect of, "Don't lose money" and that really is the core tenet of investing. Missing some monster hits is fine and normal and preferred to putting money into big failures.
It has even happened to Buffet. Regarding the sale of his shares in Paramount:
“Actually, owning Paramount made me think even deeper, but I certainly looked harder about the whole question of what people do with their leisure time and what the governing principles are of running an entertainment business of any sort, whether it’s sports or movies or whatever it might be,” Buffett said. “I think I’m smarter now than I was a couple years ago, but I also think I’m poorer because I acquired the knowledge in the manner I did.” ← great quote
Buffet operates in an entirely different space than these people.
VCs brand themselves as finding the next growth monsters. It's fine if they want to "find companies that you can reliably value and are undervalued by the market" (which is what Buffet does), but then don't market yourself as a VC.
A reasonable criterion for whether somebody sucks/is good at investing would be something like "what % return did you get over the last decade, and how does that compare to (a) markets in general and (b) other investors in your field?". If BVP passed on a bunch of great opportunities but also passed on a bunch of money-losing deadends, and on net got better % returns than the hypothetical alternative VC fund that took more of these but also lost a pile of cash on terrible startups, then BVP is making good decisions even given the failures. That a hundred-year old VC firm didn't identify every unicorn it ever had the opportunity to invest in doesn't seem very surprising to me.
Is it? If you investment well, you make money. If you invest poorly you lose money. It’s quite simple. It’s not about “faking it till you make it”. It’s a numbers game. If you don’t have the skill to pick winners well, you’ll invest in bad companies and your fund will dry up.
You said "they're no longer in business", you didn't say "they lose money", those are not the same thing. You can lose money for a long time and still be in business because you're good at attracting capital. This is not an hypothetical, it actually happens in the real world. Madoff stayed in business for 30 years while at the same time losing money.
Furthermore, you might make money but less than you could at no risk.
Your criterion of being in business is awful. It sounds like it was the first thing that popped into your mind and you entertained it for about a second before typing it down.
Being able to attract capital requires you to convince others to invest in you. For a VC firm, usually that means your fund needs to be profitable. Nobody will invest in a VC firm that loses money. So again, staying in business as an investor requires you to invest well.
Or, I suppose, you could commit fraud. I’m assuming we’re talking about regular vc companies and not criminals.
Yes, the truth is more complex than a single sentence can convey. I hope in time you can forgive my crime of brevity.
> Being brief is ok. But if you're allowing for a broader interpretation of "being in business", then that's so broad that it's meaningless.
On reflection, the long version of my comment is something like this: “The market is the best judge of VC funds. Good choices mean good returns. Bad choices mean VC funds go out of business. And BMF had been profitable for 113 years. Make of that what you will.”
In retrospect, perhaps I could have said that.
> …, just skip the typing instead.
Similarly, lay off on policing my words so heavily. It’s rude. You are a single voice, and while your opinion is interesting, how I phrase things simply isn’t up to you. Especially when you do so from an anonymous burner account, “lkdfjlkdfjlg”.
If you don’t like my tone, perhaps consider following your own advice. Skip all the typing and just downvote my comments.
The next sentence is “in other cases, our partners had already run out of spaces on the year’s Schedule D and feared that another entry would require them to attach a separate sheet.”
Investors are in the business of buying things that don't yet exist.
Sure, they might do spreadsheet analysis and business planning to show the first person to invent a working, practical <foo> will make billions. But is this the company that will invent that?
That is an inherently vibe-heavy judgement.
I can well believe they remember considering a load of things, including the competition from their buddy's new venture firm. And they don't know themselves quite how they weighted the many things that contributed to the vibes, but they know saying 'generosity' sounds better than saying 'I didn't like the guy's glasses'
> David 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?”
> 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!”