What’s in your Anti-Portfolio?

Posted on | April 28, 2010 | 3 Comments

One inevitable aspect of being in the venture capital business is living with the ones that got away.  Every vc out there has passed on at least one deal that has gone on to become a big winner.  If they tell you differently, then they are either new to the profession, or in serious denial. 

We all deal with this aspect of the job differently.  I, for example, have convinced myself that the ones that got away serve a purpose.  It is the ghosts of those deals that cause me to a look a little closer at each new business plan that crosses my desk, to treat each entrepreneur with just a little more respect, and to take that one extra meeting a day (just in case).   In other words, my bad decisions have made me a better (albeit poorer) venture capitalist.  You can laugh at the logic, but it has probably saved me endless hours of therapy.

And while we all deal with the trauma differently, most of us share one behavioral trait — we tend to keep our bad decisions to ourselves.  It is for this reason that it was so refreshing to read about  Bessemer Ventures’  “anti-portfolio.” 

Bessemer is widely recognized as one of the top venture funds in the world. Yet, right on their website, for everyone to see, is a list of the ones that got away — and it is quite a list.   They introduce the list with this statement:

“Bessemer Venture Partners is perhaps the nation’s oldest venture capital firm, carrying on an unbroken practice of venture capital investing that stretches back to 1911. This long and storied history has afforded our firm an unparalleled number of opportunities to completely screw up…Our reasons for passing on these investments varied. In some cases, we were making a conscious act of generosity to another, younger venture firm, down on their luck, who we felt could really use a billion dollars in gains. 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…Whatever the reason, we would like to honor these companies — our “anti-portfolio” — whose phenomenal success inspires us in our ongoing endeavors to build growing businesses. Or, to put it another way: if we had invested in any of these companies, we might not still be working.”

They go on to discuss several specific examples, including these whoppers:

Apple: BVP had the opportunity to invest in pre-IPO secondary stock in Apple at a $60M valuation. BVP’s Neill Brownstein called it “outrageously expensive.”

Ebay: “Stamps? Coins? Comic books? You’ve GOT to be kidding,” thought Cowan. “No-brainer pass.”

PayPal: David Cowan passed on the Series A round. Rookie team, regulatory nightmare, and, 4 years later, a $1.5 billion acquisition by eBay.

And finally, Google: 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?”

So, a big thank you to BVP for their honesty and humor, and for helping the rest of us sleep just a little bit better at night.

Category: Investments, Portfolio Companies, Venture Capital

Comments

3 Responses to “What’s in your Anti-Portfolio?”

  1. Lincoln
    April 30th, 2010 @ 10:35 am

    Chris,
    Have you begun to compile an “anti” list?
    It would be interesting to see. Always good to check in on the blog.

  2. Mike
    May 5th, 2010 @ 11:19 am

    I’m curious to know about your “anti-portfolio.”

  3. Prostate Gland Problems
    May 17th, 2010 @ 7:52 pm

    Pretty nice post. I just stumbled upon your blog and wanted to say that I have really enjoyed browsing your blog posts. In any case I’ll be subscribing to your feed and I hope you write again soon!

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