The Blog For Entrepreneurs

I know, from personal experience, that VC’s and Business Angels get it wrong many times, so don’t be discouraged and imagine the middle finger you can give when your project works out. Here are some classic VC cock-ups.

These first 12 are from Bessemer Venture Partners own site. If I was looking for VC financing right now, these would be the guys I would talk to. Any firm that can be so light hearted about missed opportunity have to be great guys to work with!

1. Apollo Computer

(acquired by Hewlett Packard)
BVP’s Felda Hardymon was offered a small position in the company’s last private round, and waved it away: too small a position, he thought, at too high a price. In less than a year it was worth 17x.

2. Apple Computer

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.”

3. Check Point

In 1994, Gil Schwed pitched his idea to BVP’s David Cowan, who said that Gil would never get distribution in the US. The next year, Check Point got a huge Sun OEM deal and sold $25M of firewall software.

4. eBay

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

5. Federal Express

Incredibly, BVP passed on Federal Express seven times.

6. 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?”

7. Ikanos

Rob Chandra met these guys in 2000 at the start of the telecom meltdown, and remembers saying something like, “Rajesh, I like you a lot but do you really want to build a communications semiconductor business right now?” He looked at Rob in a sort of funny way and then raised money from Greylock, Sequoia and others.

8. Intel

BVP’s Pete Bancroft never quite settled on terms with Bob Noyce, who instead took venture financing from a guy named Arthur Rock.

9. Intuit

Along with every venture capitalist on Sand Hill Road, Neill Brownstein turned down Intuit founder Scott Cook. Scott managed to scrape together only $225K from friends, including HBS classmate and Sierra Ventures founder Peter Wendell, who personally invested $25K to get Scott off his back.

10. Lotus & Compaq

(formerly known as Gateway Computer)
Ben Rosen, one of the founders of Sevin Rosen, offered Felda Hardymon the chance to invest in both Lotus and Gateway Computer on the same day. Says Hardymon: “Lotus wasn’t proven yet, and I was worried about the situation there. As for Gateway, I told him there was no real future in transportable computers since IBM could do it.”

11. Paypal

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

12. Cisco Systems

(acquired by Cisco)
Felda Hardymon: “[Sierra's] Pete Wendell asked if I’d like to look at Stratacom, which was doing a ‘fast packet switch.’ I gave him a blank stare.”

I had to throw in a couple of mine at this point:

13. Pursuit Dynamics

I was sat on John Heathcote’s boat in Miami, fishing, when he told me of a ‘revolutionary pump technology’ he was working on and would I like some of the action. “Bit busy” I said. Three years later it floated for $30mn.

14. Online Poker

When I was in the Caribbean a young guy had set up a web cam and a roulette table in his basement and was making money, it was one of the first online gambling sites. My business partner was a casino veteran and knew everything there was to know about the industry. I said “We should get into the online gambling idustry” He said “No one is ever going to put their credit card on the web to gamble”. I let it go.

15. Online Trading Site

In 1999, we invested £125,000 into building a server room, installing massive amounts of kit and buying an online trading technology that was the same one as was being used by Peter Crudas at CMC Markets, when they were tiny. He advised us to invest more to use it for Forex trading, like he was. I dismissed it and tried to carry on. He has been reported to be worth $900mn… I have not even been reported…Doh!

16. Celebrity Poker

“Who wants to play against celebrities?” A classic car park conversation with a colleague who I had introduced to the deal! TV rights and millions of dollars followed.

17. Dyson Vacuum Cleaners

James Dyson took 15 years to get his ‘dual cyclone’ vacuum invention to market because no manufacturer was interested in investing in a product that cut out their $500mn per annum vacuum bag business. So protective were they Hoover’s vice president for Europe, Mike Rutter, later said on U.K. national TV, “I do regret that Hoover as a company did not take the product technology off Dyson; it would have lain on the shelf and not been used.”

18. CNN

Ted Turner found it tough for people to back him initially. Throughout its early days doubters even had a name for it: “The Chicken Noodle Network”

I am sure there will be loads more that you can add, so add-away in the comments, would love to hear some personal stories of your success when someone turned you down.

What you should know is that there can be any number of reasons that your venture is turned down by an investor and a lot of them may have nothing to do with you or your company/idea. Sometimes it is just the wrong time, the VC has had a bad day, one of their investments has tanked, they are nearly fully invested, they are under redemption pressure in their funds, it could be anything.

The fact is that if you have a business that is well thought out, has good management and you have the passion to succeed, you WILL get funded eventually, just stick at it. VC’s are human, they screw up, so don’t hold it against them if they turn you down, but just think of the gentle reminder you will be able to give them when your project succeeds..

Happy hunting.

Regards
David
@OneLifeNoFear