DAMN, I MISSED IT!
Hey <<First Name>>,
A couple of weeks ago, two-year-old online sports-video site Overtime announced it had raised $23M in Series B funding, valuing the company at over $100M. Although I was happy to hear that my good friend, CEO Dan Porter had taken the company to new heights, I couldn’t help but think of the fact that he gave me a chance to be his very first investor and I passed!
Fortunately, or unfortunately, being a venture capitalist means placing a lot of bets. Sometimes you hit it big with a startup, and sometimes you lose it all. But sometimes you never place a bet at all—and end up missing out on an idea that can turn out to be a multibillion-dollar winner.
Investors love to talk about their successes, but seldom publicly acknowledge their misses.
I’m the lucky guy that gets reminded constantly for my misses, as Alex Mather, CEO of the subscription-based sports website The Athletic, makes sure to remind me that declining to be his third investor is currently worth eight figures plus.
VCs are always on the hunt for the next 1000x company, but even the most experienced investor can fail to see the amazing potential in a company that’s just getting started. Maybe the marketplace or model looks uncertain, the potential upside doesn’t appear big enough, or the company’s valuation is just too high. In instances like The Athletic and Overtime, I didn’t believe both business models had the market size both founders pitched me.
Fortunately, passing on a killer investment is not the end of the world, I believe it’s best to follow those companies closely and learn from what you missed. Those key learnings are what make the diligence in making the next investment that much better.
Venture Capital is for generalists. You need a curious mind, and you better love learning to quickly understand business models, technologies, and industries you’ve never dealt with before. However, it’s important to develop a certain expertise in the sectors you want to invest in and surround yourself with as many experts in those sectors as possible.
Most things that seem nuts are nuts. But every once in a while, what appears nuts is one of the 15 ideas each year that 95% of financial returns in venture capital.
The one thing that ALL venture capitalist have in common is they all failed to invest in MOST of the big winners. Luckily for us, I’m not the smartest guy in the room, but I sure as hell make sure I find out who is!