Real VCs Aren’t Afraid to Cry: The Anti-Portfolio

It’s said that real self-confidence means being willing to own up to your faults and foibles. If that’s true, Bessemer Venture Partners, with offices in Wellesley Hills and five other locations worldwide, gets our vote as the most secure VC outfit around.

Google, Apple, eBay, FedEx, Intel, PayPal, Cisco, Lotus, Compaq. Would you admit it if you passed on opportunities to invest in all of these mega-stars in their early stages? Well, maybe under oath. But would you feature that fact on your website and make fun of yourself? Bessemer does. All these names were taken from the firm’s Anti-Portfolio, which is given equal play with lists of Bessemer’s current investments and Top 50 Exits. As the folks at Bessemer, which was founded in 1911, explain (emphasis theirs): “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.

Several of the Bessemer items poke fun at managing partner David Cowan, who has a stellar rep and a blog, by the way, and must be very secure indeed. Some highlights:

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

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

FedEx—“Incredibly, BVP passed on Federal Express seven times.”

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?'”

We’d like to thank our friend and fellow scribe Scott Kirsner for pointing out the Bessemer Anti-Portfolio. Scott mentioned it at Convergence: The Life Sciences Leaders Forum, as he began a great Q&A with Bessemer senior partner and former Massachusetts gubernatorial candidate Chris Gabrieli.

Inspired by the Bessemer list, we queried a few local VC and angel groups we know about the companies in their anti-portfolios. The early results:

CommonAngels managing director James Geshwiler (who also likes to blog) nominates EnerNoc (ENOC). The company, which seeks to automatically balance electric supply and demand to make the grid more efficient, went public in May at $26 a share, a nice premium over its early target of $21-$23. Writes Geshwiler in an e-mail: “When they presented, we liked the idea of virtualizing a powerplant. A ‘client-server network for electric power,’ is what I called it. But selling ‘dumb’ electrons (ie., power)…we like selling ‘smart’ electrons (ie., software)…well, see who was ‘smart’ and who was ‘dumb’ after all…oh well…”

A late-breaking entry from Jonathan Seelig (Akamai co-founder) over at Globespan Capital Partners, where he is managing director: “Great one to add to the list—Tacoda—really liked Dave Morgan and the behavioral advertising space—but dug in on price—sold today [to AOL, on Tuesday, July 24] for $275M.”

Noubar Afeyan, managing partner and CEO, Flagship Ventures: “Since we have been around only since 1999-2000, we haven’t had a chance to see the companies we passed or missed flourish to become great successes. I am sure that day will come soon enough.”

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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  • Anonymous Xconomist

    They do have some great ones in their list of top exits (Staples, Skype) but there are more well known and interesting companies in their anti-portfolio than in their top 50 exits, let alone their whole portfolio. I have a feeling that it would be the same at any top venture fund listing their anti-portfolio. Encouraging for entrepreneurs who hear the phrase “We’re going to pass…”

  • Steve Woit

    I remember meeting with a company at the COMDEX show in 1996 with someone from my venture firm. The conversation went something like this:

    “We would like to meet your CEO.”

    From one of the two bearded guys in sandals in the booth:

    “Well, we don’t really have a CEO or anyone like that…”

    “OK…..Well how do much to you charge for your software?”

    “It’s free.”

    When he heard the word “free”, my partner literally walked away from the booth.

    Oh, that company? It was Red Hat. (RHT), current market cap. over $4 billion.

  • This is a really fun topic, and great anecodtes from Geshwiler and Seelig.

    I wrung confessions out of some other VCs and entrepreneurs and deals they passed on in this Globe column from 2004.

  • Chris Gabrieli

    We take some pride at BVP at what we believe to be humility and humor. We are often forced to make quick judgments on entrepreneurs – that’s our job. But it is so important to remember that while our judgment counts when it comes to our wallets, it is far from decisive with regard to the fate of the investment. I like to close my turn down notes to entrepreneurs saying, “I look forward to your proving me wrong.”

    My personal biggest contribution to the anti-portfolio would be my pass on the opportunity to pursue Millennium Pharmaceuticals. I just could not see how their brilliant genetic and genomic capabilities could lead to drugs in any quick way. I was right, I think, in my concern and dead wrong on the investment decision. Lesson learned – when the best team pursues the most exciting new enabling field, don’t worry too much about how you can answer all of the questions or clear all of the hurdles. Lesson taken – invested in Sirtris Pharmaceuticals and now it is public at a very nice premium to our price.