A VC in Vacationland

One of my CEO’s, Dan Dershem of LeanLogistics, turned me on to a really interesting page on Bessemer Venture Partners web site.  It’s called the Anti-Portfolio and it details investments which they have passed on over the years and why.  The page is fascinating reading, not only because of the names listed–Google, FedEx(six times!) and Intel to name a few, but it also details the reasons why the partner(s) decided to pass on the investment.

Bessemer is one of the oldest and, by most accounts, one of the most successful venture capital firms.  The experiences detailed are important ones for any investor and entrepreneur to know and understand.  I personally took three lessons away from the page:

1. Move Outside Your Comfort Zone–we all have zones that define our areas of expertise and often have a hard time identifying disruptive technologies.  I often ask myself the following question when reviewing an investment: "If I was going to invent a new business model that would be cheaper and faster than anyone else in that industry, what would it be?"  If the answer compares favorably with the investment I am reviewing, then I intensify the due diligence.
2. Understand Who You Are Dealing With–Are the guys across the table capable of being true revolutionaries in business or do they just have a good idea.  Almost all business plans I see have good ideas in them.  What I do not often see is the team to make that idea happen.  I try to spend most of my time trying to understand what is motivating the people involved with the business plan to see what makes them tick and how they will respond to adversity, which we all know is the primary diet of entrepreneurs in the first few years of operation.
3. Don’t Run Too Many Spreadsheets–Very few good entrepreneurs want to give away a lot of their company for very little money.  Yes, that pre money valuation is outrageous, since the company has no revenue and few customers.  But if the product or service will truly revolutionize an industry, like I believe Kiva Systems will do in the warehousing industry, then gulp hard and write the check.  Remember, you did not have the idea in the first place and those smart guys were nice enough to ask you to be a strategic investor.