Venture Cap Reading

Here’s a witty read from Bessemer Venture Partners, speaking to the woulda should coulda in all of us. Some highlights:

“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.

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

Federal Express
Incredibly, BVP passed on Federal Express seven times.

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 thoughts on “Venture Cap Reading”

  1. Warren Buffet, in the Money Masters, said he never invests in what was then called “high tech”. If he didn’t understand how it worked, he left it. Also, he was of the view that all high tech firms have to bet the company every few years on new products, and that even the best of them would blow it eventually, so it was better to look for other sources of value. I don’t know if these guys had a similar philosophy, or were just not attuned to what would make these businesses valuable. Of course, if you had stayed out of the last wave of tech stocks entirely, you’d have been better off, in most cases … .

  2. I think there are significant discrepancies between what Buffett does and what he says he does. Else all the accolytes would be getting rich on their own, and I don’t think many of them do. But perhaps I am wrong, and the economy is really driven by tightwads buying distressed properties cheap rather than by risky investments in productivity-enhancing technologies. I think it was Don Luskin who pointed out that Buffett benefits heavily from our confiscatory death tax, which he conspicuously supports, because it forces many business onto the block after the deaths of their founders.

    I admire Buffett for his success but not much else.

  3. “Of course, if you had stayed out of the last wave of tech stocks entirely, you’d have been better off, in most cases … .”

    Not necessarily. I think the trick would have been getting out just before the market tanked. Anyone who pulled that one off would have made off like a bandit.

  4. Lex..Bessemer is a very successful VC firm, and has had many successes in the so-called “high tech” field (like Skype)…and some of their misses were in non-tech areas (FedEx). I don’t think they are missing what makes the tech businesses valuable; it’s just that when you bet on the future, you’re sure to have a fairly high % of misses..which hopefully will be more than balanced out by the runaway hits.

  5. George Stigler (who is on our masthead) once said, “If I knew why the stock market does what it does, I’d be talking to you from across my solid gold desk.” I have great admiration for the guys who can get more hits than misses at that game. Buffett and Bessemer have both managed to do that. They have a model, and it works for them, and they stick to it. No doubt every successful trader has lots of “big fish that got away.” It would be interesting to hear from these guys what their most disastrous investments were, and why they thought, up front, that they would be winners.

    Jonathan, that book came out many years ago. No doubt Buffett has changed his approach over the years. Also, I agree, a certain amount of strategic disinformation may well be part of his public message and public persona.

  6. The joke is that almost nobody remarks on the exploitative qualities of Buffett’s investment style, whereas George Soros, who made his money fair and square by honest speculation, frequently is accused of being economically destructive.

  7. Yeah, Buffett has cultivated his whole “aw, shucks” avuncular curmudgeon shtick as a way to gain popularity as a folksy wise man, instead of a rapacious capitalist. Very clever. He saw all along that the PR and political dimension of what he does needs to be carefully cultivated, too, not just the pure business side. I think that if Michael Millken had been so clever he never would have gone to jail.

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