The VC Who Passed on Tesla in 2006 Says It ‘Stings Every Day’
Byron Deeter has made some pretty great investments in his time as a partner with global venture capital firm Bessemer Venture Partners. He directly led investments in IPOs including Box and Twilio as well as in private companies like DocuSign and Procore. As head of BVP’s cloud investments team since 2005, Deeter has been involved in a portfolio that now includes more than 100 cloud investments.
Perhaps even more interesting, however, are the companies the VCs chose not to invest in. Bessemer Venture Partners showcases its “anti-portfolio” – the investments the firm decided to pass on. Apple (“outrageously expensive), eBay (“Stamps? Coins? Comic books? You’ve GOT to be kidding,”) and Facebook (“Kid, haven’t you heard of Friendster? Move on. It’s over!”) are on the list.
You’re guaranteed to cringe when you see Deeter’s contribution to this list – Tesla. After meeting Tesla’s team in 2006, Deeter test-drove a roadster. He put down a deposit on the car, but was turned off by the negative margin company and decided to pass.
“Tesla stings every day I drive my (full priced) X to work,” Deeter said Monday in a live chat on the site Product Hunt.
Here are a few of Deeter’s insights on identifying potential investments, working at a startup and advice for new founders.
On identifying potential investments
“Personally I have about 3 dozen websites that I visit daily and another several dozen via RSS/Feedly. That’s general tech/cloud/mobile/geek content just to stay current.
“From a longer term perspective, at Bessemer Venture Partners we spend a lot of time ‘roadmapping’ future investments where we call out new sectors and spend years trying to become experts.
“We lean on the experts in our portfolio companies to make us smarter, we also often pull in academics, and occasionally paid consultants. We also try to train each other to continuously be thinking about the future. We do this in a couple of ways: 1) we have an annual meeting where the global team gets together for 2 days and does a deep dive on the past year. What did we do well? What could be better? What did we pass on that we shouldn’t have? Which areas are heating up? What data supports these assumptions? The annual event gives us good fodder to continue the process for the year and helps align the firm around 3-5 strong roadmaps of interest.
“For totally new areas, we sometimes have to start from ground zero. I’ll admit that my most recent (not yet announced) investment is in an area of cutting edge tech that I knew very little about before writing the check. I literally hit Wikipedia to prep for my first meeting. I had to start somewhere!”
On the value of working at a startup after college
“There are very few jobs that offer the same learning experience that startups do, especially at smaller startups, where you will be encouraged to lead and explore a number of different roles and build processes and judgment with limited information.
“But, make sure you have done your homework on the market and the product, and most importantly, the team you’ll be working with. You will spend many many hours with these people – so make sure you get along! I would STRONGLY counsel you to join a high quality company with a great manager, and focus on that above role and title. It’s important for your early jobs to get mental models of success.
“If you don’t feel like you’ll be with great people, then go somewhere you will – join a larger tech company for a few years, or even a consulting firm (I sincerely had a great experience at McKinsey for 2 years as an analyst and it really helped me understand basic business). Early jobs are important to build a high quality network (of future co-founders!) and to learn how to build companies and products the right ways.”
On developing a business plan
“Let me save you a lot of time: don’t spend your time on a business plan! 30+ page business plans simply aren’t read anymore. My recommendation would be to spend time talking to potential customers and solidifying your product/market fit – rather than conjecturing about a 5-year business plan. We usually receive ideas in the form of a tight 5-15 page slide deck and/or a 2-page executive summary with key details and vision. You can actually hack together a demo product these days in the time folks used to spend drafting a business plan.”
On advice for new founders
“Let me try to give a couple here:
– Know your ‘superpower’ or your unfair advantage over everyone else. Why will you succeed in your market over everyone else. Of course it’s because you’re a better team, but what business/product advantage do you have that no one else does?
– Know how to tell your story well. Why did you start this company? What brought you to this stage of your career and why are you passionate about this market area? Founders that don’t have strong conviction around this or a real pain point behind their company usually don’t have what it takes to stick it out during the crazy startup rollercoaster!
– Once you get rolling, have your hands around the metrics you care most about. It’s not cool or acceptable for a growth stage CEO to say that your “operational team” handles that info. The best CEO’s we’ve worked with (Jeff @ LinkedIn, Ben @ Pinterest, Jeff @ Twilio, etc..) all know their core metrics in great detail. It’s possible (and needed) for you to be great at product and still understand KPIs and operational scale.”