This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
Byron Deeter, a partner at Bessemer Venture Partners, has led investments in companies including, Twilio, Box, ProCore, and Tile. He’s personally backed more cloud companies to IPO than any other individual investor, and heads Bessemer’s cloud portfolio, which contains more than 100 startups.
Oh, and he’s also known for passing on Tesla in 2006. Term Sheet spoke with him about Tesla, the cloud, and Bessemer’s infamous “anti-portfolio.”
TERM SHEET: Your investments include Box, Twilio, DocuSign and Procore. What are some of the key elements you always look for in a founder/company before investing?
DEETER: I look at team and TAM (total addressable market). We invest in people that have done all sorts with things in the past, but we look for winners and leaders who know how to conquer hard challenges and recruit great people.
You joined Bessemer in 2005. Knowing what you know now, what is the one thing you would do differently when you first started investing?
I would’ve gone in on everything cloud. We had massive conviction there, but I think about how many deals we turned down that have gone on to become great companies. We could’ve been three times more aggressive and done twice as well. There was so much opportunity there.
Why weren’t you as aggressive then as you would’ve liked?
It was a combination of bandwidth and learning about the market. There was an evolution where we wanted to ease into the space and learn at every step and amplify what was working. We did a number of small deals that informed our thinking on where we could be more aggressive. As a result, we doubled down more on deals like LinkedIn, Shopify, and Twilio, but there were just so many great companies where we liked the team, but were hesitant about one aspect of the model, and we overthought it. We were just too cautious.
What’s going on in the cloud space right now that you think Term Sheet readers should know about?
The massive replatforming of software continues, and cloud is that next evolution. We are doubling down in every way on the space now and absolutely believe that the trend is ripping through the software ecosystem.
It’s created a number of related trends where cloud is the enabler for enterprise mobile, and this notion that mobile workers can get access to great software products is now taking hold. We went from clunky heavy software, to a browser interface with cloud, to your phone with mobile. The next iteration will actually have the interface disappear, and you will interact with software much more naturally. The pace of innovation is accelerating, and each of these cycles is compressing.
You often point to a section on your website entirely dedicated to your biggest misses called, The Anti-Portfolio. Why does Bessemer showcase winning investments the firm decided to pass on?
We’ve had people call and notify us that our website’s been hacked: “Oh my God, someone put up an anti-portfolio on your page. You guys should know so you can take it down.” It’s hilarious, and I tell them, “Guys, just step back. You can’t take yourselves this seriously. Can you not enjoy a little bit of humor?”
We need to be able to make fun of ourselves. As good as we can be in this business, we still wake up every day and read articles of great companies that we missed or didn’t quite understand, and they materialized. We hope every entrepreneur we meet with ends up on one of two pages on our website — either the portfolio or the anti-portfolio. And we’re sincerely happy for their success either way. It’s not a zero-sum game. The spirit of the anti-portfolio is to acknowledge that even the best investors screw up all the time.
Related: VCs Confess Their Biggest Regrets
In 2006, you put a deposit down on a Tesla but passed because you were turned off by the fact that it was a negative margin company. Describe how you feel about that pass today.
It drives me crazy every time I drive to work in my Model X. What I really regret about Tesla is how transformative it’s been for the industry.
In hindsight, automotive was not a sector I was an expert in. I just didn’t understand how great of an entrepreneur Elon [Musk] was and what a force of nature he was to overcome so many tremendous obstacles. He’s absolutely transformed multiple industries, and he’s the type of entrepreneur we love to work with — the type willing to take massive risks for massive change in the industry.
What are your thoughts on the future of cryptocurrency and the blockchain as it relates to venture capital?
I struggle with two diametrically opposed positions on this. On the one hand, I absolutely love the innovation that the blockchain is bringing and see a lot of need for financial industry innovation and removing friction from that ecosystem. On the other hand, I believe that Bitcoin and Ethereum are wildly overvalued relative to any notion of what is value. I do fear and suspect that a lot of the short-term price escalation is driven by speculation and/or improper uses for things like money laundering.
What’s the best business advice you’ve ever received?
Success = Results – Expectations. It was good practical short-term advice I received as an early founder. Obviously, long-term results in the absolutely sense are all that matters. For early companies just attracting investors and team members, you need to show that you’ve got control of your business, and you know what you’re building. At the end of the day, you need to overdeliver.