Chris Sacca, a well-known Silicon Valley venture capitalist, private equity adviser and former Google executive, recently shared some of his missed investment opportunities. The list includes well-known companies, such as Pinterest, GoPro, AirBnB, Snapchat and Dropbox.
Sacca, a former lawyer, prefers to invest in companies that need more than just his capital. He looks for companies that value his guidance and business acumen. His early investments in Twitter and Uber made him rich. Numerous other well-known startups, such as Instagram, Stripe, Twilio, Docker, Lookout and Automattic, contributed to his success. Without a doubt, Sacca knows what he is doing, at least most of the time.
Yet, with a good dose of humor, candor and self-deprecation, he admitted to missing the boat several times by overly relying on his common sense, reason and intuition. The following excerpts illustrate this point.
For example, with respect to Pinterest, Sacca was a bit late. Actually, two years too late! Next time over drinks his associate will tell him, “I told you so, man!”
With GoPro, Sacca was a victim of Silicon Valley’s widespread and understandable hardware bias. While investors seem to be a bit more open minded about hardware these days, it will likely take at least another generation of investors to see a greater shift. How many GoPro-like and Nest-like opportunities are missed because of this bias?
Sacca’s AirBnB miss can likely be blamed on his law school training. Judging from my personal experience as a law school graduate, one cannot graduate from law school unscarred about what can possibly go wrong on one’s property or surrounding land. From hidden doors and entrapments to giant wells in one’s yard, properties are full of liability. Good issue spotting, a legal virtue, likely led to a missed investment opportunity in this case. On a bright side, the law is a bit more positive about automobiles where, for example, a driver has a reasonable expectation of privacy. So, it partially explains why spotting a car-related opportunity, such as Uber, was an easier proposition for Sacca.
When it comes to Snapchat, my only comment about Sacca’s explanation: “Really!? That is what you were thinking.” As tempted as I am to mention Freud, this missed opportunity probably makes sense in light of generation gap. Sacca likely could not relate to the product and its audience. Of course, one would expect better from an investor who spotted Twitter early.
And then, of course, it probably makes sense to not pick a fight with Google, a two hundred pound Silicon Valley gorilla. Yet outside of search, it is not unusual for a startup to do well when it innovates close to what Google is doing, which is everything these days. Dropbox is one example among many. After all, Google touches everything from cars and advertising to social networking and payments these days. So, everyone competes with Google, at least on some level.
Our mistakes and imperfections are what make us human. Even top investors, such as Sacca, miss gems every now and then.
It also suggests to entrepreneurs that rejections during fundraising are nothing more than a few humans trying to predict the future, without a crystal ball, and make high stakes bets. In fact, for most startups, fundraising is full of rejections. Some are polite and subtle, while others are more direct and obvious. Independent of their packaging, entrepreneurs should take rejection as a sign that the universe has a better plan for them and learn to take rejection gracefully. After all, as Sacca made clear, even good investors can miss good opportunities.