On this special segment of The Full Ratchet, the following Investors are featured:
- Vince Hsieh
- Ryan Delk
- Aaref Hilaly
Each investor highlights a situation where they decided not to invest, why they passed, and how it played out.
The host of The Full Ratchet is Nick Moran of New Stack Ventures, a venture capital firm committed to investing in founders outside of the Bay Area.
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Transcribed with AI:
0:19
Welcome back to TFR on today’s special segment, we ask guests to discuss their anti portfolio, a startup investment that they passed on. Here’s the segment called Why I passed
0:35
today’s special segment, we have Vint Shea of Cyprus. Can you tell us about a startup that you passed on that later found success, and what did you learn from that experience?
0:45
So there was a company we looked at last year that was in a heavily tax credit dependent industry, let’s call it, where they sold through businesses, but their end customers benefit from big tax credits. We really liked the entrepreneur. We really liked the founding team. We their financials were great. Product showed well, all that good stuff, but we couldn’t get comfortable with the fact that it was so dependent on the tax credits. And no matter what side of the political spectrum you’re on, the one thing that’s constant is that it keeps changing, left, right, left, right, all the time. And we didn’t want to bet on that market and knowing what happened there, so we ended up passing on the deal. Turns out that the laws and regulations did change in this particular industry, but the entrepreneur pivoted alongside that and succeeded and scaled quite nicely after we had passed. So I think the lesson learned here was yes, market and yes the TAM and the regulation, all that matters clearly, but you got to go with your gut instinct here. If it’s a good team, good entrepreneur, they’re going to figure it out, and maybe it’s still worth an investment.
1:42
You on today’s special segment, we have Ryan Delk of primer, can you tell us about a critical opportunity or decision you chose not to pursue? Was it the right call, and why did you pass on the opportunity? That’s
1:53
a good question. I’ve missed out on my investing strategy in startups is basically just invest in all your smartest friends, and there’s been two instances where, because things were there was just something particularly crazy happening at primer. I just didn’t get back on the deck or the round or something fast enough, and both that’s happened twice in the last 10 years, and both of those have ended up being pretty painful. In retrospect, I don’t know that I actually passed proactively, but I guess I passed in the sense that I did not adequately prioritize it. But I’m not a professional investor. I just invest, invest on the side. And so I think, I think there’s no regrets there in the sense that it was the correct time allocation on a long enough time horizon, but certainly in the moment or looking back, and probably more accurately, those are quite painful.
2:37
Have you ever been approached for primer specifically about big partnerships, you know, big opportunities to kind of, oh yeah, arms with that you’ve had to forego,
2:46
yeah. My team hates me about this stuff. I am, I am so annoying to work with because I just, I try to, I basically shoot down every because we were very unique in that we’re doing this thing that is that everyone wants, in every state, all these organizations want to partner with us to bring primer to these states, or to launch primer and these, you know this, these libraries or community centers or churches or, you know, whatever it might be. And literally, probably three times a week, someone on the team pings me and says, Oh, this, this mayor or this state representative or this organization wants primer to come to Pennsylvania or Idaho or Indiana or Ohio or wherever it is. And some of them are very exciting, and the team gets excited about it, and I shoot every single one of them down. Just remind us that we have to focus. And so I don’t, I don’t regret that at all. I think it’s I, I’m 110% convinced that focus is the only way to win in what we’re doing. But it is, it is, I’m sure, quite annoying to the team there.
3:45
On today’s special segment, we have Arif hilali of Bain Capital ventures. Can you talk about your anti portfolio? Tell us a story about a startup that you passed
3:54
on. I think the one that stands out of my mind is zoom at seed. I just joined Sequoia. I think they were in beta at the time. They had about 28,000 users. I met Eric, and was excited. After the first meeting, I took it to my partners who had reasonably, very reasonably, had a bunch of questions. How’s this different from Hangouts? Do people really need multi party video? What’s the differentiation? I explained. The magic of the experience is having something that just works when you, when you you fire it up. Because I spent ages futzing with ActiveX controls at that point and wasting time in meetings. So I organized a big group meeting to show everyone the product, and then the demo didn’t work. Having sold it to everyone, is it just works. It didn’t work. So that unfortunately killed it at that point. But thankfully, Pat Grady and Carlos and bark invested in the company of Series C, so we still got to work with Eric later, but it was very painful not to have been able to do it then
4:48
the notorious seed demo, but it never seemed to work.
4:57
That will conclude this installment of. Investor stories. If you’re enjoying the program and would like to see it continue, take a moment and leave a five star review in iTunes. Okay, that will wrap things up for today until next time over. Prepare, choose carefully and invest confidently. Thanks for joining me.
