On this special segment of The Full Ratchet, the following Investors are featured:
- Lara Banks of Makena Capital Management
- Jim Tananbaum of Foresite Capital
- David Cohen of Techstars
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
on today’s special segment, we have Lara banks of mechanic Capital Management. Lara, can you tell us a story about a fund that you passed on, sort of your anti portfolio?
0:45
Oh, there’s so many, I think, generally, the ones that I think about that I passed on are the ones that did really well, and the times that happened were when I couldn’t get either. There was actually two that I can think of. One is, like, it was just too fast and we weren’t ready. And that’s where we spent so much more time and preparing our minds, both on the company side, but also on the fun side, of like, who are great people. And so we we have a list of angel investors that are in companies that we think really highly of, and so trying to get closer to those people earlier, and so that’s where we passed, or kind of just missed those opportunities, because they came, came really quickly. But with those we always kind of stay in touch and look for the next fund. The other one is where we don’t fully understand what’s driving the returns. That I can think of one manager where I didn’t really understand it or appreciate it, and then, therefore, couldn’t kind of verbalize it to others, but they have gone on to do two great things. And so I think that’s something that it’s sometimes a big part of our work is this, like detective work on what is driving that return, and if, if I can’t feel comfortable with that and seeing that it’s repeatable, because a lot of this very like, there’s, there is luck to this business, but, but, you know, spending more time and understanding what is repeatable, what is not is, is a real a big part of our job. And so that was a lesson going for me, and kind of picking more of those intangibles, because I think that that’s what this manager really did
2:26
on today’s special segment we have Jim Tannenbaum of foresight capital, can you tell us a story about a startup that you passed on your anti portfolio?
2:35
My anti portfolio? Well, bridge bio, you know, they’re a bunch that we regret. You know, I think, I think you’ve been doing this long enough, yeah, and like, at the end of the day, you know, in the early on, the early stages of things, it’s hard where you’re when you’re working with a first time around entrepreneur, you know, to kind of catch the superstar. But, you know, bridge had, you know, really strong first time around CEO. We thought long and hard about it. I think we caught, I think we caught the company one. We caught it a little too early. And, you know, as with a number of things, we weren’t aggressive at following up up to look at the next round. And, you know, I think if we had been more aggressive, we probably would have ultimately gone into it. There was another one, Beijing, which, you know, deeply regret. John oiler, you know, another great entrepreneur spent a lot of time I ended up ultimately getting concerned that having a substantial Chinese investment in, you know, seven, 810, years here, whatever would have, you know, would be too distracting for us, given where we were as a fund at that point in time. But, you know, that’s also, he’s built an incredible company. And so i The list goes on and on, but, but I think the thing that holds them together. Are just really great entrepreneurs that are you know, that have vision in their specific area, and as a result, are you know able to just, you know, execute well on
4:16
today’s special segment, we have David Cohen of TechStars, tell us about your anti portfolio, pick a startup that you missed.
4:24
Sure, gosh, you know, the one that comes to mind is little company called Lyft. Maybe you’ve heard of them. Zimride, yeah. Zimride, exactly I saw when it was Zimride. There were, I can’t remember, seven or eight co founders, which was felt a little bizarre, and just invested in Uber and the Zimride story, of course, if you, if you remember, this was, you know, intercity rides, right? So here was Uber saying, We’ve got this really high end black car, you know, it’s expensive, it’s exclusive. Of, you know, I met Ryan. He was mentoring in the Tech Stars program, Ryan Graves, and told me about Uber, along with his feedback on our companies. And I was like, hey, you know, love to be involved in that. Loved his sort of vision for it. But then when I met in the same context, you know, zemride, founders that would become Lyft, the story just felt like that seems like crazy, like there aren’t that many people that go between cities, right? And of course, they would pivot and sort of fast, follow, you know, Uber and do something quite similar. That was one I said no to I love I love the people, and I love the general space, which should be enough, right, to make a pre seed investment back then, we just called it seed, by the way, but, you know, ended up, ended up passing because I didn’t totally get the idea. I think I overvalued the idea over what was a pretty strong and interesting team. So that’s one that always comes to mind, and just interesting because I ended up doing one of the two big winners in that space.
6:03
Has that changed the way that you look at, you know, prospective accelerator companies, if the ideas feels off the mark in some way?
6:13
Yeah, I put less emphasis on the exact thing they’re doing. I put much more emphasis on, you know, the market that they’re in, and their belief about the market, because the belief may lead to a different product. And of course, the team at the early stage sort of everything, right? It’s the talent, the storytelling, the permission that team has to go and do something from its experiences. And you know, I think that’s the stuff that really matters more so than the idea, you know, it’s very, very common that we see companies that go through the accelerator, come out the other end, you know, doing something a bit different, right? So if you get over focused on that as an investor at the at the earliest stages, I think it’s problematic.
7:02
I 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.
