On this special segment of The Full Ratchet, the following Investors are featured:
- Natalie Dillon of Maveron
- Larry Cheng of Volition Capital
- Ben Black of Akkadian Ventures and Powerlaw Corp
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. On today’s special segment, we have Natalie Dillon of Mavron. Natalie, can you tell us a story about a startup that you passed on your anti-portfolio.
0:43
Early in my career, I had an opportunity. I met Grant at whatnot. This was in the thick of the pandemic. I thought he was incredibly sharp. He is incredibly sharp. Clearly, I had been looking at the live shopping ecosystem in Asia for years. I’d actually spent a summer in China when I was in college because I was just like fascinated with Chinese consumers and their buying behaviors and patterns. I was a senior associate. I met him on Zoom, and I think I just I talked myself out of it and didn’t think that this was the right one. And I look back and deeply, deeply regret not trusting my instincts, not pushing harder, not believing in myself. I look back. I’m like, I had the thesis. This guy was a rock star. Should have been one that that I pushed much harder and and not pass on.
1:37
On today’s special segment, we have Larry Chang of Volition. Larry, can you tell us a story about a startup that you passed on your anti-portfolio?
1:45
In my early days as a young investor, I went to Harvard. I was at Battery Ventures at the time, and I went back to visit a school club that I was involved with. And I asked the students, “What’s going on on campus at school? And they said, “There’s this new website called Facebook. And and I said, oh, what is it? It’s like a social network that that had been started by Zuckerberg and Eduardo Savarin. And so I spent some time with Mark and Eduardo, and I I actually brought them back to my firm that I was working at and explained to them what a term sheet was and socialized a term sheet and so forth. And and ultimately, because I was young and so forth, the investment committee couldn’t get their head around investing in a sophomore in college with a social network that had like 6000 users at one school, and which is reasonable at the time. And then obviously, Mark and Eduardo went off to the West Coast and launched at 200 more schools, and then expanded beyond from there, and it became what it was or what it is today. It’s well known in the Boston area that I was the first VC to meet with Mark and Eduardo, and I don’t, I don’t wear that proudly. I wish we had invested, but it’s interesting to see a company from it’s literally three or four weeks old to what it has become now. It’s you know, it’s amazing.
2:56
On today’s special segment, we have Ben Black, managing director of Acadian Ventures, CIO of PowerLaw Corp, and founder of Raise Global. Ben, can you tell us a story about a startup that you passed on your anti portfolio? This
3:10
is the most painful pass of my life, and it’s one that I still lie in bed think about all the time. It was a long time ago. It was in our third fund, and I I knew no NoSQL databases were going to be big. So you you had MongoDB was new, right, and then you had Databricks, and there was a third one who I’ve not forgotten the name of, and I was like, I I went really I said I got to pick one of these. I probably should have bought them all, but I said I got to pick one, and so I got like some of the most smartest people in the room. I knew it was like the CIO of a VP of technology at Netflix, like the CIO of Yahoo at the time. And oh, the boy, a guy that was like running 20,000 developers for Disney was the CIO in the Disney divisions. And I was like, MongoDB, Databricks, this third one. You know, which do you like? Sorry, not Databricks, Data Stacks. I misspoke, which is you know no more. It’s been bought, and all of them, all three of these calls, all three of them, were like we hate MongoDB because of security problems, and it’s our developers love it and they all want to use it, but we we’re trying to get it out of our stack. We it doesn’t scale, and it was just a vicious takedown on MongoDB. And everyone was like, “We love Cassandra, which this database was was the open source. You know, it’s Cassandra open source database that’s completely scalable, and you know it’s just this great solution. And we want you know we want Cassandra. All three calls. If I had done the Databricks deal, it would have returned my fund two times over. And I did Data Stacks, which lovely people, but sorry, it was not a good investment. I passed, I guess, for the right reasons. But like, maybe I should have just focused on what developers liked more than what these got, what the CIOs were saying. I still. Think about that to this day. It is such a painful decision to have missed MongoDB, and you know, I gotta stop beating myself up over it.
5:09
You know, a lot of VCs are worried about conflicts. Some are not, but could you have done both?
5:14
I, I looking back on it, I should have done both. Like clearly, as secondary fund, I absolutely should have. I had a really small fund at the time, an $80 million fund. I felt like I it didn’t have enough capital, and so I just chose one, and it was an incredibly dumb decision. I
5:27
had a call last night with a VC buddy of mine. He’s an indexer, really small checks, really passive, but he was all bent out of shape because he’s looking at a deal we did, and he’s like, ah, I feel like it’s a it’s better than this one I did three months ago, but they’re both the same, and I’m like, man, you can probably do both. Check your docs.
5:47
Yeah, and and now, like, talk about lessons learned. Like now, very much, you know, like we have, you know, we we put both deal and rippling in the same fund. You know, they’re pretty similar in some ways. You know, I have no problem saying I’m going to buy them all. You know, when when it’s a space, it’s clearly going to be hot, and I think that going forward, it’s not going to be something that I worry about.
6:16
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, overprepare, choose carefully, and invest confidently. Thanks for joining me.
