Investor Stories 444. The Biggest Misses in VC: Passing on Airbnb, Overlooking Skype, and Arriving Hours After Postman Closed (Maples, Okike, Mohapatra)

**Nick Moran** (0:00)
This episode of TFR is brought to you by Ramp, the spend management platform we use here at TFR. They're offering listeners $150 just to take a demo. We've never had an offer quite like this. Claim your $150 before this offer is gone at our partner link, ramp.com/partner/tfr. And this episode of TFR is brought to you by the American Arbitration Association, where smart startups and investors turn to for fast, efficient, and cost-effective dispute resolution. Visit adr.org/tfr to learn more.

**SPEAKER_2** (0:41)
Welcome to the podcast about venture capital where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran and this is The Full Ratchet.

**Nick Moran** (0:57)
Welcome back to TFR. On today's special segment, we asked guests to discuss their Antiportfolio, a startup investment that they passed on. Here's the segment called Why I Passed. On today's special segment, we have Mike Maples Jr. of Floodgate. Can you tell us a story about a startup that you passed on?

**Mike Maples Jr.** (1:21)
Stupidly, I passed on a startup called Air Bed and Breakfast in 2008 Oh, brutal. So now in my defense, it was before they even applied to YC. So Michael Seibel had been one of the co-founders of Justin TV at the time, and he introduced him to me, and they couldn't get the product to work in our meeting.
And then they didn't bring slides because they heard that I wanted to see the product. So we're 20 minutes into the meeting, I still have no idea what they do. And then it was a room full of cereal boxes. They were trying to sell me Obama O's and Captain McCain Crunch because that was what they were funding the company with, was selling these cereal boxes for the election. And I just didn't really figure out what his fundamental insight was. I was like, well, doesn't couchsurfing.com already exist and isn't it free? And why are you different from that? And I just didn't have the presence of mind. A lot of why I wrote the Pattern Breakers book was looking back on the postmortem of why I got Airbnb wrong and what I needed to learn from that lesson. Fortunately, we got it right with Lyft, right, later on. So I'd say that that was the biggest, that was the biggest miss that I ever had, probably by a wide margin even.

**Nick Moran** (2:43)
On today's special segment, we have Nnamdi Okike of 645 Ventures. Nnamdi, can you tell us a story about a startup you passed on, your anti-portfolio?

**Nnamdi Okike** (2:53)
Yes, yes. I'll mention one, Skype. So when I was at Insight, we came upon Skype super early. I found it through the outbound sourcing that I was doing. I was kind of interested in internet telephony at the time, super early in that world. And so we chatted with the founders. I think they had just launched the product, if I remember.
And there was some hair on that one because the founders had come out of... They started Kazaa, which at the time was a file sharing company that got sued and had to pay a lot of money to the record companies. And so there was some question around the founders and even legally whether they could operate this company given the previous legal situation they were in. And it was also, again, too early for Insight, the firm I was at at the time. And so we passed on it. It got a part a couple years later for two and a half million dollars. I was in business school at the time and I remember saying, wow, you know, that was a miss. Should have definitely done that. That was one that comes to mind. It was kind of a costly, costly class.

**Nick Moran** (3:58)
This episode of TFR is brought to you by ADR. A business dispute doesn't need to become a legal and reputational crisis. Smart investors and startups add arbitration language to their term sheets for fast, efficient and cost-effective dispute resolution. The American Arbitration Association has arbitrators that understand your business, bringing industry expertise and experience with startups, tech and finance. Visit adr.org/tfr to learn how arbitration helps leaders keep their focus on growth, not legal battles. Now back to the episode. On today's special segment, we have Hemant Mohapatra of Lightspeed. Hemant, can you tell us a story about a startup that you passed on?

**Hemant Mohapatra** (4:45)
So, okay, I have one that's very, it's my part of my anti-portfolio. It's a company called Postman. This is a company that is, I would say, very central to the API economy in the world. Last round they raised was roughly at five billion. I saw them five, six years ago. Actually, I didn't really pass on the company, but this is an example. In our business, if you blink and you have conviction and you don't really act on your conviction, it really haunts you for the rest of your career. We had done a lot of work on the company. The founder was not really raising, so we didn't have access to the primary data, data room, deck, none of those things. But we really, really had a lot of respect for the founder and the business they had built and how quickly they were growing. We spoke to about 50 people across all the top companies. They were users of this product and we heard great things. We went there. Since he was not fundraising, it took us a couple of months to really build that level of conviction. And then one day, one fine day, I heard that, you know, he is, he's raised. And I was in India at the time, in the office. I heard it, kind of skipped a beat. Went back home, picked up my passport on the way my EA booked a ticket to the US. On the flight, we designed what kind of strategy we'll do to really, you know, be in business with them, landed with a term sheet and an offer. And unfortunately, just about eight to ten hours before that, just the night before, in front of his office when I was there, he said that I already signed with a partner that, you know, that we like, and unfortunately, there's no more room. And then I realized that, you know, it's so rare in our business to find that tip of the spear company that actually is scaling, has the highest quality founder, really excites you, right? Tailwinds, all things coming together. And if you have to have done the work to build conviction, do not sit on your conviction. Act on your conviction. Put a ring on it. Otherwise somebody else will.