Investor Stories 497: Passing on Snapchat, Canva, and Hugging Face: The Rules of Thumb That Cost VCs Billions (Vaidya, Fubini and Patel, Rosenbloom)

Nick Moran (0:00)

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Now, on to the episode.

SPEAKER_2 (0:24)

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 (0:40)

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 Vivek Vaidya of Superset. Vivek, tell us a story about a startup that you passed on, your antiportfolio.

Vivek Vaidya (1:06)

I haven't passed on too many startups because I just started investing very, very, very, very recently as part of Superset. And as I told you, we don't look at that many companies ourselves, but I love hard systems engineering problems. And I've spent the last three to six months going deep on inference engineering. This whole point about open weight, open inference models. I would have loved to have been a seed investor, angel investor, whatever, in like a base 10 or a fireworks or any of these companies.

Nick Moran (1:34)

Love it.

On today's special segment, we have Ross Fubini and Manish Patel of XYZ Venture Capital. Ross and Manish, tell us a story about a startup you passed on, your anti-portfolio.

Ross Fubini (1:50)

I got a good one. Canva and Snapchat. Both were like sad, sad stories where I saw them early in my career.

Snapchat, Evan actually was in the design program where I teach at Stanford. The advice was don't, I took a lot of venture advice from people that were older, wiser, gray haired, and the advice was like, oh, you should not invest in that company because it's about sexting. And I was like, but the usage is amazing. And people like, I was like, you don't understand. And it was just a little bit of that like too much of the rule of thumb, like, oh, that seems like gray zone. Don't touch it, actually. But it was this joyous experience for these young people. Not about sexting, but engagement. Canva, don't invest in tools companies was what I was told. And I was like, this is an amazing company as a design tool. I was like, I love this thing.

Melanie, the founder, is incredible. Many of my good friends, Cable Desai and Wesley Chan, did that early deal. But I was just like, this is an amazing product. Nope, don't invest in tools companies. So, two really, really big misses in my career.

Nick Moran (2:54)

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Micah Rosenbloom (3:37)

There are so many, it's hard to do, but right now, the present one is Hugging Face because when Clem came to see me, by the way, we knew the BetaWorks guys pretty well. They had been doing these camps, and I think it was Matt Hartman and John Borthwick. And I think I met Clem a few times, and my kids were little. He was working on a chat bot for kids. I think it was teenagers. And I was a little bit spooked about what it could, like, what is this thing going to say to kids, especially my kids or anybody? And, you know, it was the beginning of this chat bot client era that, again, it started as a toy. I didn't totally get it. I will defend myself because it was a pretty big pivot from where they started.

But they definitely saw something. And so, boy, right now, that one hurts.

Nick Moran (4:31)

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.