While the Web 3.0 revolution is intensifying, venture capital is also undergoing intergenerational changes-a16z represents the imagination of VC platform operation, and personal VC has begun to become the next wave of global venture capital.
Platformization and personalization can be defined as VC 2.0 and 3.0 respectively. What about VC 1.0? The first wave of venture capital institutions started on Dune Road in the 1960s. They were usually managed by white men from investment banks or consulting backgrounds. Most of them disappeared with the wind when the Internet bubble burst in 2000 or the financial crisis in 2008.
So we think Bessemer Venture Partners is a case worth studying. It is the representative institution of VC 1.0, but it has demonstrated unique industry influence in the era of cloud and SaaS, and its performance is also dominated by cases such as Twilio and Shopify.
In 1974, the officially independent BVP was established even before Sequoia and KPCB, and it still maintains the style of a VC 1.0 organization to a large extent. Reporter Eric Newcomer described:
Usually Silicon Valley VCs pay more attention to the matching degree between founders and events, while BVP has formulated detailed investment roadmaps for their optimistic industries; a16z has boasted that all its partners are former industry practitioners since its establishment, and BVP partners Almost all people are professional investors; a16z is willing to raise the valuation, while BVP is keen to keep everyone sane…
Its performance is still enough to outsmart the latecomers. BVP’s 7th and 8th funds both have a return of more than 4 times. In the beginning of 2021, two funds raised 3.3 billion US dollars, and 12 IPOs and 7 mergers and acquisitions were harvested throughout the year, including toast and HashiCorp. Waiting for stars:
How does BVP do this? The anti-portfolio list that we translated tells the answer to a certain extent- BVP is humble, humorous and innovative.
The Anti-Portfolio published on the BVP website lists companies that BVP had the opportunity to invest but rejected. Among them are Apple, Google, and Tesla. Making investments in Memo public has become a trend to some extent, but there are still very few top institutions around the world willing to show off which companies they have missed, and BVPs have acted far earlier than this trend.
This list was proposed by Cowan, a partner of BVP, in 2009. He passed eBay, Google, and PayPal on his own.
As one of the most senior partners of BVP, Felda Hardymon supported Cowan’s “horrible idea” out of nowhere. Hardymon joined the BVP in 1981. His seniority did not restrict his thinking, but helped the BVP maintain complete honesty and clarity in the competitive investment circle—just like the anti-portfolio text shows.
This article will be composed of the following parts:
1. BVP pays tribute to the missed company
2. BVP’s anti portfolio (we help readers to categorize them in the figure below)
3. Complete home runs on Twilio and Shopify
Tribute to the missed company
Bessemer Venture Partners may be the oldest venture capital company in the United States. Our history can be traced back to the Carnegie Iron Empire (Note 1). The long and legendary history has given us unprecedented opportunities to mess things up completely.
Throughout our history, we have invested in a wig company, a French fries company and Lahaina, Ka’anapali & Pacific Railway Company (Note 2). However, we rejected these companies that had the opportunity to invest, and each of them has achieved great success.
The reasons why we give up these investments vary. Sometimes we generously give opportunities to younger venture capital institutions. They are not lucky, and we think that a return of $1 billion can really help them. At other times, our partners had already filled up the Schedule D (Note 3) that year, and they had to make a separate form if they wanted to invest in another company, and they were dismissed as a result.
Regardless of the reason, we want to pay tribute to the companies in this anti-portfolio. Their extraordinary success inspires us to continue to work hard and continue to build a growing company. You can also look at it from another angle: if we invest in any of these companies, we may not have to work.
Note 1: Henry Phipps, the co-founder of Carnegie Steel, founded the family office Bessemer Securities in 1911. The company spun off its venture capital business into Bessemer Venture Partners in 1974.
Note 2: A railway connecting sugar cane plantations and mills in Hawaii.
Note 3: Schedule D is the part of the U.S. tax return that reports the investment profit and loss.
Airbnb (currently has a market value of over 100 billion U.S. dollars)
Jeremy Levine (Note 5) met Brian Chesky in January 2010, when Airbnb’s monthly income just reached $100,000. The $40 million valuation requested by Brian was “crazy”, but Jeremy was moved and planned to contact him again in May.
Jeremy couldn’t predict that the 100,000 U.S. dollar became 200,000 in February and then 300,000 in March. In April, Airbnb did a round at 1.5 times the “crazy” valuation. In December 2020, Airbnb went public at a valuation of US$47 billion.
Note 5: Jeremy Levine is still a partner of Bessemer. He joined the company in 2001 and invested in multi-billion-dollar public companies such as LinkedIn, MindBody, Pinterest, Shopify, and Yelp in the early days.
Note 6: Brian Chesky is the founder and CEO of Airbnb.
Apple (currently market value is close to 2.9 trillion US dollars)
At the time of Apple’s pre-IPO, Bessemer had the opportunity to buy its old stocks at a valuation of $60 million. Neil Brownstein (Note 7) considered this price “outrageously expensive”.
Note 7: Neil Brownstein was a founding partner at Bessemer from 1973 to 1995, and he subsequently founded Footprint Ventures in 2005.
Atlassian (currently has a market value of over 98 billion U.S. dollars)
In 2006, Byron Deeter (Note 8) flew over after noticing Atlassian, a developer tool for Australia (from so many parts of the world). The minutes of that meeting included: “I used my own funds and started with a credit card” and “The business is great, but Scott Mike (Note 9) never wanted the company to go public.”
After countless meetings over the years, Bessemer ushered in its first investment opportunity in 2010, but the $400 million valuation was considered a bit “expensive”. In 2015, Atlassian became the largest technology IPO in Australia’s history, and the stock we missed is worth more than US$1 billion today.
Note 8: Byron Deeter is currently a partner of Bessemer, specializing in cloud and Internet investments. He is the creator of the famous Bessemer Forbes Cloud 100 and BVP Nasdaq Emerging Cloud Index.
Note 9: Scott Mike is the co-founder and CEO of Atlassian. His great motivation for creating Atlassian is to get the average starting salary of Australian graduates while not having to work for others.
Coinbase (currently has a market value of over 57 billion U.S. dollars)
One evening in the summer of 2012, an email titled “Demo day, follow up, Coinbase” appeared in the inbox of Ethan Kurzwil (Note 10). After the regular courtesy, Coinbase founder and CEO Brian Armstrong went straight to the subject: “What questions can I answer in the next two weeks to facilitate your investment in Coinbase?”
In that round, we were able to invest $500,000 at a valuation of $10 million under a conventional simple future equity agreement, and the investment object was something that almost no one had heard of. Ethan’s brilliant answer allows Brain and Coinbase to stay on this anti-portfolio for the rest of their lives: “There are no questions you can answer that allow me to invest.”
Nearly 9 years later, Coinbase became a $85.8 billion cryptocurrency exchange through a direct listing-only 8,580 times the valuation that Brain eagerly proposed!
Note 10: Ethan Kurzwil is currently a partner of Bessemer, focusing on developer platforms and digital consumer technology. Twitch is the company he has invested in.
Ebay (currently has a market value of over 40 billion U.S. dollars)
“Stamps? Coins? Comic books? You must be teasing me.” David Cowan (Note 11) therefore gave an Ebay a “brainless pass.”
Note 11: David Cowan is currently a partner of Bessemer. He is Twitch’s first venture capitalist and has also invested in a series of star companies such as Rocket Lab, LinkedIn, LifeLock and Zapier.
Facebook (currently has a market value of over US$930 billion)
At a corporate retreat in the summer of 2004, Jeremy Levine spent the weekend avoiding the promotion of Harvard University undergraduate Eduardo Saverin (Note 12). In the end, Jeremy made a wise suggestion on the lunch line: kid, have you heard of Friendster? Go ahead, it’s over. “
Note 12: Eduardo Saverin and Mark Zukerberg co-founded Facebook. As of March this year, he still owns 1.88% of Facebook.
Note 13: Friendster is the originator of social networking sites launched in 2003. At one time, one out of every three people in Silicon Valley used Friendster. Friendster was subsequently overtaken by MySpace. In early 2005, Zuckerberg also tried to sell Facebook to MySpace at a valuation of $75 million.
FedEx (currently has a market value of over US$67 billion)
Unbelievable! Bessemer has passed FedEx 7 times.
Google (currently has a market value of over 1.95 trillion)
A friend of David Cowan in college rented his garage to the two founders of Google, Sergey and Larry. In 1999 and 2000, she tried to introduce “two smart Stanford students who were writing search engines” to Cowan.
student? New search engine? At the most important moment of Bessemer anti-portfolio, Cowan asked her: “How can I avoid the garage?”
Intel (currently has a market value of over 200 billion US dollars)
Pete Bancroft (Note 14) failed to negotiate with Bob Noyce (Note 15) on terms. The latter turned to Arthur Rock’s (Note 16) venture capital.
Note 14: Pete Bancroft joined Bessemer Securities, the predecessor of BVP in 1967, and was promoted to president and CEO nine years later.
Note 15: Bob Noyce is one of the co-founders of Fairchild Semiconductor and Intel, and has the title of “Father of Silicon Valley”.
Note 16: Arthur Rock is the inventor and spokesperson of the term “venture investment”, and invested in and participated in the construction of Fairchild Semiconductor, Intel and Apple.
Intuit (currently has a market value of over 180 billion U.S. dollars)
Like every venture capitalist on Dune Road, Neil Brownstein rejected Scott Cook, the founder of Intuit. Scott managed to grab $225,000 from a friend. His classmate at Harvard Business School and the founder of Sierra Ventures Peter Wendell is one of his friends. He personally invested US$25,000 to support Scott.
After extensive investigation, Jeremy Levine discovered a fatal flaw in Kayak’s business model: the airline will not pay high prices for ranking on the platform. Fortunately, the hotel is willing to pay this money. Also willing to pay is Priceline, which bought Kayak for $1.8 billion.
Okta (currently has a market value of over 35 billion U.S. dollars)
In 2009, Salesforce alumni Freddy Kerrest had lunch with his co-founders Todd Mckinnon and Byron Deeter. They introduced SaaSure.com, which they had just established. Although Byron believed in their product vision, it was in the early days of SaaS, and it was too complicated to migrate web applications to smart and integrated cloud local area networks. Today Okta has become a leader in user access management and has a market value of more than 14 billion U.S. dollars.
PayPal (currently has a market value of over 220 billion U.S. dollars)
David Cowan passed in the A round. The rookie team, the regulatory nightmare, and the $1.5 billion acquisition that eBay spent 4 years later.
Note 17: In February 2002, PayPal went public and was subsequently acquired by eBay for US$1.5 billion. In 2015, PayPal once again broke away from eBay’s independent listing.
Snapchat (currently has a market value of over 78 billion U.S. dollars)
In 2011, Jeremy Levine landed at Los Angeles International Airport 3 hours late. Two meetings on his calendar that day had to be cancelled. Jeremy really tossed a coin and then called Evan Spiegel, the founder of Snapchat, to apologize. SNAP became the largest IPO in 2017.
Tesla (currently has a market value of over US$1 trillion)
In 2006, Byron Deeter met the team and drove their convertible sports car. He paid a deposit for the car, but passed the negative margin company and told the partners: “This is a win-win. I got a good car, and some other VCs pay for the company!” This company was the first in 2014 More than 30 billion U.S. dollars in market value. Byron paid the full amount for his Model X.
Zoom (Currently, the market value is over 57 billion U.S. dollars)
After trying out a series of next-generation video conferencing products, Alex Ferrara clearly knew that Zoom was the winner. More importantly, Eric Yuan’s founder as an engineer impressed him. However, the video conferencing market is crowded with entrenched established companies and many start-ups, so Alex abandoned Zoom’s Series B financing in 2014. It’s better to be late than nothing. We participated in Zoom’s IPO at a valuation of $9 billion.
Complete home runs on Twilio and Shopify
Despite being wiped out in trillion-level companies, BVP invested in two of the most iconic cloud companies in the early stage and heavy warehouses-communication PaaS Twilio with a market value of over 46 billion US dollars and SaaS Shopify with a market value of 175 billion US dollars-and long-term Hold, they have not sold a single share within two years of their listing.
As a reporter, Eric Newcomer conducted in-depth interviews with the partners of BVP. We learned these stories from his Newsletter:
In a restaurant in San Francisco in 2009, Ethan Kurzweil, then a senior partner of BVP, took a check for $250,000 from his jacket, then slid it across the table to Twilio’s CEO Jeff Lawson. Lawson has been pushing Bessemer to lead its Series A financing, but the agency decided that it would be better to give Lawson a smaller investment to observe whether Twilio’s customers accept its new telephony product.
This seed-level check was not what Lawson wanted, and he ultimately failed to cash the check. But he did postpone his A round of financing and did a pre-A round, in which BVP participated in the investment of 125,000 US dollars.
In those days, investors believed in their influence on founders. Elite venture capital institutions like Bessemer still think they can make entrepreneurs wait for their own money.
It turns out that Bessemer is too cautious about Twilio. A few months after Pre-A, Albert Wenger of Union Square Ventures suddenly stepped in and led the $3.7 million Series A financing of Twilio with a valuation of $12.4 million. When Twilio IPO in 2016, USV held 14% of its shares at a very low cost.
Bessemer would not make the same mistake in round B. They completed the transaction with Lawson through the function of Twilio: Lawson dialed a number and heard “Please press 1 to get 10 million USD investment, press 2 to get 15 million USD,…”.
Partner Byron Deeter persuaded Lawson to take the money from his family. In the end, Bessemer invested US$12 million with a post-investment valuation of US$52 million, and Deeter got the board seat.
Deeter is 47 years old, Bessemer’s best performer and cloud expert. He also represents the public image of the company. In parallel time and space, he may be serving as the CEO of a large company. A former Bessemer employee described him as “a person who really cares about people.” Deeter organized Bessemer’s first cloud discussion meeting in 2007, and in 2011 created the now-famous BVP Cloud Index.
In 2012, Deeter hoped to lead Twilio’s C round, and said to Lawson, “I am very confident in the company, and these idiots in the market can’t understand you.” In the end, they led the investment at a valuation of US$187 million. The next year, when Deeter tried to use the same strategy, Lawson insisted that the company needed other outside investors and let Redpoint Ventures and Bessemer lead the investment.
When Twilio went public in 2016, Bessemer owned 28.5% of its shares. Its IPO was priced at a market value of 1.2 billion U.S. dollars, and at the end of the first trading day, the company’s market value reached 2.4 billion U.S. dollars. That was a shining moment in Bessemer’s history.
Twilio’s market value once reached 67 billion U.S. dollars. Even Bessemer, who has been dealing with Twilio for a long time and has worked hard on the SaaS track, did not expect this. Deeter remains a member of Twilio’s board of directors, but Bessemer allocated Twilio stock to its fund LP two years after the IPO. If these LPs choose to sell at a particularly early point in time, they will miss billions of potential returns.
However, if investors sell Shopify, they may miss tens of billions of dollars- Bessemer invested $5 million in Shopify early; at the time of Shopify’s IPO, Bessemer held 26% of its shares, worth $500 million; after the epidemic In the era, as Shopify’s stock price soared, Bessemer’s shares were valued at more than US$25 billion.
At the end of 2018, Bessemer had allocated all shares to LP. At that time, Shopify’s market value was 15 billion U.S. dollars, which is 1/10 of today’s.
It was an analyst who found Shopify for the BVP. Daniela Bechet joined Bessemer in 2008. Before leaving in 2010, BVP hadn’t voted for any of the 900 companies she talked about. Tavel, another analyst at the same time as her, pushed through cases such as the talent development software company Cornerstone OnDemand and the bank big data company Yodle, and invested in Pinterest after being promoted.
Bechet was extremely disappointed with his investment philosophy and decided to leave.
During her resignation, Shopify CEO Tobias Lütke finally replied to her persistent email. He told her in the email: Shopify is ready to raise money, and he wants to talk to her.
Negotiations for the transaction continued, Bechet resigned in August 2010, and the BVP classic Shopify Memo was dated October 12, 2010. At the time, Shopify had only 24 employees and raised $1 million in financing. BVP’s envisaged exit estimates are 0, 8 million, 25 million, 50 million, 100 million, 250 million U.S. dollars and a home run of 400 million U.S. dollars.
Daniela Bechet recalls Shopify like this:
“Shopify has not become Bessemer’s anti-portfolio. But maybe for my life, it is similar to an anti-portfolio.”
Bechet did not receive a bonus from BVP’s shares in Shopify. If she stays in Bessemer until Shopify’s Series A financing ends, then Bechet will be allowed to make a small follow-up investment.
We can see why the BVP of VC 1.0 is successful, and why the personalization trend of VC 3.0 is emerging.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/bessemer-lost-and-gained-by-a-sensible-vc/
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