These Famous VC Mistakes Still… | The VC Corner Summary

1. Key Themes

Theme: Investors price what's in front of them instead of the capability underneath

The article's unifying thesis is that most famous misses share one root reflex.

"each comes down to the same reflex of pricing whatever sits in front of you rather than the capability that decides what it eventually becomes."

Even the winning investors were not immune. Doerr, who funded Google, still misjudged it:

"Doerr wrote the check anyway and earned a fortune, and yet in the room he underpriced the winner by an order of magnitude while looking straight at it."

Theme: A crowded market is not a closed market

Pattern-matching on incumbents led Cowan to pass, while Doerr and Moritz asked what the real battleground was.

"A crowded market and a closed one can look almost identical from the outside, and confusing the two has cost investors far more than any single bad check ever could."

"Doerr at Kleiner Perkins and Michael Moritz at Sequoia worked backward from the binding constraint and asked what the real battleground actually was."

"Cowan settled his verdict about the market before ever testing what the fight was really about."

Theme: Founder flaws are work to be done, not reasons to leave

Labels like "rookies" or "odd" ended diligence early. The investors who won treated gaps as fixable, often by structuring an operator into the deal.

"a label is where lazy diligence ends and the real work should begin."

"Real obsession and first principles thinking are the rare ingredients, because you cannot install them in someone who lacks them, whereas missing experience can usually be hired around."

"Rather than walking away, Valentine made Mike Markkula's involvement as a seasoned operator a condition of the money going in."

Theme: Growth compounds faster than human intuition, so prices that look insane often aren't

"Human intuition is calibrated for a slower world than the one venture actually operates in, and every technology cycle resets the speed limit before anyone updates their estimate."

"The number that looked insane was actually conservative, and the market corrected him before he could correct himself."

"ChatGPT reaching 1 million users in 5 days... made a mockery of every earlier benchmark. Then Threads broke it with 1 hour."

Theme: The real money is in owning and holding winners, not just getting in

"Venture returns come far less from which companies an investor gets into than from how much of the winners an investor keeps."

"Getting in buys a seat, while owning enough of the winner and holding long enough to let the power law reveal itself is where the returns live."

"When one of the most disciplined firms alive rebuilds its entire structure to stop making a mistake, the mistake deserves to be taken seriously." (on Sequoia's 2021 evergreen restructuring)

2. Contrarian Perspectives

Passing on a "settled" market is the more dangerous error

The consensus is that crowded markets destroy capital. The article argues the better question is what the binding constraint is.

"At that point Yahoo and MSN together controlled the large majority of search traffic, so another search engine looked like a settled contest, and settled contests are usually where capital goes to die."

The evidence: Doerr and Moritz reasoned that "If search quality rather than distribution decided the winner, and the incumbents were structurally unable to compete on quality, then the size of the existing crowd was beside the point."

"Correct" math can still be the wrong verdict

Cowan's "rookies facing a regulatory nightmare" and Deeter's "negative margin company" were both accurate descriptions. The contrarian claim is that accuracy isn't the issue.

"His math on the car in front of him was correct and told him nothing about businesses nobody had proposed yet."

"a true description of a founder is not the same as a verdict on them."

The article is careful not to turn this into a blanket "ignore losses" rule. WeWork was "a leasing business wearing a technology multiple," so distinguishing the two "is a judgment about what the losses are buying rather than a calculation."

Caution about price can be the costliest instinct

Stebbings' biggest lesson cuts against valuation discipline at early stage.

"Never let deal mechanics like round size or price stop you from doing an early stage deal you believe in."

The evidence: by his own account, passing on price "cost him around $500 million in gains" in Neko Health. A second pass over a $10M post-money valuation, driven by a doubt that the category could "support a new $10 billion player," missed a company now worth roughly $14 billion.

3. Companies Identified

Google

Description: Search company founded by Larry Page and Sergey Brin; funded by Kleiner Perkins and Sequoia in 1999.
Why mentioned: The central case study of both a great investment and a repeated underpricing.
Quotes: "They reached exactly that conclusion and co-invested twenty five million dollars in June 1999, with Moritz stating plainly that Google should become the gold standard for search."

PayPal

Description: Payments company founded by Peter Thiel and Max Levchin.
Why mentioned: Passed on at Series A over founder inexperience and regulatory risk.
Quotes: "Cowan also turned down PayPal's Series A, summarizing the team as rookies facing a regulatory nightmare."

Apple

Description: Computer company funded by Don Valentine in 1977.
Why mentioned: Example of backing a flawed founder team by adding an operator.
Quotes: "plenty of investors would not even talk to Apple because Steve Jobs struck them as odd."

Tesla

Description: EV maker; passed on at Series C by Bessemer's Byron Deeter in 2006.
Why mentioned: Negative margins read as a verdict when they were a stage.
Quotes: "a loss of roughly $30 million that year against almost no revenue."

WeWork

Description: Office-space company backed by SoftBank at a ~$47B valuation.
Why mentioned: Counterexample where the red ink never washed out.
Quotes: "a leasing business wearing a technology multiple."

Airbnb

Description: Lodging marketplace founded by Brian Chesky.
Why mentioned: Levine called a ~33x multiple "crazy" while revenue tripled within months.
Quotes: "February revenue reached $200k, March reached $300k, and by April the company raised again above the price Levine had refused."

ChatGPT / Threads

Description: Consumer products with record user ramps.
Why mentioned: Evidence that growth speed keeps accelerating.
Quotes: "ChatGPT reaching 1 million users in 5 days... Then Threads broke it with 1 hour."

Amazon Web Services

Description: Amazon's cloud unit, launched 2006.
Why mentioned: The "second business" hidden inside the first.
Quotes: "Amazon Web Services launched in 2006 with about $21 million in revenue, buried inside a company already doing more than $10 billion."

Nvidia

Description: Chipmaker that opened gaming GPUs to general-purpose computing in 2006.
Why mentioned: A decade-long "distraction" that became the AI franchise.
Quotes: "The instrument never changed, only what the market was eventually asked to compute on it."

Neko Health

Description: Healthcare company founded by Hjalmar Nilsonne.
Why mentioned: Stebbings' $500M pass on price.
Quotes: "Neko went on to raise roughly $700 million and, in his words, become the category leader."

Facebook

Description: Social network; DST invested in 2009 near a $10B valuation.
Why mentioned: Example of buying what earlier holders wanted to sell.
Quotes: "much of what it bought was stock that earlier holders were glad to hand over."

Sequoia

Description: VC firm that restructured into an evergreen fund in 2021.
Why mentioned: Structural fix for selling winners too early.
Quotes: "so it would never again be forced to sell the next Google the year it went public."

Alumni Ventures (sponsor)

Description: Venture platform offering co-investment alongside name-brand firms.
Why mentioned: Sponsored placement, not an editorial recommendation.
Quotes: "co-invested alongside name-brand VC firms like Andreessen Horowitz (a16z), Bessemer, & Y Combinator."

4. People Identified

John Doerr

Description: Kleiner Perkins investor, early Google backer.
Why mentioned: Funded Google despite misjudging its scale; insisted on an experienced CEO.
Quotes: "Page told him $10 billion... Doerr... assumed Page meant market capitalization."

Larry Page / Sergey Brin

Description: Google founders.
Why mentioned: Page's $10B annual-revenue answer; Brin conceded they needed supervision.
Quotes: "Brin later conceded, without much enthusiasm, that they had needed adult supervision."

Michael Moritz

Description: Sequoia partner, Google co-investor.
Why mentioned: Reasoned from the binding constraint.
Quotes: "Moritz stating plainly that Google should become the gold standard for search."

David Cowan

Description: Bessemer partner.
Why mentioned: Passed on Google and PayPal.
Quotes: "his recorded reaction was that he wanted out of the house without going anywhere near their garage."

Don Valentine

Description: Sequoia founder; funded Apple in 1977.
Why mentioned: Funded Apple while openly doubting the team, and fixed the gap.
Quotes: "His own memo openly recorded doubts about the management team."

Byron Deeter

Description: Bessemer partner.
Why mentioned: Passed on Tesla's Series C despite placing a personal deposit.
Quotes: "test drove a Tesla Roadster, put down his own deposit, and then passed on the Series C."

Masayoshi Son

Description: SoftBank founder.
Why mentioned: Backed WeWork near $47B and admitted error.
Quotes: "later admitted he had been foolish."

Jeremy Levine

Description: Bessemer investor.
Why mentioned: Called Airbnb's price "crazy."
Quotes: "the roughly 33x multiple Chesky wanted earned the verdict crazy."

Brian Chesky

Description: Airbnb founder.
Why mentioned: The founder Levine misjudged.
Quotes: "Airbnb's first $100k revenue month."

Harry Stebbings

Description: Founder of 20VC.
Why mentioned: Rare first-person account of two multi-hundred-million-dollar misses.
Quotes: "Every case above comes from investors who never volunteered a play by play of their own reasoning, which is what makes this one rare."

Jensen Huang / Jeff Bezos

Description: Nvidia and Amazon leaders.
Why mentioned: Track records of finding a second act.
Quotes: "Jensen Huang funded a decade long, unpriced bet on general computing while still running the gaming business well enough to pay for it."

Yuri Milner

Description: DST founder.
Why mentioned: Let Facebook compound by buying from sellers.
Quotes: "that willingness to let the compounding run is a large part of why DST won."

Peter Thiel / Max Levchin

Description: PayPal founders.
Why mentioned: Lacked financial services experience yet succeeded.
Quotes: "Peter Thiel and Max Levchin had never worked in financial services."

Sebastian Mallaby

Description: Author of a history of venture capital.
Why mentioned: Cited for the power-law structure of returns.
Quotes: "the whole business hangs on a handful of positions carrying entire funds."

5. Operating Insights

Name the binding constraint before judging a market

When you hear "someone already does this," switch from describing the competitive landscape to asking what actually decides the winner.

"The reflex to pass because someone already does this is precisely the moment to stop describing the room and start naming the constraint."

Fix founder gaps through deal structure instead of passing

Make an operator hire a condition of investment, as Valentine did with Markkula at Apple and Doerr and Moritz did with Schmidt at Google. Expect founder resistance.

"which took 2 years and real founder resistance before Eric Schmidt arrived in 2001."

Protect your ownership in the winners

Skipping pro rata because a company "looks expensive" or selling into the first secondary can feel like discipline while capping your best outcomes.

"Skipping your pro rata in the one company that is finally working... reads as prudence in the moment."

6. Overlooked Insights

AWS's growth hid inside consolidated numbers for years

Amazon didn't break out AWS as a segment until 2015, so the profit engine was invisible in reported financials. For investors in conglomerates, segment disclosure timing can hide the real story.

"Amazon did not break it out as its own segment until 2015."

Network effects make growth nonlinear

The article notes that value tracks connections rather than headcount, which helps explain why linear instincts keep failing.

"so doubling the users can roughly quadruple the value."