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February 24, 2005

The "Anti-Portfolio"

As a stock market investor, I used to pray every time I sold a company's share that it never again reached that price again. Unfortunately, the price at which I sold was most often the starting point "for a major bull run", as those analysts say. This was a strong motivator for me to move to mutual funds. (There is no way anyone can get me to name the companies whose shares I sold sickeningly early and definitely, no way will I let on at what price I sold.)

Given this, I was fascinated when I chanced upon, at US-based venture fund Bessemer Venture Partners' web site, a detailed list of companies that the firm declined to invest in, and "each of which later blossomed into a tremendously successful company".

"Our reasons for passing on these investments varied. In some cases, we were making a conscious act of generosity to another, younger venture firm, down on their luck, whom we felt could really use a billion dollars in gains. In other cases, our partners had already run out of spaces on the year's Schedule D and feared that another entry would require them to attach a separate sheet. Whatever the reason, we would like to honor these companies -- our "anti-portfolio" -- whose phenomenal success inspires us in our ongoing endeavors to build growing businesses. Or, to put it another way: if we had invested in any of these companies, we might not still be working."

The "anti-portfolio" list includes Apple, eBay, Check Point Software, FedEx,..... well, you get the idea.

Some extracts:
Apple Computer
BVP had the opportunity to invest in pre-IPO secondary stock in Apple at a $60M valuation. BVP's Neill Brownstein called it "outrageously expensive."

Check Point
In 1994, Gil Schwed pitched his idea to BVP's David Cowan, who said that Gil would never get distribution in the US. The next year, Check Point got a huge Sun OEM deal and sold $25M of firewall software.

Federal Express
Incredibly, BVP passed on Federal Express seven times.

Google
Cowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine”. Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage?”

Click Here for the full anti-portfolio.

As is to be expected of a firm that is as disarmingly candid about its "non-investments", BVP's actual portfolio is way impressive too. And given that BVP is one of US' longest-standing venture capital funds (since 1911!), the list a pretty long one too.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.