“Wistful, not acute” is how one venture capitalist describes the pain of missing out on a return of more than $1.1 billion after passing on a $250,000 early stage investment in Uber.
In a post last month for Entrepreneur, VC and entrepreneurship professor John Greathouse explained how he passed on investing in Uber during not only its seed round but also its A Round as well.
“I never even bothered to listen to [Uber co-founder Travis Kalanick’s] pitch, even though I was repeatedly offered the opportunity,” he wrote.
If Greathouse, who serves as a managing director for Rincon Venture Partners, had had his firm invest in the ridesharing company then, their investment would have multiplied 4,000 times in value, turning a $250,000 investment into one worth more than $1.1 billion.
In the summer of 2010, Greathouse could have been one of Kalanick’s first-ever pitches because they shared a mutual friend who informed him that Uber was raising a seed funding round. He didn’t bite.
“It might work in San Francisco, Boulder and Austin, but I don’t see it expanding beyond a few small cities with strong tech communities,” Greathouse recalled telling his friend, who is now a senior executive at Uber. “If they try to move into Philly, New York or Boston, they’re going to get their throats slashed.”
A few months later, the friend, who did not work for Uber at the time, pitched the fledgeling ridesharing company again and praised it for “turning the downtime of town car/limo services into cab service” in an unrelated email.
Greathouse replied with what he writes was a “characteristically brilliant” response. His email read:
“Looks like they are ultimately providing the service (via independent drivers), correct? If so, not a great fit. If they are selling s/w that allows independent drivers to make more money, that is a bus model that fits within our overall investment thesis (i.e., s/w sales vs real-world fulfillment of a service).”
In hindsight, Greathouse says he underestimated Uber’s ability to create a two-sided market and its “wily use of consumers to muscle its way into hostile markets.”
The missed opportunity has resulted in Greathouse and Rincon partner Jim Andelman being reminded of Uber’s success every time they connect with that mutual friend.
“The ultimate lesson I learned from scoffing at Uber is that I should have honored my friend’s thoughtful (and repeated) suggestions and his nose for great businesses,” Greathouse wrote.
He added: “Note to my loving wife: The next time a friend knocks me over the head with a billion dollar opportunity, I’m going to listen. Promise.”