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What successful startups were rejected the most by VCs?

I have heard the online radio Pandora was rejected 300 times or so. Do you know any surprising cases that would be a good fit to mention on this thread? Thanks!

11 Replies

Michael Feder
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Michael Feder Advisor
Founder and CEO at PrayerSpark; Finalist: Global Business & Interfaith Peace Award
Famously, AirBnB, over 200 times

Michael Leeds
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Michael Leeds Entrepreneur • Advisor
CEO & Founder
Look up the eBay story Via mobile
Martin Omansky
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Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
I can only say that VC staffs and partners are humans - flawed and imperfect - and not clairvoyant. There are many examples of lost opportunities and near-misses (FEDEX comes to mind, when only a last-minute investment saved the company from an unfortunate demise. What, the VC's said, are you proposing to compete with the U.S. Post Office?) Not every good idea gets a fair hearing or an investment. It is the nature of life on this planet.
Chuck Blakeman
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Chuck Blakeman Entrepreneur
Founder, Chief Transformation Officer, Crankset Group
Almost all of them. The core reason for this is the arrogant assumption that "startups" are some kind of special, unique way of starting a business that must be followed in some kind of formulaic way, including the desire from the gitgo to be big. The VC community's view of what will make for a successful startup is the very thing that blinds them. Scott Case expresses this arrogance, "These startups are special and they have a different mindset [than small businesses]", and, "If you sit in a room of 200 startups, and you ask which of them are small businesses, no one will raise their hand," he said. "What they'll tell you is that they are giant businesses that just haven't scaled yet." Total BS. Here's the link - wapo.st/2dN5gG7

The ones sitting with Case who would answer that way are the ones who have drunk the VC Kool Aid - that central to being a startup is that you have to want to be a giant from the start.

Most SUCCESSFUL startups have no motivation to be big when they start; they only have the a) desire to do something better, b) meet a need others aren't, or c) follow their passion. Most huge businesses started out being small businesses solving a problem or following a passion, not "big businesses in the making".

One of my favorite examples is McDonalds. It was a hot dog stand for a decade and a half that evolved into two hamburger joints for many more years. The McDonald brothers had zero interest in being big - ever. No VC would have thrown money at this "small business" that now dominates the fast food industry. Soooo many more examples like this.

There are 600,000++ businesses that start every year. 6/100ths of one percent of them 00.06%, will ever in their life cycle have more than 500 employees. The odds against a VC choosing the potential winners is exponentially bad. If you look at the graduates of almost all incubators you see this in action. Techstars vets 15,000+/- businesses for every cycle, and only take 15 or so. Yet having sifted through 15,000 of the most motivated startups, the number of companies they have backed that have made it to 500 staff is a tiny fraction of their graduates. They trumpet their "success", but it's like Harvard taking credit for turning out successful people. When you reject 99.9%, and only a tiny percentage still become big, it's not exactly a model of booming success.

83% of the fastest growing companies in America do it without VC money. And likely another 16% could have done it as well, but took the money. VCs are historically epically terrible at picking winners.
Alf Poor
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Alf Poor Entrepreneur
Chief Operating Officer at Global Data Sentinel
This link should provide the context you need to understand that the VC community does pass up what, in hindsight, appeared incredible opportunities: https://www.bvp.com/portfolio/anti-portfolio
Joseph Wang
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Joseph Wang Entrepreneur
Chief Science Officer at Bitquant Research Laboratories
Almost all of them. The fact that pretty much every successful startup gets rejected by everyone makes sense once you understand what VC's are looking for.

A typical successful startup would have been rejected by dozens and probably hundreds of VC's, and that's "normal". One issue is that VC's typically do not invest in seed stage companies, and there are strong pressures for a VC not to invest in anything original. Basically, if you lose money investing in what everyone is investing in, then your clients aren't angry, but if you lose money doing something original, they are. Also, VC's are interested in investing in companies that are "ready to roll". They typically are not willing to put any time and effort into managing the company.

The other thing is that the VC vetting system doesn't really care about rejecting good companies. You rejected company X, that later went on to make a bizzion dollars. So what? As long as the company you accepted made money for the investors, no one cares, and it turns out that the companies you did invest in made the money in ways that required less risk on your end.

One other thing that I've seen is that in many cases, it wasn't the VC rejecting the company, but the company rejecting the VC. This happens when the VC's make an offer, the company doesn't like it, and rejects it.

The VC model has been a highly successful model, but it's not the only way of skinning the cat. The VC model works well with only one specific type of company, but there are other types of companies out there.






Didier Depireux
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Didier Depireux Entrepreneur
Faculty, Institute for Systems Research; co-founder, Otomagnetics
I just read the article referenced above by Chuck Blakeman,

I just wanted to chime in that the comments are a whole lot more interesting than the article itself!
John T. Maloney
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John T. Maloney Advisor
Internet of Things Executive Consultant, IoT Engineer
Startups should not even be talking to VCs. Startups are NOT 'small businesses'; Startups are NOT small copies of big companies; startups are NOT businesses at all.

A startup is a investigating and research collaboration formed to discover repeatable customer creation and scalable business models. Period.

VCs pursue investment in going concerns ready to scale to reward their investors. VC do not make investments until the deal is safely out of the Valley of Death. Period.

Anything else is not VC 'rejection'; its just how VCs (should) operate.

Beware of all the myth and hubris of the VC industry.

Thanks for the cogent comments. They are very good.
michael burack
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michael burack Entrepreneur
president
seconded
Martin Omansky
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Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
There are important exceptions. I agree that many VC's only invest in stuff that has much of the market and technical risk wrung out of them, but there are some institutions and man individuals that invest in start-ups - usually because they believe that they understand the underlying technology and/or the market opportunity of the enterprise. Sent from my iPhone
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