Investor Stories 499: When Conviction Comes Too Late: Higgsfield, Coinbase, and an Anonymous Founder Story (Chen, Sagalov, Aarons)

0:00This episode is brought to you by Ramp, the spend management platform we use here at TFR. They're offering listeners$150 just to take a demo. We've never had an offer quite like this. Claim your$150 before this offer is gone at our partner link, ramp.com slash partners slash TFR. Now on to the episode. Welcome to the podcast about venture capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is The Full Ratchet.

0:39Welcome back to TFR. On today's special segment, we ask guests to discuss their anti-portfolio, a startup investment that they passed on. Here's the segment called Why I Pass.

0:56On today's special segment, we have John Chen of FECA. John, can you tell us a story about a startup that you passed on, your anti-portfolio? I passed on Higgs field early on. It was an intro from a good friend at Snap who was very well embedded in the ecosystem. a painful lesson to learn around, you know, having someone sit alongside the value of having someone sit alongside and working shoulder to shoulder with somebody and having a positive view on this person and ultimately ignoring that as a signal. So that was a big miss, you know, on our part. Was that the real reason or was there another?

1:47I think we were honestly not, uh, we, we didn't have a prepared mind, I think on, on the category where I think, um, it wasn't, you know, uh, AI video was still emerging. Um, there were a lot of lookalikes that claim to be able to do it well. Um, and, you know, To be fair, like we aren't a consumer focused firm, but it was one, again, that happened right in our backyard in L.A. at a company like Snap where, you know, we we have an unfair advantage in seeing, you know, some of the best folks come out. So they that's a big mess on us.

2:29On today's special segment, we have Yuri Sagalov, MD at General Catalyst. Yuri, can you tell us a story about a startup you passed on? You're anti-portfolio. Yes, but I won't name names just because I prefer to keep them anonymous. There's a company that I met years ago, and it's just like an interesting reminder of really focusing on founders, where the team was a little bit of a mess. There were two co-founders. It was very clear when you spent time with them that they were going to head for a breakup. and ultimately the team did blow up and I passed because I was just like okay this team will blow up and 99 % of the time when the team blows up the story is over but in this particular case the team blew up one of the founders stayed and the company actually became incredibly successful and it's probably one of the biggest misses of my career and so that one just reminds me of just like you have to look at the founders holistically I don't know that I would have done anything different because I think actually most of the time when the team blows up, it is the end of the story.

3:36And I honestly would require a lot of revisionist memory on my part to remember if I would have felt that like one of the founders was strong enough to carry on on their own. But it is a anti-portfolio company that I think about a lot.

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4:36Yeah, I would say the biggest one in my anti-portfolio is Coinbase. I was an early user of Funders Club. I had the opportunity, this was pre-Metaprop days, had the opportunity to invest, I guess, in the post Y Combinator Coinbase rounds. And for some reason, I was into crypto. For some reason, I just didn't click the button. That's probably my biggest miss thus far. Didn't click the button. What was the hangout? At the time, I really thought crypto was going to stay sort of like cypherpunk. And cypherpunks wouldn't want to give their wallet over to a corporate entity. Ah, I see. Interesting. That proved to be incorrect.

5:19That will conclude this installment of Investor Stories. If you're enjoying the program and would like to see it continue, take a moment and leave a five-star review in iTunes. Okay, that will wrap things up for today. Until next time, overprepare, choose carefully, and invest confidently. Thanks for joining me.

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