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The Full Ratchet

Investor Stories 410: Why I Passed (Stevens, Patel, Shen)

9 min episode · 2 min read
·

Episode

9 min

Read time

2 min

Topics

Productivity, Investing, Startups

AI-Generated Summary

Key Takeaways

  • Focus Balance: Kevin Stevens passed on a now $3 billion German solar company by over-indexing on enterprise SaaS specialization, learning that climate investors should trust their domain expertise beyond narrow categories.
  • First Principles Thinking: Manish Patel missed Snapchat by following conventional VC rules instead of trusting user data and instincts, emphasizing that breakthrough companies redefine standard KPIs rather than conforming to them.
  • Service Level Economics: Dockless bike sharing requires 20-30x supply versus demand to ensure availability, making venture capital unsuitable for infrastructure models needing long payback periods despite founder claims of easy breakeven.

What It Covers

Three venture capitalists share investment mistakes: passing on a German solar company now worth $3 billion, Snapchat, and dockless bike sharing startups due to flawed economics.

Key Questions Answered

  • Focus Balance: Kevin Stevens passed on a now $3 billion German solar company by over-indexing on enterprise SaaS specialization, learning that climate investors should trust their domain expertise beyond narrow categories.
  • First Principles Thinking: Manish Patel missed Snapchat by following conventional VC rules instead of trusting user data and instincts, emphasizing that breakthrough companies redefine standard KPIs rather than conforming to them.
  • Service Level Economics: Dockless bike sharing requires 20-30x supply versus demand to ensure availability, making venture capital unsuitable for infrastructure models needing long payback periods despite founder claims of easy breakeven.

Notable Moment

A founder became United Global Service member by flying excessive economy flights, using this experience to explain why bike sharing companies failed to understand idle capacity requirements.

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Episode Transcript

This episode of TFR is brought to you by Ramp, the spend management platform we use here at TFR. They're offering listeners a $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/partner/tfr. And this episode of TFR is brought to you by the American Arbitration Association, where smart startups and investors turn to for fast, efficient, and cost effective dispute resolution. Visit adr.org/tfr to learn more. 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. Welcome Welcome back to TFR. On today's special segment, we ask guests to discuss their anti portfolio, a start up investment that they passed on. Here's the segment called why I passed. On today's special segment, we have Kevin Stevens of Energize. Kevin, can you tell us a story about a startup that you passed on? Oh, there's many. There is a German version of Sunrun that we were we looked at the series a three years ago now, and it was coming out of a series of investments that didn't go well for us that weren't b two b SaaS. And so we internally discussed, like, okay, what is Energize great at? And we determined that that was enterprise SaaS. We were going to do those types of businesses. And so this company comes to us, great metrics, looks like a winner, by all intents, a home run. And we just said, Hey, we don't do this anymore. We don't do anything different outside of our strike zone. And so we, for that point, we know you're a winner, but we have to pass. And as a result, it's like a $3,000,000,000 company now. And so it was a, it was a big miss and the learning for us was maybe we focused too much, you know, as, as climate focused and energy focused investors, we do have this earned secret of what we think could win in the market. And sometimes we should listen to that instead of just completely retrench into, you know, a very narrow window. On today's special segment, we have Manish Patel of Nava Ventures. Manish, can you tell us a story about a startup that you passed on? Oh, yeah. So many in my Etsy portfolio. I would say the one that comes to mind, most vividly is Snapchat. So Snap, Evan Spiegel was in the class I teach at Stanford. He was the year before I started teaching, actually. Met him, did not get it at all at all. Right? I was even then as a young guy, I was an old man, did not understand why this app was addictive, saw it as the, you know, thirty fifth messaging app, passed on the seed opportunity, and that was a big miss. What did you learn …

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