Investor Stories 426. Investor Regrets and Hard Calls: From Tax Credit Dependence to Saying No to Zoom (Hsieh, Delk, Hilaly)
Episode
5 min
Read time
2 min
Topics
Investing, Startups, Product & Tech Trends
AI-Generated Summary
Key Takeaways
- ✓Tax Credit Risk Assessment: Vince Shea passed on tax-dependent business despite strong team and metrics, but founder pivoted when regulations changed—lesson learned to prioritize exceptional entrepreneurs over market concerns.
- ✓Passive Passing Costs: Ryan Delk missed two investments in smart friends by failing to prioritize responses during busy periods at Primer—both became painful misses, reinforcing systematic investment review processes matter.
- ✓Demo Failure Impact: Arif Hilaly passed on Zoom at seed stage with 28,000 beta users after organized group demo failed, despite recognizing product worked reliably—single technical failure killed internal momentum.
What It Covers
Three venture investors share investment regrets: passing on tax-credit dependent startup that pivoted successfully, missing friend rounds, and Zoom's failed demo at seed stage.
Key Questions Answered
- •Tax Credit Risk Assessment: Vince Shea passed on tax-dependent business despite strong team and metrics, but founder pivoted when regulations changed—lesson learned to prioritize exceptional entrepreneurs over market concerns.
- •Passive Passing Costs: Ryan Delk missed two investments in smart friends by failing to prioritize responses during busy periods at Primer—both became painful misses, reinforcing systematic investment review processes matter.
- •Demo Failure Impact: Arif Hilaly passed on Zoom at seed stage with 28,000 beta users after organized group demo failed, despite recognizing product worked reliably—single technical failure killed internal momentum.
Notable Moment
Sequoia partner organized large group meeting to showcase Zoom's reliability advantage over competitors, but the demonstration completely failed to work, ending investment consideration despite earlier enthusiasm.
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. Today's special segment, we have Vince Shea of Cypress. Can you tell us about a startup that you passed on that later found success, and what did you learn from that experience? So there was a company we looked at last year that was in a heavily tax credit dependent industry, let's call it, where they sold through businesses, but their end customers benefit from big tax credits. We really liked the entrepreneur. We really liked the founding team. We their financials were great. Product showed well, all that good stuff. We couldn't get comfortable with the fact that it was so dependent on the tax credits. And no matter what side of the political spectrum you're on, the one thing that's constant is that it keeps changing left, right, left, right all the time. And we didn't wanna bet on that market and and knowing what happened there, so we ended up passing on the deal. Turns out that the the laws and regulations did change in this particular industry, but the entrepreneur pivoted alongside that and succeeded and scaled quite nicely after we had passed. So I think the lesson learned here was, yes, market and, yes, the TAM and the regulation, all that matters clearly, but you gotta go with your gut instinct here. If it's a good team, good entrepreneur, they're gonna figure it out, and maybe it's still worth an investment. On today's special segment, we have Ryan Delk of Primer. Can you tell us about a critical opportunity or decision you chose not to pursue? Was it the right call, and why did you pass on the opportunity? That's a good question. I've missed out on my my investing strategy in start ups is basically just invest in all your smartest friends. And there's been two instances where because things were there was just something particularly crazy happening at Primer, I just didn't get back on the deck or the round or something fast enough. And both both that's happened twice in the last ten years, and both of those have ended up being pretty painful …
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