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The Full Ratchet

Investor Stories 451: Why I Passed: Moving Too Slowly, Misreading Return Drivers, and Passing on Lyft (Banks, Tananbaum, Cohen)

7 min episode · 2 min read
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Episode

7 min

Read time

2 min

Topics

Investing, Startups, Fundraising & VC

AI-Generated Summary

Key Takeaways

  • Speed preparation: Maintain pre-built lists of high-quality angel investors and target companies to avoid missing fast-moving opportunities that close before proper evaluation can occur.
  • Return driver analysis: Invest time in detective work to identify repeatable versus luck-based performance factors in fund managers, even when intangibles drive success, before committing capital.
  • Team over idea: At pre-seed stage, prioritize founder talent, market belief, and team storytelling permission over the specific product idea, as pivots are common before accelerator completion.

What It Covers

Three venture investors share missed investment opportunities, revealing why they passed on successful companies like Lyft, BridgeBio, and others that became major winners.

Key Questions Answered

  • Speed preparation: Maintain pre-built lists of high-quality angel investors and target companies to avoid missing fast-moving opportunities that close before proper evaluation can occur.
  • Return driver analysis: Invest time in detective work to identify repeatable versus luck-based performance factors in fund managers, even when intangibles drive success, before committing capital.
  • Team over idea: At pre-seed stage, prioritize founder talent, market belief, and team storytelling permission over the specific product idea, as pivots are common before accelerator completion.

Notable Moment

David Cohen passed on Lyft after investing in Uber because intercity ridesharing seemed impractical with too many cofounders, missing the team strength signal entirely.

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Episode Transcript

Today's episode of TFR is brought to you by .techdomains. The right .com is usually taken, and adding extra words weakens your signal. I see thousands of decks every year, and a clean domain still matters. That's why founders choose .tech. It's simple, modern, and sends the right signal. Secure your .tech domain early. And this episode of TFR is brought to you by the American Arbitration Association, where smart startups and investors turn for fast, efficient, and cost effective dispute resolution. Visit adr.org/tfr to learn more. Now here's 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. 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 Lara Banks of Mechanic Capital Management. Lara, can you tell us a story about a fund that you passed on, sort of your anti portfolio? Oh, there there's so many. I think, like, generally, the the ones that I think about that I passed on are the ones that did really well. And the the times that happened were when I couldn't get, either there were actually two two that I can think of. One is, like, it was just too fast, and we weren't ready. And that's where we spent so much more time in preparing our minds, both on the company side, but also on the fun side of, like, who are great people? And so we we have a list of angel investors that are, in companies that we think really highly of. And so trying to get, closer to those people earlier. And so that's where, we passed or kind of just missed those opportunities because they came came really quickly. But with those, we always kinda stay in touch and and look for the next fund. The other one is where we don't fully understand, what's driving the returns. And I can think of one manager where I didn't really, understand it or appreciate it, and then, therefore, couldn't kind of verbalize it to others. But they have gone on to do two great things. And so I think that's something that it's sometimes a a big part of our our work is this, like, detective work on what is driving that return. And if you return. And if if I can't, feel comfortable with that and seeing that it's repeatable, because a lot of this, right, like, there's there's luck to this business. But, but, you know, spending more time and understanding what is repeatable, what is not is is a real big part of of our job. And so that was a lesson going for me in kind of unpicking more of those, intangibles because I think that that's what this manager really …

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