Deals Missed

If you are in this business long enough, you’ll see some great deals walk through your door.

If you are in this business long enough, you’ll show some great deals the door.

We try to limit our self-flagellation to one deal per fund.

Fund 1 – formed in 1983
Mentor Graphics (Beaverton, Oregon)

We actually wanted to do this deal, but our first fund was closing at the same time they were closing their last round of venture funding. We had no track record. There was no reason for them to wait for us (does this sound like we know what it is like to be on the entrepreneur’s side of the table?). That company went on to become the second largest software firm in the Pacific Northwest, with sales over $700M and a market capitalization of over $1 billion.

To get even, we stole their co-founder and President in 1992.

Fund 2 – formed 1986
Starbucks (Seattle, Washington)

A guy walks into your office in the late 1980’s and says he wants to open a chain of retail shops selling a commodity product you can get anywhere for 25 cents, but he will charge 2 dollars. Of course, you listen politely, and then fall off your chair laughing when he leaves. Howard Shultz didn’t see this as humorous. And we didn’t make 500 times our money.

To get even (wasn’t our not making money enough?) years later, Howard opened his own venture capital firm right down the street.

Fund 3 – formed 1994
Amazon (Seattle, Washington)

The Internet boom was just beginning. Amazon had sales of $4M a year. We had a handshake on a term sheet with the CEO to put $2M into Amazon for 20% of the company (a $10M post money value). At the eleventh hour, some guy named John Doerr flew up and offered $8M going in for 20% of the company (a $40M post money value). Handshake? What handshake?

To get even, we buy all our books at Barnes & Noble. We don’t think Amazon has noticed.

Fund 4 – formed 1997
Pixelworks (Wilsonville, Oregon)

This was a high technology company right in our sweet spot. We saw the firm early on when there was plenty of time to make a decision. There was one small concern – the CEO was an ex-venture capitalist. (Shouldn’t he have gotten credit for realizing his mistake?). However, the big negative came as we walked away from the meeting at the company. One of our partners turned and said, “Why would we want to do another semiconductor deal?” Apparently, we all suffered a memory lapse greater than Amazon’s CEO, since we did back some little company called Xilinx in fund 1.

To get even, we now are all forced to buy flat panel TVs and computer displays containing Pixelworks’ chips. And the ex-VC, used OVP as a “case study” for years.

Fund 5 – formed 1999
Blue Nile (Seattle, Washington)

Why was it that the dot-coms we invested in bombed, and the one we turned down, multiple times, went public in 2004? Maybe because diamonds are forever – or we should never say never again – or the world is not enough, Mr. Bond. Whatever the reasoning, we left this diamond in the rough for others to capitalize, and capitalize upon.

To get even, we are not getting our respective spouses diamonds next holiday season, while those who invested in Blue Nile are. If you don’t think this is painful, we’ll introduce you to our spouses.

They know. They remember. They remind.

Fund 6 – formed 2001
Networks in Motion (Aliso Viejo, CA)

How many times does a guy have to make you money before you just take his word for being right? In 2005, we were approached by a former portfolio company CFO of ours, who had made us money twice before. He said he had joined a company that was going to be the best one yet. He didn’t just ask us to invest, he begged us! He wanted to be the first OVP “three-peat” successful entrepreneur.

We knew the space (wireless, location services), we had independent calibration on the terrific CEO this CFO worked for. We even had the benefit that their first major account (Verizon) was one of our largest investors, so we had a back channel into how the company was viewed. So, why didn’t we invest? Was it because one of our partners literally lost their demo phone? (clue to VCs – don’t ever do this!)

No, we were worried the category would get commoditized and so pricing wouldn’t hold up. Sure enough, in 2009 up pops Motorola’s Droid phone offering a similar product as a free application. One of us (name withheld to protect the not-so innocent) even went so far as to write an internal email saying maybe we hadn’t missed the boat on Networks in Motion (NIM) after all. That email was followed no more than a week later by the announcement that NIM had been acquired for an amount that would have made it a winner for OVP. (Was that CFO on our email string, chuckling in his beer?)

So, we were analytically right, and financially wrong. In this business, as in life – timing is everything.

To get even…

Oh, to heck with it, getting even isn’t working.

Fund 7 – formed 2006

We’re absolutely, positively sure we haven’t missed any big winners in our current funds. And if we’re wrong, you’ll read about it here first.

*and it appears we may be wrong. One contender for the title is Inrix, the traffic information service. Once we passed on the deal, and began to realize our mistake, we tried our best to sabotage the company by messing with their forecasting algorithms. Two of our partners opted not to drive to the office any more, but rather hold court at the Madison Park Starbucks. This backfired when Starbucks, still smarting over our snub back in the 1980’s, sent us a rent check covering our partners’ usurping of their space. Then, one of our partners decided to go for the ultimate algorithm muddle by driving to work a different way every day. We believe he is lost somewhere south of Fargo – and yet the Inrix software still hasn’t broken.

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Deals Missed

Fund 1 – formed in 1983 Mentor Graphics (Beaverton, Oregon)

Fund 2 – formed 1986 Starbucks (Seattle, Washington)

Fund 3 – formed 1994 Amazon (Seattle, Washington)

Fund 4 – formed 1997 Pixelworks (Wilsonville, Oregon)

Fund 5 – formed 1999 Blue Nile (Seattle, Washington)