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Home > Blog > Mourning the one that got away
Out of Our Minds
Monday, August 23, 2004 3:00 PM
Mourning the one that got away
Anita Sharpe on Business

For the venture capitalists who turned down Google, it has clearly been wrenching to watch the stock return a 250-to-1 five-year payout to the investors who said 'yes.'

Indeed, one such VC would only talk to the New York Times if the reporter agreed not to mention the name of his firm. He said his firm chose to pass because the young Google founders appeared 'naively egalitarian in ways that seemed incompatible with their
ambitions.'

'We were wrong,' he told the Times. 'It would have been a great investment.'

Similarly, when Howard Schultz was trying to convince the first investors to back Starbucks, he was turned down by more than 10 people for every one that signed on.

It would be interesting to know if the typical investor psychology is stung more by losing money on something that looks like a sure thing -- or missing out on a long shot that hits the jackpot.



2 comments

Robert - 8/24/2004 9:49:49 PM
Well, there are indeed psychologists who specialize in patients in the investment game (especially up here in New York). In their absence, I'll offer an amateur's observation.

Many (perhaps most) people might reason that losing a million dollars already in your pocket -- which might require you to make lifestyle changes -- is far worse than merely missing the opportunity of gaining, say, two million dollars that you don't have today. However, I'd speculate that many serious investors and businesspeople would follow the opposite approach, as for them, being in the game is as important (if not more important) than the financial outcome. That is, plenty of serious investors would prefer to actively take a stake in something (and lose big), and the worse fate would be sitting out on a Google-like deal and watching others gain a huge payoff.

Ted Turner famously lost billions through his investments after the AOL / Time Warner deal. I don't know him, but the few interviews he gives (including an interesting hour recently with Charlie Rose) suggest that he is far more angry about how the management of the combined company treated him, than by any of the resulting financial losses. So he's off partly to create a chain of bison-burger restaurants, good for him. (He should read your blog on customer service in the food business.)
Anthiypatus - 8/23/2004 10:36:11 PM
Many years ago, my boss had a chance to buy a significant portion of starbucks for 25 grand. She turned them down.

As to your final point, the investor is stung a LOT more when they miss out on a long shot that hits the jackpot.

I don't know how many times I've heard the story of how she 'had the chance to invest in Starbucks but she turned them down.'

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