Thoughts about the Snap IPO from a prominent Los Angeles VC who didn't invest

Thoughts about the Snap IPO from a prominent Los Angeles VC who didn't invest
Thoughts about the Snap IPO from a prominent Los Angeles VC who didn't invest

What happened was I had just seen (maybe 6 months before) a project called TigerText. It was a "disappearing text app" where the founders told me that they named the company because the idea came from how Tiger Woods got caught cheating on his wife because all of his mistresses had evidence that he cheated because they saved text messages from him. What if text messages disappeared? To be fair to TigerText they build a company focused on the healthcare industry and HIPAA compliance. But that narrative was fresh in my head when I first had the discussion about Snapchat.

I hugely respect James Bailey's instincts (I still do) and he pushed other deals that we did complete. So we had the discussion and I told James, "Isn't Snapchat just a photo-based TigerText?" I had a narrative in my head that I didn't want to fund apps that would help husbands cheat on their wives or help kids send naked photos. Of course that was a wrong narrative for both companies.

What I *SHOULD HAVE* considered was that I was in college in a time when there were no digital cameras and I'm very thankful for that or I likely wouldn't be writing this blog post today. Mostly kidding. But of course we all need the space to be young, to experiment, to do stupid things and not to have it define our entire future. Evan Spiegel and Bobby Murphy were fresh out of college in this generation, as was James Bailey who was slightly older but not much. I simply couldn't see it. I should have. But I didn't even have a meeting so it's not like I passed. I hear tons of ideas for early-stage apps.

What I did see where several companies doing similar things and many taking off. I saw one that we considered strongly and then declined due to the people sharing obscene photos on their app and our worry that the company might struggle to contain that. Another firm funded them. 6 months later the company was in the press because predators had used the app to rape and molest three children under the age of 15. These experiences make you cautious. I don't blame this company but honestly it just does make you cautious.

So Jeremy Liew at Lightspeed wrote the check for the first $500,000. I don't feel badly about that —Jeremy is smart, successful and a friend and there's no reason to sit around and be jealous about his success — I'm genuinely happy for him.

Benchmark deserves the biggest credit for writing a $12 million check at what then seemed a healthy price to get into Snapchat. By then we knew that Snapchat was on fire but we knew the price would be too high relative to our fund size, and frankly Snapchat was so successful at that point we knew it was also more likely that they would choose a Bay Area firm. $12m on a $60m for an early-stage business is a not a bet that most LA firms could or would take. I don't feel badly about that — there are hundreds of other bets like that which don't pay off.

My job as a VC isn't to beat myself up or any other partner up for the one deal we didn't do. My job is simply to make sure we're getting into a few industry-defining investments per fund and to make sure we capture enough successes. If you swing at every pitch you'll end up with a lot more losers.

Mostly I wanted the journalist to know:

  1. We love Snapchat. We are hugely appreciative of their successes because it's helped grow technology talent in Los Angeles and some time down the line we know the "Snapchat Mafia" will be armed with millions of dollars and fund and create startups all over LA. That's a benefit for us as a local VC.
  2. We didn't "pass" because that implies we considered it strongly. We simply didn't think it fit our profile. We knew about it before people up North because it's our job to know about everything local at the time of creation. But we didn't see the value in it at the time. MANY who create consumer apps pitch me. Many seem plausible. Very, very few pan out.
  3. Those that funded it deserve credit. Lightspeed, Benchmark, IVP, General Catalyst, SV Angel and others. But local VCs don't deserve to get beat up for not investing. Are you beating up every Silicon Valley VC that didn't do Facebook or Google or Uber early? Because that would a very long and bitchy article I'm sure.
  4. There will be more enormous successes in Los Angeles and it's our job to get into enough of these. We felt proud to be the lead investor in Maker Studios at a sub $5 million valuation. We feel very proud about the success of Ring and our investment in Jamie Siminoff who is amongst the most talented tech leaders in LA or the country. And we feel great about the many companies in LA that have now reached serious revenue growth. None are Snapchat but many will return huge amounts of money and we'll all be fine.
  5. The most important take away to me is "what comes next." If you believe that more great firms will be created out of the successes of Riot Games, Maker Studios, Snapchat, Tinder, Dollar Shave Club and all the other wealth creation activities over the past 5 years — then you have to believe that LA tech is on the rise and LA venture capital is well positioned to be a part of that future success story.

Any other angle is just sour grapes. And we will be cheering on our fellow Angelenos over coming year, not taking snipe swipes at them. Snapchat truly built an amazing product and an amazing community and anybody who knows me knows that I'm very active on it.

If you really want to know how I feel about Snapchat then you need to check out www.snapstorms.com where I post short advice videos that I previously recorded on Snapchat. I love this product and the community I've formed there.

This post originally appeared on Mark Suster's blog, Both Sides of the Table, and is published here with permission.

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