Do You Regret Failed Investments?

This weekend I’m co-hosting the VC Bootcamp at my house in Boulder. It starts tonight and goes through mid-day Sunday. It’s an experiment with Jerry Colonna and about 15 other VCs to see if the bootcamp construct works with VCs, where the tag line for the experience is:

Practical Skills + Radical Self-Inquiry + Shared Experiences = Enhanced Leadership + Greater Resiliency

It’s either going to be valuable to this group or not. We’ll know more on Monday. The only way to learn is to try.

As part of the pre-work for the weekend, I went back and re-listened to several of the podcasts that Jerry recommended in advance (for you Soundcloud people I made a VC Program collection.)

So, my brain was already trending toward the headspace around radical self-inquiry in the context of venture capital. Yesterday, Fred Wilson wrote what is the best VC-related post of 2016 so far titled Losing Money. In addition to exemplifying the notion of radical self-inquiry, it is filled with gems about how to think about struggling companies and what to do with them in the context of a VC portfolio.

Go read Fred’s post Losing Money right now. I’ll be here when you get back.

When I woke up this morning, I noticed a tweet from Rand Fishkin aimed at me and Fred.

Fred answered “it is one of my weaknesses that I let a bad experience sour me on a market for life.” And, I’ve seen some of Fred’s own behavior around this, as he won’t touch anything hardware-related at all because of some miserable hardware-related failures during the Internet Bubble (or is it “internet bubble” now that the AP Style Guide says not to capitalize internet.)

But I had a different response to Rand’s question “Do you regret every investment that fails?” 

I’d like to think that I no longer regret any investment. As Fred discusses in his post, many VC investments fail. I’ve yet to meet a VC who says “This is a totally shitty company and a lousy opportunity so I’m going to invest in it anyway.” When a VC makes an investment, she is incredibly enthusiastic about the opportunity. If you know that failure is part of the process, then there is enormous emotional dissonance that gets generated if you regret the investment in hindsight, as you are going to have a lot of regret over the years as a VC, which I think creates a very negative feedback loop in terms of how you think about new investments.

Instead of “regret”, I think it’s much more important to embrace failure as part of the overall experience and focus on learning from every investment that fails. And, a failed investment often has many lessons – some new and some old. Some of these lessons are temporal and while others are foundational. In Fred’s post, he opens with:

“I remember back in the mid 90s, I used to say with some pride that I had not lost money on any of my VC investments. Then one day, someone told me “then you are not taking enough risk.” I ended that streak of not losing money on VC investments in the late 90s in a series of epic flameouts. I lost somewhere between $25mm and $30mm on one single investment. I am not proud of those mistakes. They were stupid. I am ashamed of them to be honest. But I learned a lot from them. Not only was my “winning streak” a case of not taking enough risk, it was also a case of not enough learning. The go-go Internet era of the late 90s fixed both of those things for me. I took more risk and learned a ton.

The bold section is what I’m trying to say. And, when I say “embrace failure”, I’m not suggesting that one be proud of failing, but I also don’t think there’s any shame in failing. There’s only shame in not learning.

The second part of Rand’s question “Or do you ever think ‘I’d place that same bet again'” is more complicated for me and my view diverges from Fred’s quick response of “it is one of my weaknesses that I let a bad experience sour me on a market for life.” For starters, I don’t think of my investments as bets, so I have an immediate knee-jerk reaction to characterizing investments as bets. That always creates fog for me in answering something, so I have to let the fog clear. Then, given that we invest in a set of themes over a very long period of time, a failed invested is a fundamental component of our ongoing learning in a theme. So I thought hard about what about a failed investment would cause me not to invest in some aspect of the investment again.

The answer appeared before me as “bad people.” My favorite entrepreneurs to back are ones who have had success and failure, so I’m very comfortable making multiple investments over time with people I trust and enjoy working with, even if we’ve had failures along the way. But if the people are fundamentally dishonest, immoral, unwilling to listen and learn, or behave in what I consider to be inappropriate ways, I don’t want to work with them again.

So the essence of regret for me comes from when I make a mistake around people. This is not only the founders but also co-investors. And, after 20+ years of doing this, I’m much better (but not perfect) in figuring out in advance who I shouldn’t work with.

I’ve accepted that in the end we all die. So, as part of my own radical self-inquiry, I’ve tried to isolate and limit my own regret to situations where I spent a lot of time and learn (or teach) nothing. Fortunately, this rarely has anything to do with the investments that I make.

  • Brad, are you open to what Amar Bhide has talked about for decades, what Charlie and Len have talked about more recently in HBR Press’ Just Start, that applying corporate startup criteria and procedures (market research, formal planning, using OPM, etc) to entrepreneurship before the first sale almost never works?

    Are business plan competitions and entrepreneurship education geared more to winning them than anything else one of the reasons there has been such a sharp decline in startups since the SBA was formed in 1953?

    • I’m not familiar with what you are referring to but I’m a huge believer in the Lean Startup and accelerator (e.g. Techstars) approach, which is antithetical to classic corporate top down planning.

      Business plan competitions, that have shifted to approaches like the CU Boulder New Venture Challenge ( and MIT $100k ( which are about creating businesses (not business plans) are highly effective. If the competition is about creating a business plan, it is worthless.

      Re: SBA startup data – I don’t view any data coming out of the SBA about startups as credible or useful so I don’t really know what supports your assertion that “there has been such a sharp decline in startups since the SBA was formed in 1953?”

  • I can easily + rationally state that regret – as I experience it – ranges from simply unproductive to mentally destructive. We’ve discussed this several times over the past 10 years.

    Unfortunately, my rationality isn’t always front + center when this emotion emerges. Regret is closely tied to shame for me: I’m embarrassed at an outcome. Disappointment quickly turns to regret, which can – and with a few very specific, big things, *does* – linger.

    It’s tricky, as they say.

    P.S. have fun over the weekend… is the pool open yet? 72 + sunny Sat.

  • I regret a couple that I made, only because of myself and not the entrepreneurs. In your equation, “radical self inquiry” is where I focus when something goes south. How did I mess up in analyzing this? What could I do better? What did I miss that I should take forward into new investments? It’s easy to look in the rear view mirror and say, “I wouldn’t do that investment again” and have regret. It’s harder to put yourself back into that time, and that frame of mind and say, “Given what I knew then and how excited I was about investing, I don’t regret it because sometimes things just don’t work.” Fred’s hardware is my consumer products.

  • Sam

    I am a big fan of Jerry, whom I first learned about through your blog, Brad. His is a unique voice and perspective on leadership, and his podcasts regularly re-ground me in what’s important and how to shape my own leadership style. Good luck to the 16 of you this weekend! Would love to be a fly on the wall. Please report back what is appropriate to share.

  • Love this perspective and post Brad. Thanks for sharing!

  • bwertz

    I think the only time that I regret having made an investment is if I made mistake during the decision process – perhaps ignoring signals that I shouldn’t have or not having identified some core questions I should have thought through more.

  • Simone Brunozzi

    An even more interesting question is: what do you do when a company fails because of illegal/unfair/wrong behavior by the founders?

    • Hopefully we dealt with the illegal behavior before the company failed. Note that I separate illegal from unfair/wrong – these are very different things. If the company fails, we lick our wounds, try to learn what we can from the experience, and move on – that’s about all you can do.

  • I’ve read – maybe from you Brad- that 10/3/1 is a decent ratio for investment success in VC:

    10 investments
    6 losers
    3 “winners”
    1 “champion”

    Of course as they say “YMMV”

    And if you can do this your fund will return nicely.

    So accept the losers as the price if getting into deals that will make your fund successful.

  • I was glad to read your Tweet that you thought Fred’s post was the best in the last while. I wanted to say it on his blog, but coming from me it would have sounded like I was sucking up to him, as he says he doesn’t like compliments and gifts. But coming from you that would be OK.

    If his was the best post of 2016, then this one from you is the next best one IMO.

    It resonates outside of VC per se.

    As an aspiring entrepreneur, I’ve had three side projects built to my specifications since 2010.

    All three have failed miserably.

    I may be “on the slow side” as far as having the right makeup to be an entrepreneur, but nonetheless I’ve still learned a ton of stuff.

    I’ve also had, in the middle of this, a personal challenge to deal with that for a while I doubted could be overcome; but I’ve managed to navigate through it thus far, although the battle is not over.

    Now, I’m addressing the entrepreneurship challenge differently by having gone back to the drawing board and decided to take classes in computer science, practical computing, and more, so I can lose the “non-technical” status. I need to know what I’m doing at a deeper level.

    All this while I keep preparing myself for the right opportunity, as a lot of the success comes in the timing, and luck is helped if you’ve been preparing yourself.

    I’ll be working on this until I succeed at it, or until I die, whichever comes first.

    And so this post has struck a responsive chord with me.

  • Just wanted to say thanks for answering my question so comprehensively.

    When I try to imagine the professional life of an investor, part of me wonders if there’s companies that, had things gone just a little differently with things outside their control, or had they made just a slightly different move, the outcome would have been massively better. We (founders/CEOs) always think the fate of the company is in our control, but I suspect like most things in life, there’s huge elements of luck and timing and outside forces that shape and influence outcomes.

    It’s interesting, and a little odd, that Fred felt so burned on hardware decades ago that he doesn’t want to make any investments there ever again. I wonder if part of it is just knowing the pains and the pitfalls and not wanting to deal with them, even if there’s good potential. I can certainly imagine saying “I hate those problems; I don’t want them in my life anymore,” and investing accordingly.

    • There are huge amounts of externalities that affect the outcome of any startup.

      It’s why big companies are so bad at new ideas. At a big company you can’t stand those risks.

      I used to say it was because people were afraid to fail, and they were wimps.

      I don’t believe that so much anymore. I had a guy who was high up at Amex tell me if I screw up the cost is so high merely losing my job is not nearly enough.

      That is one of the greatest strengths of the U.S. People aren’t afraid to fail. It doesn’t leave a permanent stain unless as Brad points out you did it through lack of character.

    • TeddyBeingTeddy

      If you’ve ever dated a lawyer, the whole “Jesus Christ…I’ll never do that again…” will make more sense. Don’t invest in hardware, and don’t date a lawyer – everyone learns that lesson at some point…

  • TeddyBeingTeddy

    Brad do you ever have 3rd party psychologists evaluate the C suite before you invest? To have an unbiased view of how good or bad they will be to work with going forward? Why/not?

    • I don’t. I know some VCs who do and I was on the receiving end of this several times in the 1990s. While some psychologists are effective at this, there are so many biasing components at work that I don’t like it. I’d rather form my biased opinion.

  • It’s hard to “embrace a failure”, if your investment goes in the tank within a month of investment.

    I was a investor in this company last year (I believe you were as well) that this happened to. I’d love to have a chat and hear your thoughts on this one and what you learned out of it.

    On the positive, it failed fast enough for a write down in this year’s tax return.

    • I don’t remember which one you are referring to but drop me an email – happy to go back and forth.

  • Dave Abajian

    Late comment, I know, but I think the original question can be extended to an equally important but broader question. That is, when does it make sense to regret any decision?

    It seems to me that every decision of consequence has risks or costs of some type. Otherwise there would be no decision to make. For me, regretting an outcome of a decision because the risk was realized makes no sense. I didn’t think of it that way but Brad is right when he says it can lead to a negative feedback loop.

    What I think is worth regretting, i.e., being willing to invest in learning from it, is my role in the decision making process. If I rushed a decision, didn’t recognize the biases I was bringing to it, failed to realize I needed help with evaluation, or worst of all, if I wasn’t honest with myself in making the decision, then those issues are worth the investment of time and energy.