Hindsight can be a little painful in the investment game. Photo/Getty Images.
Hindsight can be a little painful in the investment game. Photo/Getty Images.
On a June evening in 2010, six Silicon Valley start-ups gathered at a waterfront venue in northern San Francisco to pitch to angel investors at an event that, at the time, seemed unremarkable.
But among the start-ups hoping to receive their first outside cheques from one of the 20-odd investorspresent was ride-hailing app Uber, then known as Ubercab.
Over burgers and beers, Travis Kalanick, at the time an adviser to the company, took the stand for five minutes to present his vision: a world where smartphone users could summon taxis at the tap of a button, thanks to geolocation services.
At the end of his talk, only a couple of the investors took the bait — handing over their dollars in what has since proved to be one of Silicon Valley's most lucrative opportunities. Mark Suster, a general partner at Upfront Ventures who attended the evening, was not one of them.
"It's even worse because they kept inviting me to events over the course of the next few months and I kept ignoring them," Suster told the Financial Times, laughing nervously. "Aaaargh."
In its 2010 seed round, Uber raised US$1.6m according to Pitchbook, giving it a US$5.4m valuation. On Friday, it closed its first day of trading publicly with a valuation of around US$70bn. That was significantly below the US$100bn valuation the company had recently hoped to achieve, but it still meant early investors were able to cash in on huge returns. Suster is not the only angel now lamenting. Venture capital heavyweight Mark Cuban took to Twitter on Friday to bemoan his "biggest miss ever".
Suster describes Kalanick's pitch at the event, known as the Open Angel Forum, as "compelling" and one that resonated with him personally.
But he was wary. Having lived in London for many years previously, he said he knew how strong the taxi lobbies were. In Los Angeles, he knew that everyone had their own cars and never took cabs. This was clearly going to be a niche, local service for certain cities only, he thought.
At the time, the Ubercab pitch was also for a premium taxi service for business people who would typically take private cars on expense accounts, rather than the ubiquitous UberX service that has driven much of the group's growth in recent years. "Everybody's private driver" was the tagline.
Uber listed on the stockmarket last week. Photo/Getty Images.
Suster shares an email he sent to a start-up advisory group that offered an introduction with the company: "No, thank you. Not a good fit. We've looked at these before. Hard to imagine it becoming big enough."
But there are a lucky few who thought differently. According to Suster, after Kalanick finished his pitch, a partner at First Round, Chris Fralic, raised his hand on the spot and said "I'm in for US$500,000".
"Everybody was shocked because that kind of thing didn't happen," Suster said. "We had just come off the worst financial crisis since the depression . . . people were not writing venture capital cheques."
"[Chris] is retired now. I'm not," he added.
For those who might be feeling resentment, Uber's first day of trading may have provided some comfort. The stock closed at US$41.57, down 8 per cent from the offer price of US$45 a share.
But Suster remains good-humoured about the debacle, praising Uber for helping to erase drink driving and dangerous unlicensed cabs.
"You can't be bitter about the [deals] you didn't do. You should be bitter if you never saw it," he said.
Instead, he is focused on chasing the next big Silicon Valley craze: electric scooters. Upfront Ventures counts Bird, the brainchild of Uber alumni, as one of its portfolio companies. According to Suster, Bird is growing faster than Uber ever did, has better unit economics and offers an easy alternative for short journeys in particular.
"Ride-sharing is a public good . . . It's brought a level of transparency and safety," he said. "That said, I'd like to disrupt the hell out of them."
