Startups · Startup

What successful startups were rejected the most by VCs?

Whitney MPA Founder & Director at Hello, My Name is KING, Inc.

October 8th, 2016

I have heard the online radio Pandora was rejected 300 times or so. Do you know any surprising cases that would be a good fit to mention on this thread? Thanks!

Joseph Wang Chief Science Officer at Bitquant Research Laboratories

October 8th, 2016

Almost all of them.   The fact that pretty much every successful startup gets rejected by everyone makes sense once you understand what VC's are looking for.

A typical successful startup would have been rejected by dozens and probably hundreds of VC's, and that's "normal". One issue is that VC's typically do not invest in seed stage companies, and there are strong pressures for a VC not to invest in anything original. Basically, if you lose money investing in what everyone is investing in, then your clients aren't angry, but if you lose money doing something original, they are. Also, VC's are interested in investing in companies that are "ready to roll". They typically are not willing to put any time and effort into managing the company.

The other thing is that the VC vetting system doesn't really care about rejecting good companies. You rejected company X, that later went on to make a bizzion dollars. So what? As long as the company you accepted made money for the investors, no one cares, and it turns out that the companies you did invest in made the money in ways that required less risk on your end.

One other thing that I've seen is that in many cases, it wasn't the VC rejecting the company, but the company rejecting the VC. This happens when the VC's make an offer, the company doesn't like it, and rejects it.

The VC model has been a highly successful model, but it's not the only way of skinning the cat. The VC model works well with only one specific type of company, but there are other types of companies out there.

Chuck Blakeman Founder, Chief Transformation Officer, Crankset Group

October 8th, 2016

Almost all of them. The core reason for this is the arrogant assumption that "startups" are some kind of special, unique way of starting a business that must be followed in some kind of formulaic way, including the desire from the gitgo to be big. The VC community's view of what will make for a successful startup is the very thing that blinds them. Scott Case expresses this arrogance, "These startups are special and they have a different mindset [than small businesses]", and, "If you sit in a room of 200 startups, and you ask which of them are small businesses, no one will raise their hand," he said. "What they'll tell you is that they are giant businesses that just haven't scaled yet." Total BS. Here's the link -

The ones sitting with Case who would answer that way are the ones who have drunk the VC Kool Aid - that central to being a startup is that you have to want to be a giant from the start.

Most SUCCESSFUL startups have no motivation to be big when they start; they only have the a) desire to do something better, b) meet a need others aren't, or c) follow their passion. Most huge businesses started out being small businesses solving a problem or following a passion, not "big businesses in the making".

One of my favorite examples is McDonalds. It was a hot dog stand for a decade and a half that evolved into two hamburger joints for many more years. The McDonald brothers had zero interest in being big - ever. No VC would have thrown money at this "small business" that now dominates the fast food industry. Soooo many more examples like this.

There are 600,000++ businesses that start every year. 6/100ths of one percent of them 00.06%, will ever in their life cycle have more than 500 employees. The odds against a VC choosing the potential winners is exponentially bad. If you look at the graduates of almost all incubators you see this in action. Techstars vets 15,000+/- businesses for every cycle, and only take 15 or so. Yet having sifted through 15,000 of the most motivated startups, the number of companies they have backed that have made it to 500 staff is a tiny fraction of their graduates. They trumpet their "success", but it's like Harvard taking credit for turning out successful people. When you reject 99.9%, and only a tiny percentage still become big, it's not exactly a model of booming success.

83% of the fastest growing companies in America do it without VC money. And likely another 16% could have done it as well, but took the money. VCs are historically epically terrible at picking winners.

Didier Depireux Faculty, Institute for Systems Research; co-founder, Otomagnetics

October 9th, 2016

I just read the article referenced above by Chuck Blakeman, 

I just wanted to chime in that the comments are a whole lot more interesting than the article itself!

Chuck Blakeman Founder, Chief Transformation Officer, Crankset Group

October 11th, 2016

In response to John T. Maloney that startups aren't businesses, but just idea machines - that, too is part of the problem of the VC community; their definition of a "startup". Almost all of them define a startup specifically as a business that could be in anything from year 1 to year 11 of its existence, but has as its primary motivation to be big. This was the working definition of the epically failed Startup America initiative by Steve Case and Scott Case (not related) that tried to get government to stop paying attention to small business. They love to use this definition to separate their "giants in the making" from small businesses.

Two businesses could be in a lease beside each other in the same building, focused on the same product or service and the same market. Both could have 15 staff and revenues of $5million the last five years in a row, be in their tenth year of existence, and the VC community would call one of them a startup, and the other one a small business. The only differentiation? One wants to be big, the other doesn't.

My definition of a startup - a business that is starting up. VCs reject that simplicity - it puts them in the same bucket as lowly small businesses - they are no longer "special" per Scott Case.

John Maloney Internet of Things Executive Consultant, IoT Engineer

October 9th, 2016

Startups should not even be talking to VCs. Startups are NOT 'small businesses'; Startups are NOT small copies of big companies; startups are NOT businesses at all.

A startup is a investigating and research collaboration formed to discover repeatable customer creation and scalable business models. Period.

VCs pursue investment in going concerns  ready to scale to reward their investors. VC do not make investments until the deal is safely out of the Valley of Death. Period.

Anything else is not VC 'rejection'; its just how VCs (should) operate.

Beware of all the myth and hubris of the VC industry.

Thanks for the cogent comments. They are very good.

Michael Burack

October 9th, 2016


Michael Leeds CEO & Founder

October 8th, 2016

Look up the eBay story Via mobile

Alf Poor Chief Operating Officer at Global Data Sentinel

October 8th, 2016

This link should provide the context you need to understand that the VC community does pass up what, in hindsight, appeared incredible opportunities:

Martin Omansky Independent Venture Capital & Private Equity Professional

October 9th, 2016

There are important exceptions. I agree that many VC's only invest in stuff that has much of the market and technical risk wrung out of them, but there are some institutions and man individuals that invest in start-ups - usually because they believe that they understand the underlying technology and/or the market opportunity of the enterprise. Sent from my iPhone

Michael Feder Founder and CEO at PrayerSpark; Finalist: Global Business & Interfaith Peace Award

October 8th, 2016

Famously, AirBnB, over 200 times