If you said, “Investing in bad deals” you would be dead wrong. Mike Arrington asked Sequoia partner Roelof Botha the same question and Botha explained that missing winners was the biggest risk. Botha explained that it is a MUCH bigger problem to miss winners versus investing in too many losers. Botha and his team passed on a number of hits including Twitter, Zynga and even our own ShopSavvy. He explained, “Because of the way the model works, returns are very asymmetric – a failed company will lose 1X, but a home run could get 50X or 100X upside.” As his partner Doug Leone explained, “When in doubt, lean forward.”
