John Doerr’s Biggest Mistake

In 2007, venture capitalist John Doerr met an intriguing young entrepreneur. His name was Elon Musk.

Musk pitched Doerr on investing in his new car company, Tesla. Doerr passed.

The mistake cost him billions.

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The legendary investor opened up on this major regret in an interview out this morning on Bloomberg:

The billionaire chairman of Kleiner Perkins had the opportunity in 2007 to back “an ambitious, slightly crazy entrepreneur” named Elon Musk before he became the world’s richest man, but ultimately decided against it, as new car companies traditionally fail far more often than they succeed. 

“That’s probably the worst investment decision of all time,” Doerr, 71, said…

Doerr did wind up investing in an electric car startup. But it wasn’t Musk’s:

“There have been 400 new car companies in the nation’s history. Every one but one has gone bankrupt. But I was still very attracted to the market, and we had the choice of backing a brilliant car designer by the name of Henrik Fisker, or an ambitious, slightly crazy entrepreneur by the name of Elon Musk at Tesla. Well, we made the wrong decision.”

On paper, Fisker seems like a great bet. He designed iconic cars like the Aston Martin Vantage and had deep experience in the auto industry.

What he didn’t have was a strong background as an entrepreneur.

Musk had no real auto industry credentials. But he had co-founded PayPal and sold it to eBay for $1.5 billion.

Whatever he may have lacked, Musk was an ace entrepreneur. He took that experience to Tesla and built it into a colossus.

The lesson for me here as an angel investor is to not overvalue industry expertise. Sometimes it takes someone from outside an industry to revolutionize it.

Amazon was Jeff Bezos’ first store. Travis Kalanick never owned a cab company.

Founders should be familiar with the market they’re operating in. But if they need deep industry expertise, they can always hire for it.

But what’s most instructive about Doerr’s mistake is how it never mattered! He backed Google, Amazon, and countless others early, changing the modern world and making a fortune in the process.

Doerr’s experience illustrates one of my favorite things about venture capital. You don’t have to be right all the time.

In fact, you only have to be right once.

Investors: how much do you value industry expertise? Founders: how important is industry background to your startup?

Leave a comment at the bottom and let me know!

More on tech:

Talking Startup Fundraising with Travis King of Launch Point Labs

Record Funding for Climate Startups in Q2

The Power Law (Part Four): The First Venture Deal

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Photo:John Doerr” by Thomas Hawk is licensed under CC BY-NC 2.0.


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