In 2008, Brian Chesky was trying to raise $150,000. For this sum, you could’ve owned 10% of Airbnb. His friend Michael Seibel introduced him to 7 top investors, but Brian didn’t get a single check.

Today, that 10% stake would be worth about $5 billion.*

Let’s look at the reasons these investors passed and figure out where they went wrong. You can read the entirety of the rejections here, but I’ll just quote some key parts.

#1 “Not in our area of focus.” Having too narrow a focus can be a real problem.

Every year, there are thousands of new startups created. Only a few will ever matter.

If you’re looking in a narrow area, it’s very hard to find an outlier.

For example, I worked in medical software for many years. What if today, I only invested in healthcare tech companies?

How many important ones are created every year…is there even one? What are the odds I meet them and decide to invest?

My aperture would be just too narrow. I need the flexibility to invest in the next Brian Chesky if I meet him.

#2: “Potential market opportunity did not seem large enough.”

Airbnb created a new market. That’s what this investor missed.

The market for staying in someone’s house was pretty close to 0 when Brian was pitching in 2008.

That was the point of Airbnb! He was going to take those empty rooms and put guests in them.

Maybe staying in someone’s house was a small market, but hotels certainly weren’t. If this investor had looked at an adjacent market, they could’ve seen how big this opportunity really was.

#3: “Not in one of our prime 5 target markets.” Again, having too narrow an aperture is a real problem. That’s why I consider anything software to be fair game.

I’ve tilted more toward SaaS because that’s where my background is. But I also have some great marketplaces, consumer subscriptions, and more.

#4 “I was unavailable to get on a call.” Michael introduced Brian to prominent people in Silicon Valley. Many probably had a team of people working with them.

Delegate the call to someone else if you’re too busy!

#5 “We’ve not been able to get excited about travel-related businesses.”

I don’t even know what this means. Do you want to make great investments or not?

I can only imagine being the founder getting messages like this one. Weird, non-specific, and totally unhelpful.

When I pass on a company, I like to give the founder a reason that makes some sense. “I’d like to see higher growth” or “I’d like to see you find a CTO.”

At least then, the founder knows where she stands.

The Ghosts

Remember, Michael introduced Brian to 7 people. We’ve only covered five.

The other two never even replied!

Of all the mistakes investors made here, this one is the most egregious. How do you not reply to a warm intro?

I can’t always reply to every cold message. But if someone I know introduces me to a founder, I’m going to at least respond to the email!

Some investors just aren’t working hard enough. I don’t do 90 hour weeks or anything crazy like that, but I at least manage to reply to warm intros.

There’s no excuse for this sort of stuff. Try harder!

Wrap-Up

In the end, hindsight is 20/20. We cannot meet with every founder, and we can only invest in a small group.

Some day, I’ll be looking at an e-mail in my inbox from the founder of a now-unicorn. And I’ll be crying in my cinnamon apple herbal tea, “I never even met them!”

That’s the way the business is. You’ll have many mistakes, but hopefully you’ll make them up with one or two big successes.

What do you think of Brian’s story? Leave a comment and let us know!

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*10% of the company would be worth about $10 billion, but an early investor would have been diluted by future fundraising. That dilution is usually around 50%, hence the $5 billion figure.