The 5 greatest venture capital investments of all time
Updated: Nov 28, 2022
One of the greatest maxims in the investment world is the concept of Risk and Return: The greater the risk, the greater the return.
And if there is one type of investor who understands this well, it's Venture Capital investors - funds that specialize in investing in startups that are still at an early stage, with high growth potential
In the world of very high risk of venture capital, for every 10 companies invested, 8 tend to go bankrupt, putting an end to every investment made, 1 tends to have some moderate success, and one… well, this one needs to be a real goal. This 1 company needs to generate giant gains to offset the losses of all other companies.
In this post, we'll show you the 5 best venture capital investments of all time, and you'll see why this form of investment generates returns approximately 2x the market on the stock exchange.
#5: Accel & Facebook
Founded in 2004 in Harvard dorms, the so-called "thefacebook" was a social network that only college students could join. The company initially had an initial investment of US$500k from Peter Thiel, one of the co-founders of Paypal, and in 2005 it needed to raise a larger investment round to accelerate growth.
Although it was still a small social network, Accel partners saw great potential in the idea and invested US$12.7M, at a valuation of US$87.5M - an amount that even the already investor Peter Thiel believed was too high for the Startup.
Clearly Accel was right. In 2012, the renamed Facebook IPO valued the company at US$104B, of which US$9B belonged to Accel, multiplying the amount invested by more than 700x in 7 years, an annual return of 155%!
#4: Kleiner Perkins & Google
Founded in 1998 by Larry Page and Sergey Brin, 2 PhD students at Stanford, Google needed to raise capital 1 year later and 2 investment funds made the right choice to believe in the idea of the new internet search engine: Sequoia Capital and Kleiner Perkins Caufield & Byers.
Each of the companies contributed US$12.5M to Google 1 year before the burst of the internet bubble that led most startups at that time to bankruptcy.
The contributions of the two funds were important to keep Google fully operational, and the rest is history… In 2004 Google made its IPO on Nasdaq at a market value of US$23B, with US$4.3B of each of the two funds that had trusted in the company - multiplying the amount invested by more than 300x in just 5 years, an annual return of ~220%.
#3: Sequoia & Whatsapp
Typically, when early-stage investors invest money in a company, they want to attract additional investors to increase the excitement and validate their investments. Startups can end up raising money with up to five or six different funds in the same investment round.
That's not what Whatsapp founders Brian Acton and Jan Koum did. From the beginning until the sale of the company to Facebook, Whatsapp had only 1 external investor: Sequoia Capital, one of the most famous Venture Capital funds in history, which financed companies such as Apple, Google, Oracle, Youtube, Paypal, Instagram, among others.
Sequoia invested $8M in Whatsapp in 2011 and another $52M in 2013, totaling $60M in total - even for a company that generated virtually no revenue.
But the strategy worked - In 2014, when Facebook acquired Whatsapp for $22B, Sequoia's $60M was worth over $3B, multiplying the amount invested by 50x in just 3 years, an annual return of ~260% per year!
#2: Benchmark & Snap
You might even no longer have Snapchat installed on your phone and find that the app has been completely replaced by new Instagram features. But Snap's sudden success was a great bet for the best venture capital fund of all time - The Benchmark.
The fund invested $13.5M in the startup in late 2012, believing the app could become a global hit, not just a passing app for teenagers.
To Benchmark investors, it was clear that Evan Spiegel and Bobby Murphy, founders of Snapchat, had characteristics very similar to those that made Facebook, Instagram and Twitter successful.
In March 2017, Snap made its IPO at a market cap of $25B, multiplying the amount invested by the Benchmark 237x, with an average return of ~290% per year!
#1: Benchmark & Ebay
In 1997, eBay, which had been founded in 1995, was still a small startup that, like the others, asked for money month after month. That same year, Benchmark, which had been founded 2 years earlier, decided to invest US$6.7M in eBay, valuing the company at US$20M.
Just 2 years later, eBay made its IPO and shares soon skyrocketed, with eBay's market value reaching $26B. As a result, shares held by Benchmark, eBay's only investor so far, were worth more than $5B.
The amount invested of US$6.7M multiplied by ~750x in just 2 years - an annual return of 2632% p.a. and by far the best investment in history.
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