The financial loss from a failed startup investment is capped at 1x the capital. Conversely, the opportunity cost of passing on a company that becomes worth billions is uncapped and unlimited. This asymmetry dictates that VCs should fear sins of omission more than sins of commission.
David Ulovich of a16z admits he was dissuaded from investing in ClickUp because the founder's casual attire (flip-flops, shorts) and story (moving for better burritos) made him hard to take seriously. This surface-level bias overrode strong underlying business metrics.
An investor passed on Figma's Series B because its $500k ARR seemed too low. He later realized he should have focused on the "phenomenal" viral user growth within companies, which was a strong leading indicator of future monetization that he overlooked.
An investor attributes missing Uber, Pinterest, and DoorDash to his fund's structure. With only 10-15 investments per fund and a "responsible investing" mandate, each decision is heavily weighted, leading to a slower, more cautious approach that is ill-suited for capturing power-law returns.