Bessemer's Shopify Underestimation
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Sam Parr shares a story about how even top investors underestimate the potential of great companies, using Bessemer's investment in Shopify as an example.
"I saw this amazing thing where Bessemer, a fantastic VC, released old memos from past deals. They had this amazing memo on Shopify when they were raising $5 million at a $20 million valuation. The company was doing $5 million in revenue.
In the memo, they said if all things work out, they thought in four to six years this company could sell for $400 million, and they would 20x their money. Obviously that's wrong - the company's now worth $130 billion.
In the memo, they even have updated quotes. The person who wrote it said, 'A few months after we invested, Oracle acquired one of Shopify's competitors for $500 million, and I remember emailing Toby, the CEO of Shopify, about how great it would be if someday maybe we can achieve that outcome, but I thought it was just a little bit too aspirational.'
He also mentioned that some employees and advisers at Shopify thought the company at best would be worth around $50 million. The associate at Bessemer who made the deal asked Toby, 'Can we put something in the contract that says you're not allowed to sell the company for less than $50 million?' because this guy thought that's all it would be worth.
Toby responded, 'I'm not agreeing to anything like that, but I'll give you a handshake offer - I promise I won't sell until at least $75 million.'
It's just funny how small the best of the best, presumably top 1%, are thinking about different opportunities that today are so obvious to us but back then were really hard to predict."
Sam Parr
Host of MFM and fitness influencer
Sam Parr is a serial entrepreneur and business media pioneer.
In 2016, he founded The Hustle, a business news media company that started in his kitchen with just $12 and grew to eight figures in revenue.
Sam led the charge in making newsletters popular when few believed in their potential.
After four successful years, he sold The Hustle to HubSpot, a publicly traded company. Now operating as HubSpot Media, The Hustle reaches 3 million readers daily, employs a team of nearly 100, and has been the launchpad for dozens of its staff to found their own media companies and newsletters.
Sam remains the host of the popular business podcast, My First Million, and continues to start and sell companies. He also co-founded Hampton, a highly vetted community for entrepreneurs, founders, and CEOs, and teaches people to write better through his platform, Copy That.