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2/6/2018 A Venture Capitalist Talks About Her Best and Worst Investments - WSJ

https://www.wsj.com/articles/a-venture-capitalist-talks-about-her-best-and-worst-investments-1512356940 1/6

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MARKETS JOURNAL REPORTS: FUNDS & ETFS BEST BET�WORST BET

A Venture Capitalist Talks About Her Best

and Worst Investments Cyan Banister of Founders Fund o�ers the lessons she has learned from both winning and losing

| |

Cyan Banister says her Postmates investment was instructive—and pro�itable. PHOTO: ANTHONY THORNTON

Dec. 3, 2017 10�09 p.m. ET

By Chris Kornelis

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2/6/2018 A Venture Capitalist Talks About Her Best and Worst Investments - WSJ

https://www.wsj.com/articles/a-venture-capitalist-talks-about-her-best-and-worst-investments-1512356940 2/6

After Cisco Systems Inc. bought IronPort in 2007, Cyan Banister, an early employee of the acquired company, found herself with money from the acquisition that she didn’t know what to do with. She considered putting it in the stock market or in land, but settled on startups. The first check she wrote was to SpaceX.

Without quantifying the size of her investment or her returns, she says “I’ve done quite well.”

Over the past decade, she has written other personal checks to companies that have become familiar names—including Uber Technologies and DeepMind Technologies, which was purchased by Google in 2014. In 2016, she became a partner at the venture- capital firm Founders Fund, where she has invested in companies such as Brave Software and Contraline, which is developing a male contraceptive.

Ms. Banister has been an employee and she has been a CEO—co-founding the pinup- photography platform Zivity—but she says

investing is a better fit for the way her brain works: She’s a sprinter, she says, not a marathon runner.

“I really like to work on different things at different times and think about different problems,” she says, adding that as an investor in various startups she can “shift from helping a hardware company, to the next day a consumer-apps company, and the next day a biotech company. I think it really just keeps me intellectually curious.”

Here, she talks about the best and worst bets she has made.

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2/6/2018 A Venture Capitalist Talks About Her Best and Worst Investments - WSJ

https://www.wsj.com/articles/a-venture-capitalist-talks-about-her-best-and-worst-investments-1512356940 3/6

Best Bet: Postmates

INVESTMENT: “Well over a million dollars”

GAINS: Millions. Her stake in the company is currently valued at several times her

investment.

Ms. Banister made a personal investment in Postmates Inc. early, in 2012, when

the company was still a bike-messenger service. Today, its value has been

estimated at about $800 million, and it delivers everything from food to office

supplies in under an hour.

Postmates is just the kind of solution Ms. Banister likes to invest in: “Someone has

the skill. Someone needs the skill. What sort of technology or platform can enable

those two people to come together as efficiently as possible?” she says. “I just

found it really compelling. It seemed like an underserved market.”

Ms. Banister says Postmates is one of the biggest personal investments she has

made, but not necessarily the investment that provided her with the greatest

monetary return. In some ways, she says, that speaks to the difference between

her life as an angel investor and her current role as a venture capitalist, where her

job is to return as much value as possible to her partners and limited partners.

“As an angel investor,” she says, “it’s the company that I was the closest to, had the

most fun with, and had really great financial rewards, and did big things for the

world.”

THE TAKEAWAY: Postmates has done well in certain regions of the country, such

as Los Angeles, but it isn’t dominant nationwide in a way that, say, Uber is. Ms. Banister

says that demonstrates that a company need not be a nationwide force to succeed.

“If you have an investment thesis that ‘I only invest in monopolies’ and you took that

thesis down the path of national monopoly, then I may have never done that

I

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2/6/2018 A Venture Capitalist Talks About Her Best and Worst Investments - WSJ

https://www.wsj.com/articles/a-venture-capitalist-talks-about-her-best-and-worst-investments-1512356940 4/6

investment,” she says. “So I think that has definitely informed my thinking as well as

people here at Founders Fund,” which is also an investor.

Ms. Banister says her Postmates experience also taught her to put less emphasis on

product and more on the design of product and its founders. Products and strategies

are likely to change, she says, and they should. The long-term relationships, she says,

tend to be with founders more than initial product ideas.

“I’m much more open to the fact that I’m going to be in a relationship with this founder

for 10 years,” she says. “Do I believe in them? If the answer is yes, then the product is

kind of secondary.”

Worst Bet: GameCrush

INVESTMENT: $250,000

LOSSES: $250,000

In 2010, Ms. Banister became interested in a website called GameCrush that enabled

men to play videogames online with female gamers and video chat with them as well—

then tip them if they enjoyed the experience. Ms. Banister, who calls herself “a little

more libertine than a lot of people,” pledged $250,000, which was her default

investment at the time. “I was really excited about the prospect of gamers meeting

each other,” she says, “as well as these female gamers being able to make a living doing

what they love.”

The warning signs, she says, were there from the beginning.

At an early dinner—after she had committed but before the money was sent—she says

it became clear that among the three founders, there wasn’t a clear leader. No single

person was in charge. However, since she had already agreed to fork out the cash, she

stuck to her word. (The founders didn’t reply to requests for comment for this article.)

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2/6/2018 A Venture Capitalist Talks About Her Best and Worst Investments - WSJ

https://www.wsj.com/articles/a-venture-capitalist-talks-about-her-best-and-worst-investments-1512356940 5/6

Later, the company’s biggest investors pressured the founders to make the site more mainstream. GameCrush eliminated some of the features, like certain tipping mechanisms, that Ms. Banister says had made the site successful.

Women and men, she says, lost interest in the site. Ms. Banister lost her entire investment when the company went under.

“That was a great disappointment to me,” she says, “because I really like sites that push boundaries and products and companies that try to move social norms.”

THE TAKEAWAY: Ms. Banister says the experience has, in many ways, fundamentally changed the way she invests.

To start, she tells companies up front that if material information arises, she’s free to withdraw her offer. She also started investing in smaller amounts depending on her level of conviction—$10,000 or $75,000 a throw, for example—and saving those $250,000 personal checks only for those opportunities she is “willing to bet the farm on.”

Critically, she says she no longer invests in companies without a clear leader.

“There have been companies I have not invested in after GameCrush because I can smell the hint of founders not being able to be agreeable, nobody was really in charge,” Ms. Banister says. “And sure enough, within six months, they implode.”

She says the rules she set up for herself in the wake of the GameCrush experience compelled her to sit out some deals that “maybe arguably I should have been in, but I feel better about them, because you know what, this could have gone wrong. It’s better that I stick to this rigidity.”

Mr. Kornelis is a writer in Seattle. He can be reached at [email protected].

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2/6/2018 A Venture Capitalist Talks About Her Best and Worst Investments - WSJ

https://www.wsj.com/articles/a-venture-capitalist-talks-about-her-best-and-worst-investments-1512356940 6/6

Appeared in the December 4, 2017, print edition as 'Cyan Banister???s Lessons About Startup Investments.'

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This copy is for your personal, non­commercial use only. To order presentation­ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.

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