5 Of The Biggest Startup Investment Wins Of All Time

Venture Capital (VC) firms try to predict winners. If they are right, returns can be twice or even more than the initial capital of investment. Below are the five biggest startup investment wins of all time.

WhatsApp

According to CB Insights, WhatsApp has maintained its position as the best and leading VC bet of all time. In 2011, Sequoia Capital, one of the largest VC firms in the world, invested $8 million in the nascent project, valued at $80 million.

It was recorded that Sequoia was WhatsApp’s only investor in both the 2011 Series A and subsequent Series B financing rounds. Despite low revenue generated as a social media messaging startup at that time, in 2014, Meta purchased it for $21.8 billion.

Sequoia’s $60 million investment grew to $3 billion within a space of three years with a 50x return from the time Meta Platforms Inc. acquired WhatsApp.

Today, WhatsApp is the most popular global mobile messenger app worldwide with over two billion active users.

Meta

Meta may be the second best VC investment ever to exist.

Meta — founded as Facebook in February 2004 by Mark Zuckerberg and classmates Chris Hughes, Eduardo Saverin and Dustin Moskovitz — IPO’d at $104 billion valuation, a major win for VC firm Accel Partners.

In May 2005, the firm invested $12.7 million in thefacebook.com in exchange for a 15% stake in the company. Then, Meta’s $100 million valuation was considered difficult to ascertain as a result of its annual sales.

However, within two years of the company's inception, investors crowded in.

Meta bulwarked $27.5 million in its Series B fundraiser, bringing its valuation to over $418 million. A good number of VC firms steamed capital into the company. Some of them include Interpublic Group, Founders Fund, Accel, Meritech Capital Partners, Greylock Partners and SV Angel.

Peter Thiel, who funded Meta in its startup stage with $500,000, became an outward looker because of eventual skepticism. He perceived the company as being overvalued. Accel sold a portion of its Facebook shares in 2010. When the social networking giant became known to the public in 2012, it was valued at over $100 billion. Accel held on to its shares worth $9 billion.

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Groupon Inc.

In 2011, Groupon's IPO was regarded as the biggest by a U.S. web company since Google’s in 2007. At that time, Groupon was valued at approximately $13 billion.

Two major benefactors were the company's co-founder, chairman and sole biggest shareholder, Eric Lefkofsky and the VC firm New Enterprise Associates. After the first trading day, New Enterprise’s 14.7% stake was valued at nearly $2.5 billion. Lefkofsky’s 21.6% share had an estimated $3.6 billion valuation.

What sparked Lefkofsky’s story was the $386 million worth of pre-IPO shares he acquired for only $546 million. This stake was worth $4 billion after the IPO.

Undoubtedly, Lefkofsky’s 732,600,632% return on investment is the most significant VC return of all time by an individual.

Cerent Corporation

Cerent was purchased by Cisco Systems Inc. in 1999. The acquisition was recorded as the biggest for a tech company in the early 2000s.

Nonetheless, it is important to note that neither Cisco nor Cerent benefited the most from this deal. Kleiner Perkins Caufield & Byers, one of the few who invested during Cerent's bootstrapping stage, notched the biggest win.

Undeniably, the VC firm’s initial $8 million investment for a 30.8% stake earmarked a $2.1 billion payday and a staggering ROI of 26,150%.

Thus, Kleiner Perkins’ feat lives on in VC history.

Snap Inc.

In 2017, Snap went public holding a $25 billion valuation. It is the second-highest social media and messaging exit valuation since 1999. Two VC firms — Lightspeed Venture Partners and Benchmark Capital Partners — backed it and reaped the rewards.

In May 2012, Lightspeed Venture Partners invested $480,000 for 82 million Snap shares. Benchmark Capital Partners paid over $13 million for 120 million shares in the Series A fundraiser. Benchmark’s investment had Matt Cohler and Mitch Lasky as its leadoff partners.

However, following Snap's Series B fundraising, numerous VC firms were attracted to its revenue potential. These entities include SV Angel, Tencent Holdings, SE Growth Fund and Institutional Venture Partners.

Unfortunately, these firms did not survive the test of time as they were unable to make provision for returns on par with Benchmark and Lightspeed, whose investments skyrocketed to $3.2 billion and $2 billion respectively.

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