This week top-tier venture capital firm Bessemer Venture Partners (BVP) released the original deal memos from some of their best startup investments.

These memos provide a fascinating look at how VCs operate, think and make investment decisions. Today we’re going to look at a few highlights from these memos. But I strongly recommend you read them all. 

First, let’s take a look at Bessemer’s memo for their initial investment in Twilio in November 2009. Today Twilio (TWLO) is a $33 billion publicly-traded tech stock. When BVP first invested, however, it was a tiny seed-stage startup raising money at around an $8.5 million pre-money valuation cap.

At the time, Twilio was only producing around $17,000 in monthly recurring revenue (MRR). The startup didn’t even have a dedicated sales team yet. But BVP’s deal memo gives us valuable insight into why the firm thought Twilio had potential. Here’s an excerpt from the “Product” section.

The Twilio product makes the process of building a voice application extremely simple for web developers without any specialized training or need to deal with telecom companies or specialized integration service providers. Similar to consumer web apps, customers can sign up for an account with Twilio, pick a phone number (or port over an existing one), learn the five simple building blocks that make up the basis of Twilio, and start building voice applications right away.

Today every VC firm in the world is looking to invest in cloud software companies like Twilio. But at the time BVP made this investment, it wasn’t so obvious. I recommend reading the entire memo, but here are my key takeaways on what makes a successful startup investment:

• Serial entrepreneur founder
• Highly scalable business model
• Steady revenue growth
• Strong technology
• Opportunity to expand offerings

As we know now, BVP’s early bet on Twilio turned out to be a fantastic one. Twilio is one of the reasons that similar enterprise software deals today are raising money at far higher valuations than this company did back in 2009.

2010: BVP Bets on Shopify

In October 2010, Bessemer Venture Partners made a $7 million bet on a young company called Shopify. Today Shopify is publicly-traded (SHOP) and worth a mind-boggling $113 billion. It recently surpassed the Royal Bank of Canada (RY) to become Canada’s most valuable company. In other words, this is a deal memo worth paying close attention to.

When BVP invested back in 2010, Shopify was raising money at a $20 million pre-money valuation. The company had an impressive $5.5 million annualized revenue run-rate. And it showed strong organic growth. 

Today, a $20 million valuation for a similar deal would be considered unbelievably cheap. Out of the thousands of deals I’ve seen, only one comes close (and it’s probably my best investment). 

One of the big reasons BVP got such a bargain price is because Shopify is headquartered in Ottawa, Canada. Most venture capitalists are based in Silicon Valley. And they only invest locally. So because BVP was willing to step outside the Bay Area, they got an amazing deal. 

The Shopify deal memo reinforces my belief that for most online startup investors, the best deals are going to be found outside the San Francisco Bay Area (SFBA). 

There’s an incredible amount of competition for deals in the SFBA. But outside of it there’s usually not much at all. This is a big reason why I primarily invest outside of the SFBA — I’m more likely to find success. My best angel investments are from Chicago, L.A., Spain, and India. Sure I have some nice investments from the SFBA. But my largest winners are from outside California — I don’t think that’s a coincidence. 

Bessemer’s bet on Shopify will go down as one of the best tech investments of all time. There are also a ton of other valuable nuggets to be found in the full deal memo.

If you’re a new startup investor (or an old pro), I can’t emphasize enough how valuable these deal memos are. Now go read them! You’ll learn a lot.