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Video interview with Tim Draper, Managing Director, Draper Fisher Jurvetson. His original suggestion to use “viral marketing” in web-based e-mail to geometrically spread an Internet product to its market was instrumental to the successes of Hotmail and YahooMail, and has been adopted as a standard marketing technique by hundreds of businesses. On behalf of Draper Fisher Jurvetson, Tim serves on the boards of Glam, Kyte.tv, Meebo, ShareThis, SocialText, Wigix and DFJ Plug ‘N Play companies. Previous successes include: Skype (EBAY), Overture.com (YHOO), Baidu (BIDU), Parametric Technology (PMTC), Hotmail (MSFT), PLX Technologies (PLXT), Preview Travel (TVLY), Digidesign (AVID), and others. You can find Tim @ his blog The Riskmaster & Twitter @TimDraper
Transcript follows & video above. This is Part II of the interview.
- What tips would you offer women entrepreneurs who are considering sourcing venture capital?
I would think long & hard before jumping into any venture. It’s a very difficult thing to do. You take a big social risk which I think is a more difficult thing for the women entrepreneurs than for the men entrepreneurs for some reason. Maybe that’s one of the things we can get rid of is that women are more sensitive to what their peers think of them? And an entrepreneur has to be completely insensitive to that. They have to have this vision & it has to drive them. And that’s all that matters! So I think that will be a really strong & helpful piece to solve somehow in our social structure.
An entrepreneur has to look at people as we are all different, not we are all the same. There has to be that kind of a feeling. And if you’re an entrepreneur, it’s a long struggle so it has to be a strong hearted woman who just says this is what I’m going to do & nothing is going to stop me. And I’m going to be broke & eating peanut butter for 5 or 10 years & at the end of all that I will have shown the world something new that they wouldn’t have seen before. So I think that would be a good thing!
Once they’ve decided to do it, you know what’s really interesting, women are really good managers. People love working for women. That is very exciting for people to work for women. Women somehow are able to attract teams that are very driven. And I think that’s because they are willing to subvert their ego & allow other egos to shine. I think that that’s a really promising thing. So we do have a lot of good successful management women. That is definitely the case. There are very few women that have the entrepreneurial bug that is ‘I have to do this & I will break down every wall to do it. If there’s a law there I’ll get it changed. If people believe it’s wrong, I’ll make them believe its right. So that kind of thing does not come easy for a lot of women. For some women its terrific and they go after it. But they have to be willing to say ‘these walls are not the walls!’
And do you think that that’s something that could be learnt. If what you’re saying is that very few women have that ability?
I think it can change & it is changing very quickly. And I think a big part of it is women’s sports because women now are in the sporting world a lot more than they were a generation ago. I think that’s a real positive because women’s sports allow people to understand what it’s like to lose, understand what it’s like to win, understand what it’s like to lose BIG and what it’s like to win BIG! It will really help women understand what entrepreneurship is. Entrepreneurship is you’re on the losing team & you’re taking on the champions & you beat them!
Yes against all odds! I think you are spot on there, because I’ve had a woman venture capitalist & a woman entrepreneur say exactly the same thing, that they used the metaphor of sports but they were both sports women in different areas.
It helps people feel OK about failure.
Also it must break the psyche into that territory so that it’s comfortable. Because I remember the woman founder saying she was comfortable in this skin as an entrepreneur because of sports.
That’s interesting, so team sports I think! More important than individual sports for that kind of thing because you need to know how to work as a team. And you need to know how to take failure & realize that there’s another game next Saturday.
Fascinating, thanks so much.
- I noted in a recent article in Mercury News ‘Grim numbers point to the end of the venture capital era’ ‘In the game of venture capital, the 10-year return on investments is one of the most closely watched benchmarks of performance. Everyone can have a bad year here or there. And in the short run, there’s always going to be sluggishness from an economic downturn or two. But none of those excuses can explain away a whole decade of failure. No, there’s something bigger going on. The venture industry is in free fall. And that has big implications for the Silicon Valley economy, especially when it comes to job creation.’ With all the negativities out there in the global economic environments, obviously in Europe it’s even worse, possibly starting to affect investment, and the focus changing to become more risk averse, will we see even more women startups sidelined for male startups? (Obviously not in your firm) This fear has been expressed to me a few times by various people?
Well there’s a bigger problem & that is the regulators. Our government has made it more & more difficult for venture capitalists because all the regulations they put on big companies, they also put on companies that are just getting going, if they’re going to be public. So what we’ve had is a whole decade, well it’s really been since 2003, where we aren’t really able to get our companies public. And if you can’t get companies public then you can’t get your money back to your investor. Then the investor doesn’t want to put more money into you. So there isn’t an opportunity to keep that virtuous cycle going. And it’s only getting worse, the regulations are going to increase with this new administration. At least that’s the talk! So we’re very concerned & we think the venture capital business is in some hot water. Now it is somewhat cyclical but they’re 10 or 15 year cycles so it may be a while before we have another good run. It is true that when things are tighter, people take fewer risks & they may say there’s a larger risk with a woman entrepreneur than a man entrepreneur. I’m not sure that’s true & I’m not sure if anybody believes that anymore. So I think that your question is not relevant. I think it’s the industry as a whole is in trouble because of the heavy regulation that’s been put on us in the US. It’s interesting that in the rest of the world the entrepreneurship is thriving, both women & men. Interesting China has a lot of female entrepreneurs.
Wow incredible & so just as an add on to that. A few superangels or angels have been blogging recently that the venture industry has to change. I’m wondering, with the perspective that you’ve just shared with me, do you think that all the creativity that you guys deal with both for yourselves & with the entrepreneurs that you’re dealing with, that you could rethink the venture industry & make it work better?
I’ve been constantly reinventing the venture industry. Every time I try I realize my investors, the limited partners, do not want it to change much. They are very cautious, particularly now. They are very cautious about putting money out & putting money out in any new way with any new setup is very scary for them. So it’s much less likely for us to raise money with another construct. Now that said, yes I think it is time & there are some companies that are starting to change the nature of venture capital so that shareholders don’t have to hold on for 12 years before they get any liquidity. They’ll be able to pass the baton to other shareholders as they go.
- Often advice for sourcing venture is equated with dating, implying that there is a matching that needs to happen with entrepreneur & investor. Have you noticed a general psychological profile of venture capitalists and also of entrepreneurs that promotes the attraction & synergy between them to develop a great startup?
I don’t think so! Because I think venture capitalists & entrepreneurs everywhere are so different from one another. Entrepreneurs have one thing in common, the need to make a big change in the world. And venture capitalists are of all ilks. Some of them want what the entrepreneurs want. Some are more interested in money or resources or industries or technology or markets whatever. It’s a wide variety of people in this industry.
So you’ve never noticed a pattern there?
No
Fair enough!
- In the dance with an entrepreneur both in the decision making process of funding a startup & then in working with those startups what are the necessary qualities that make a good venture capitalist. Some of the talents mentioned: Would you trust your gut instincts & feelings that happen within the relationship with the entrepreneur as signs about what’s happening in the business, in the startup? Or would you ‘manage by influence or persuasion’?
Well actually the two I’ve seen are more both of those in one category. Using persuasion & looking with faith in the entrepreneur & relationship with the entrepreneur. I think the other venture capitalists are focused really on performance. Have you performed? Are your numbers proper? Are you doing these things the right way? Have you hit your milestones? So that’s one type of venture capitalist! And another type is that really the relationship venture capitalist, the connector who connects entrepreneurs to a lot of different areas. The creative piece that a venture capitalist brings to the table because they’ve seen so many things. There’s a little more interesting creativity to that. So I think that there are kind of those 2 types.
Thank you for that and as a pathfinder yourself, what would your main modus operandus be in working with an entrepreneur?
I tend to really look for really good management & if I have really good management in place then I can sleep at night. Then I also want to build a good relationship so that I can help those entrepreneurs when they need it. If they need a particular introduction or they need a little judgment on how they’re going to market their service or whatever.
So a connector. Thank you so.. much I appreciate it!
Thank you very much
