Milestone Group Quarterly: October 2006
Articles
Investment Viewpoint:
Tim Draper of Draper Fisher and Jurvetson
Milestone: Tell us about Draper Fisher and Jurvetson. It’s a rich history
Tim Draper:It’s the mission that defines us. We identify, provide capital for, and serve extraordinary entrepreneurs who want to change the world. Our approach recognizes that a new breakthrough can come from anywhere at anytime, so we’ve established a strong global presence largely through a network of affiliated funds. We have offices in more than 30 cities and approximately $3.5 billion in capital commitments. Over the past twenty years, we’ve backed approximately 500 companies across myriad business sectors including such industry changing catalysts as Hotmail (acquired by MFST), Baidu, Skype (acquired by EBAY), United Online, Overture (acquired by Yahoo!), Interwoven 411 (acquired by Yahoo!), Parametric, and Digidesign (acquired by AVID).
Milestone: It seems that DFJ is synonymous with international investing. What are the global trends we can expect to see more of in 2007?
Tim Draper: Generally, global trends are driven by the visions of entrepreneurs. That said, I suspect that we will continue to have growth in media convergence with companies like DivX and Revver, YouTube, Tagworld and MySpace. I think we will see more clean tech opportunities as worldwide creativity is focused on the opportunity, with companies like GreenFuel, Tesla, Konarka continuing their growth. I think we will see more from China, where new technologies invented there will start to spread here instead of the other way around. And I think geographic borders will continue to dissolve.
I am also actively seeking companies that take new technologies that are big with the consumer to the enterprise.
Milestone: Our theme for this issue is Web 2.0. Some say that may be all the term is, a theme. What makes Web 2.0 more than a buzzword?
Tim Draper: Nothing.
Milestone: How would we know if it’s real though? What’s happened in the last 12-18 months that would convince you that it’s arrived (or hasn’t happened to convince you that it’s not here yet)?
Tim Draper: I expect Web 2.0 allows some of these great new technologies for consumers to move to the enterprise. An example of that is one of our portfolio companies, SocialText. They fit with our investing focus of looking for companies that can have a big impact, especially in bureaucratic and inefficient sectors. The idea that you do a Wiki for any type of a project, and for any kind of organization, means more efficiency in the way projects are managed. By shifting the communication from e-mail to project, it’s much easier for a company to manage the process, or development cycles.
Milestone: The big question has to with revenue models. Facebook has a $1 billion valuation on $25 million invested. How do you create real value out of that scenario?
Tim Draper: I am not an investor in FaceBook, but I am in TagWorld. Their revenue model is pretty clear, and proven. The large value is because of the wide reach these companies get.
Milestone: Certainly the open source movement is the foundation for Web 2.0. From an investor’s view, is open source compatible with your goals? It probably depends on the company, but at what point are you no longer willing to sacrifice control over the data?
Tim Draper: We don’t really look at it that way. As investors, we are looking to build returns for our investors through backing individuals who will go out and change the world. If that is in a company that is open sourced, great. If it happens to be proprietary, that’s great too.
Sugar CRM, another of our portfolio companies, is an example of where open source and a commercial application converge. Theirs is a broad application and there’s a fair amount of open development, but they are very careful that they maintain a stable code base. It’s finding the balance between development opportunities and predictable quality in product that matter.
Milestone: Are there any mistakes from the hysteria of Web 1.0 being repeated now?
Tim Draper: I don’t know. From my point of view, in Web 1.0 we all acted pretty rationally. When money was readily available, we built market share. When money tightened up, we conserved. I think people are pretty smart on the whole.
Milestone: You really rode an elephant into a presentation? Where do you find an elephant?
Tim Draper: It is easy to find an elephant if you have enough peanuts.
Milestone: Last question. Any deal you passed on that wish you could have back?
Tim Draper: Sure. We made the first offer to Yahoo and got outbid. And I met Sergei on a plane and we passed on Google because we had already six search engines in our portfolio. But if we had invested in those companies, they may have gone another way.
Timothy C. Draper is the Founder and a Managing Director of 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 to hundreds of businesses.
Mr. Draper launched the Draper Affiliate Network, an international network of early-stage venture capital funds with offices in 26 cities around the globe. He founded or co-founded Wasatch Ventures (Salt Lake City), Zone Ventures (LA), Draper Atlantic (Reston), Draper Triangle (Pittsburg), Timberline Ventures (Portland), DFJ EPlanet (global), Polaris Fund (Anchorage), Draper Fisher Jurvetson Gotham (NYC), DFJ Frontier (Sacramento and Santa Barbara), and DFJ Dragon (Shanghai).
As an advocate for entrepreneurs and free markets, Mr. Draper is regularly featured as a keynote speaker in entrepreneurial conferences throughout the world, has been recognized as a leader in his field through numerous awards and honors, and has frequent TV radio, and headline appearances. |
