As a lot of venture capital firms do when they reach a certain age, Draper Fisher Jurvetson is going through a transition. Founding partners Tim Draper and John Fisher plan to take less active roles; Draper, in particular, has brought much of the spotlight to the Menlo Park firm since its launch in 1985.
The next generation that will be building on the founders' track records include managing director Josh Stein, who joined DFJ in 2004 and has led some of its more high-profile investments of recent vintage, including Box, Yammer and Yardbarker. In this week's Elevator Pitch, Stein recalls the most important question Draper taught his younger colleagues to ask.
Q How'd you get into this racket?
A I started out in the industry as a product manager at (software maker) NetObjects. Coming out of business school in 1999, I teamed up with three other NetObjects alums to start ViaFone, an early enterprise mobile applications company. We raised money from a number of venture firms -- including DFJ, which co-led our Series A.
I had always thought venture might be an interesting career, and in late 2003 I was accepted to the Kauffman Fellows program (which trains aspiring tech investors). DFJ already knew me from ViaFone, so it was an easy fit. I joined as an associate in 2004 and was promoted to partner a year later.
Q What kinds of pitches are you looking for now?
A We're always looking for founders who are thinking big and aiming to tackle huge markets. In the past year, we've seen these big ideas in sectors as diverse as enterprise software, consumer applications and services and even commercial space exploration.
Q What's the biggest mistake entrepreneurs make?
A Going after a problem that's either too small or too big. It sounds paradoxical, but it can actually be a lot easier to go after a really big, hard problem and market than a smaller one. Big challenges stir people's passions and make them want to join the cause, making recruiting easier. They present the opportunity for bigger wins, which attracts more capital.
Startups need to aim big if they want to succeed big. Sometimes the risky move is to try to play it safe.
Q What's the next big thing going to be?
A Mobile is the biggest meta-trend we're seeing right now -- and it's just getting started. Already, you have most of the population in developed markets walking around with always-on, always-connected computers in their pockets, computers that are both more powerful and more personal than anything we had 10 years ago.
Not only are most existing areas of technology being rebuilt for mobile, but we also see mobile as a wedge that will enable technology to spread to new, traditionally low-tech markets.
Q DFJ's going through some changes, with Tim Draper and John Fisher deciding not to actively invest in your newest fund. Is this just part of the natural evolution of venture firms?
A As markets change and our industry evolves, we want to ensure we're tapping every opportunity to connect with entrepreneurs. Tim is actively building Draper University (which teaches students about entrepreneurship) and continuing his angel investments through Draper Associates. And he continues to guide the firm's direction, manage his existing responsibilities and work on new projects. Tim expects to be one of our largest limited partners.
John started DFJ Growth in 2006 with the intention to focus on growth-stage companies in his future investments. Tim and John remain members of the DFJ management committee, which is responsible for setting the governance and direction of the firm as a whole.
Q Early in your tenure at DFJ, you made a bet on Box, which a lot of people expect to go public this year. Did you see a billion-dollar company in a small group of college kids?
A I first met Box founders Aaron Levie and Dylan Smith in 2006. While they were young (21 and 20, respectively) and the business was early, it was pretty apparent that these were exceptionally talented founders who had a big vision for what we thought could be a very broad, "horizontal" market.
While we knew there would be plenty of risks along the way, we were taught by Tim Draper to ask, "How big could this be if it worked?" And in the view of the DFJ team, we did think it could be a billion-dollar company, based on the market potential. We supplied the first institutional investment in Box and have continued to support the company in every subsequent financing round.
Watching the Box team so successfully realize that vision has been one of the most gratifying experiences of my professional career.
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.