on January 17, 2011
After writing Do More Faster with David Cohen, I have deep appreciation for the effort involved in writing a book. After reading a bunch of entrepreneurship books, I've decided there are three categories: (a) autobiographies, (b) consultant roadmaps, and (c) practitioner stories. I like the practitioner stories best, followed closely by autobiographies. I do not like consultant roadmaps and have decided I won't read them anymore.
Bill Draper (officially William H. Draper III) has written a gem called The Startup Game. It's a mix of practitioner stories with some autobiography mixed in. Draper is one of the original VCs - his father (William Henry Draper, Jr.) started Draper Gaither & Anderson, one of the first VC firms on the west coast that coincidentally was the first firm to use a limited partner (LP structure). His son, Tim Draper, started Draper Fisher Jurvetson. And William III started several firms, including Draper & Johnson, Sutter Hill Ventures, Draper Richards, and Draper International. Yup - lots of Drapers, but they've all collectively accomplished some amazing things.
In The Startup Game, Draper talks about the early days of venture capital, the creation and evolution of the industry, and many of the early players whose names are well known to any VC insider. Along the way he tells stories about companies he's funded (or missed funding) and generally teaches at least one lesson in each story. This isn't an autobiography - while he mixes in lots of biographical information, the chronology is self-admittedly random and he bounces between stories of his father and son along with his sojourn to Washington DC which he calls his lost years.
SF Gate published an interview on Sunday titled William Draper, veteran venture investor, reflects and SiliconValley.com wrote a review titled Venture capitalist Bill Draper adds 'author' to his résumé with 'The Startup Game. Both capture the spirit of the book which I view as a must read for any practicing or aspiring VC or entrepreneur.
on January 8, 2011
William Draper's account of his amazing career, and the lessons he learned along the way, is both a delight to read and a great introduction to the world of venture capital. Of course, any successful investor must be shrewd, intelligent, and skeptical. A successful venture capitalist, however, must also possess a degree of optimism that is perhaps uncommon in our age of cynicism. Draper has that quality. The irrepressible optimism of the man shines forth on every page. It is difficult not to come away from the book with a heightened sense of the possibilities for one's own life. If you've ever wondered whether you really can do what you love and have the money follow, here is a concrete example of how one man did it.
Draper does of course admit that there's an element of luck in his life. He was lucky, he says, to have had a good education, a great father, and superb partners. Draper's father, General William Draper, clearly played a key role in the author's success. It was General Draper who formed the first venture capital firm on the west coast, Draper Gaither & Anderson. It was the General who summoned his son to California from the Chicago area, where he was working for Clarence Randall at Inland Steel. But William Draper the son had done very well for himself at Inland Steel, where he had gone through the "Randall's Ranger's" management training program and had already assumed a prestigious role in the hierarchy of Inland Steel. This is the point at which the son could have gone on to have a very successful but perhaps none too remarkable career as a business man. Back in the late 1950s, venture capital did not have the reputation it has today. Clarence Randall probably summed up the attitude of most businessmen at the time when he said "Venture capital? Sounds risky. I wouldn't do it if I were you."
But Draper took the chance, and it was clearly the turning point in his career. From that point on he had a front row seat to one of the greatest economic and technological developments of our time: the transformation of an obscure community of orchards and fruit farmers into a powerhouse of innovation, a place we now know as the Silicon Valley.
Draper's book relates a good many first encounters with entrepreneurs who would go on to make the Silicon Valley famous around the world. There is an almost Forrest-Gump-like knack for being in the right place at the right time, though I doubt that luck had much to do with it, and the author is certainly no Forrest Gump. Draper relates how he and one of his early partners, Pitch Johnson, drove around the valley introducing themselves to various business leaders. It would have been really something, I think, to tag along on those adventures. It is clear in any event that Draper and his partner made their own luck by sheer reputation and hard work. As Draper himself says "Luck is clearly a factor in life, but I would advise any young person interested in becoming a venture capitalist or an entrepreneur not to be overly fatalistic. Work hard, work smart, and luck happens."
In the middle of the book, there is a fascinating chapter on what Draper calls his "missing decade". First, he ran for congress, though unsuccessfully. But even here Draper showed his characteristic willingness to take bold action. When he realized that he needed a deeper understanding of the Vietnam War, he didn't lay back and read a few books but went directly to Vietnam to see the war first hand. The congressional seat went to Pete McCloskey that year yet, as Draper says, his run for congress was a prelude for what was to come.
What was to come was an appointment to the head of the Export-Import bank for the Reagan administration. Here Draper's rather dramatic showdown with foreign countries over interest rates did a nice job of getting U.S. taxpayers somewhat off the hook. At least, as Draper says, taxpayers would be lenders of last resort. Draper's position at the Export-Import bank lasted for five years, after which point he went to the United Nations to run the United Nations Development program. During all this time, Draper met an amazing array of diplomats around the world. Though he calls this period his missing decade, it is clear that he was missing nothing in terms of establishing new and important contacts. This part of the book is festooned with remarkable characters, including a memorable encounter with Fidel Castro.
Among the entrepreneurs featured in Draper's story none is more remarkable than the story of his own son, Tim Draper, who with his father's guidance founded one of the truly remarkable venture capital firms in the world today, Draper Fisher Jurvetson. Tim Draper, who is arguably the inventor of "viral marketing", has created a network of semi-independent venture capital partnerships with offices around the world. Interestingly, the organizational structure of Draper Fisher Jurvetson, though perhaps new to venture capital, may not be entirely unprecedented. As Niall Ferguson says in The Ascent of Money, the Medici succeeded in 15th century Europe largely because they were organized into multiple related partnerships, each based on a special, regularly renegotiated contract. Thus branch managers were not employees but junior partners who were remunerated with a share of the profits. The network built by Draper Fisher Jurvetson is undoubtedly more sophisticated than this. Still, the Medicis' organization might be seen as an early prototype of the type created by the third generation of Draper venture capitalists.
Near the end of the book Draper explains how he has brought the venture capital approach to funding non-profit startups. This is the third phase of the "Andrew Carnegie Dictum", to which Draper claims allegiance: spend the first third of one's life getting all the education one can, the next third making all the money one can, and the last third giving it all away to worthwhile causes. To this end, Draper and his partner, Robin Richards, started the Draper Richards Foundation, aimed at nurturing "social entrepreneurs", i.e., people with a vision about how to change society in some positive way. Draper and Richards bring to this task everything they've learned in the private, for-profit venture capital world. The list of non-profit organizations to which the Draper Richards Foundation has contributed so far is impressive. Room to Read, Little Kids Rock, Spark, Taproot Foundation, Girls for Change, A Home Within, Education Pioneers, Mapendo International, Upwardly Global, Digital Wish, and Kiva - all of these and more have benefited from stewardship by the Draper Richards Foundation.
Draper concludes his memoir with a look back at his military service in the Korean War, drawing attention to a part of the world that is ironically back in the news even now. He remembers with sadness his buddy who was killed in that war. "I wish", he says, "that somehow ... he could come back and see the difference between North and South Korea today." Nighttime satellite photography reveals that difference all too painfully: the South is ablaze with lights and life, while the North is plunged into darkness, dead to the world. Draper notes, correctly I believe, that the South owes its prosperity to trends promoting free enterprise. As in South Korea, so in both China and India: a freeing up of the people in those countries, the elimination of government bureaucracy, and a greater respect for personal property rights has led to a renaissance of prosperity.
Unlike so many other authors on the contemporary scene, Draper clearly understands that innovation is the true mainspring of wealth. To this I would only add that the innovation set in motion by free markets is not only technological but is also organizational. As the economists like Ludwig von Mises and Friedrich Hayek said many years ago, entrepreneurs make use of information about particular facts and circumstances that exists only in the minds of millions of individuals. Free markets are epistemologically superior to hierarchical organizations: this is the true source of their strength and ability to create wealth.
Draper says with some urgency that we have to continue down the path of promoting free markets, and I agree with him. But I'm not sure I can summon enough of the Draper optimism to feel confident that we will do the right thing. The current trend out of Washington D.C. is, I'm afraid, rather un-Draper-like in its attempt to tax and spend our way out of recession. We would all be better off, I think, to take a page from William Draper's memoir. Maybe more optimism is what it will take. In any event, I agree that we do indeed need more Drapers, or at least more people soaking up the Draper vision for a better world. The Startup Game is an admirable step in the right direction. Buy it and do what you love - the money will follow.
"The Startup Game: Inside The Partnership Between Venture Capitalists And Entrepreneurs" is more of an autobiography than the what's, how's, and "why's of the startup world. Bill Draper, a pioneer and giant in Silicon Valley, provides a good historical perspective on the emergence of Silicon Valley, his (and his firm's) role in its creation, his interest and eventual career stint in public service (the Export-Import Bank of the United States and the United Nations Development Program), the creation of the cutting-edge DFJ Global Network of venture investing, and the creation of the Draper Richards Foundation which is focused on seeding nonprofit organizations.
First time entrepreneurs may find Draper's chapters "How it Works," "What it Takes," and "Finding the Exit" insightful and useful. Those who have been in the game longer will not find much new here but should find the "Startup Game" a good read due to Draper's role in the creation of the "Valley."
For me, I found the chapters on the creation of the DFJ global network and "The Business of Philanthropy" to be the most relevant and of greatest interest. I have been involved in China for two years and have a real appreciation for the globalization of innovation and venture capital. DFJ has been a leader in both.
I was unaware of the Draper Foundation and its sponsorship of social entrepreneurship. What a grand effort! The author provides information on 23 of their investments in this area. As a result, I am now a full-fledged member of KIVA, a nonprofit focused on alleviating poverty by giving entrepreneurs in the developing world access to capital through microloans. A personal loan of as little as $25 in conjunction with many others goes a long way in helping deserving projects get off the ground.
on January 24, 2011
The Startup Game really is the only book of its kind.
Bill Draper has pioneered an industry and founded Sutter Hill Ventures was arguably the only venture capital firm worth mentioning in 1960s. In the book, Bill epitomizes experience coupled with judgment. He demonstrates a keen desire to learn and never backs away from the experience of something new. More importantly, he has developed the important and elusive quality of judgment. With good judgment, little else matters. Without it, nothing else matters. His leadership is, at its marrow, the chronicle of his judgment calls.
I especially liked the chapter on "missing decade" which marks his forays into public service. His experience resonated with my experience. It is one of the most insightful books I have ever read to bridge public and private sector experience.
"Startup Game" shows that Draper has wisely processed and integrated experience, reflection, valid sources of timely information, openness to the unbidden and character. Draper has shared more than most making this a must read for those who strive to be successful venture investors, entrepreneurs, or want to understand what it takes to create breakthroughs when skeptics well outnumber the believers.
AS Eric Schmidt says in the opening paragraph: "Change is to merely necessary to life - it is life." Bill Draper demonstrates it in his various life experiences.
In the first few chapters, Bill Draper has written the definitive book on how venture capital works. He combines real world stories (his and others) and analysis is a very logical and readable format to explain the dynamics of VC and venture-backed companies. I've read a lot of books on this subject and wrote two books on this topic. Bill's book is by far the best to date on this subject. I also loved Tim Draper's afterword.
As this book makes clear, Bill Draper is superhuman. He founded many wildly successful technology companies, helped invent the venture capital business, and is remarkably wise. If I were to recommend to anyone what books they should read to understand venture capital, Bill's is such a book. He certainly epitomise the Way Of the Venture Capitalist and is the Top Venture Capitalist on any any board.