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| Home - Venture Profile - Jul 05 Issue |
Venture Profile: John Fisher, Draper Fisher Jurvetson
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Let’s take for example a given 1999 fund that I’m somewhat familiar with. It happened to place a bet in a company called Google and by most press accounts and other accounts, this particular fund was significantly under water across its portfolio for that 1999 vintage fund. One spectacularly successful deal makes the entire fund worth something like four or five times the entire committed capital of the entire fund. Our business is all about the home run deals, the superstar winners, and if you’re not taking appropriate risk, you’re unlikely to get those big winners. If you’re doing careful deals and minimizing risk and acting generally like a banker rather than a risk capital provider, you’re unlikely to get superior return. You’re only likely to get superior returns, if you take consistent methodical risks. DFJ has embraced this notion from day one.
Angel Mehta: Are you in agreement with the notion that the enterprise software business on the down slope and the real wealth opportunities are going to be found elsewhere?
John Fisher: Yes. What we have learned in the very recent past is that enterprise software has matured to the point where it is no longer a guaranteed annual growth business. I’ve been investing in enterprise software companies for 20 years. It’s what I did at Alex Brown in 1984; it’s what I did consistently in my early days here at DFJ. We never saw a year in which enterprise software overall failed to grow. I can’t remember a single year between 1984 and 2001 when enterprise software failed to grow as a category; but it did finally stop growing between 2001 and 2002. It’s a mature industry and we have to treat it accordingly. Rather than focusing as much as 50% to 70% of our portfolio on enterprise software which is what we have done in the past, we’re now being very selective and looking only at what we consider to be exceedingly novel opportunities and they’re rare.
Angel Mehta: How valid is it to make decisions, about people or deals, using your gut?
John Fisher: I believe that anytime you interview somebody in the process of evaluating them and their capabilities, you are brining to bear the sum total of all that you have learned in your life. That is what happens when people say, “I evaluate based on my gut.” There’s a famous adage that people have used to explain this general concept and that is, “I know them when I see them.” You can go through the normal checklist of experience and background, and interview them for various personality traits and examples of leaderships, and question them on management theories, philosophies and practices. You can then go ahead and do all the reference checks, and you need to do all those things. However, at the end of the day, I can’t tell you how many times I’ve done all of that and come up with a dud. It’s a very disappointing outcome and you’re not going to talk to a single venture capitalist out there that has a different story to tell. So, when somebody truly stands out above the crowd you often know it by instinct, but it’s very hard to articulate it or analyze it objectively.
One thing I’d like to point out is that youthful entrepreneurs many times have been responsible for the greatest companies ever created. For example, Microsoft was started by a 19-year-old dropout, Dell by a 19-year-old college student in his dorm room, Apple by two 21 to 22 year olds, Yahoo and Cisco by Stanford graduate students, Sun by four 26 year olds and Google by a couple of 26 year olds. The fact is that these are among the most dominant, greatest companies ever created and they were founded by people who most recruiters would consider to be children with no management experience whatsoever. My viewpoint is that there are no rules about this kind of thing; you know it when you see it.
Angel Mehta: What has been your experience with entrepreneurs who stay on to manage? Have you found them to be successful?
John Fisher: The truth is, entrepreneurial brilliance almost never makes for brilliant management skills, and that flies in the face of what I just said a minute ago. Those are the individuals who had it all and they are rare birds indeed. In my opinion, they would include Bill Gates, Michael Dell and Scott McNealy.
Angel Mehta: Why do you think those kinds of entrepreneurs – the ones who can manage – are the exception and not the rule?
John Fisher: They’re very different kinds of animals. Entrepreneurs march to their own drums. They’re mavericks in attitude and they tend to defy authority, flout conventional wisdom and those characteristics can lead to trouble when it comes to managing an enterprise. Sometimes the best managers are those who are very steady, reasoned and very rational and maybe not always the most creative but certainly those that can keep the train rolling down the tracks in the right direction for quarter after quarter after quarter. People like that know how to leverage the skills of their creative people and their maverick people and marshal those efforts, energies and resources for the overall good of the company in a way that displays fine management. This subject is one that, like so many others, is always dangerous when you’re trying to make generalizations. Nevertheless, generalizations do have a place in the world and should be made from time to time. It’s just always dangerous because there are always exceptions.
John Fisher is Managing Director of Draper Fisher Jurvetson. On behalf of Draper Fisher Jurvetson, John serves on the boards of CMI Marketing, Entegrity Solutions, MFORMA, Raydiance, SafeView, Selectica, and Visto. John graduated Magna Cum Laude from Harvard College, and has an MBA from Harvard Business School. For article feedback, contact John at: john@dfj.com
Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net
 
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