CandidCapital

Why does Draper Fisher Jurvetson, one of Silicon Valley's legendary venture capital firms, make so much of its enthusiasm for backing youthful entrepreneurs? Does the experience of Cambridge bear out this predeliction?

Earlier this month DFJ Esprit held their first event in Cambridge since Esprit joined the Draper Fisher Jurvetson worldwide network of venture capital firms. It was a good party, in an English way, with a flute and harp recital in the Victorian splendour of the Fitzwilliam Museum. The guests were the usual suspects: venture investors, business angels, partners from professional services firms, senior academics and officials from the university. Partners were invited which made for a pleasant and relaxed evening without the intensity of business networking.

The musicians were introduced by Stuart Chapman, one of DFJ Esprit's general partners, who told the story about how Esprit and DFJ had got together. He and the other Esprit partners had spent some time with DFJ at their HQ in Menlo Park, adjacent to Stanford University. During the discussions, the DFJ partners spoke about the disproportionate success that they have had in backing young entrepreneurs. This cult of youth is reflected in DFJ itself where the firm's third partner, Steve Jurvetson, was in his mid twenties when he joined Tim Draper and John Fisher in 1994 straight from the Stanford MBA program - Jurvetson is still only 36 with wins such as Hotmail and Skype under his belt.

I must confess to ambiguous feelings about a cult of youth as a factor in entrepreneurial success - both instinctively and rationally. Instinctively, and being over 50 it's easy to understand my feelings, it seems to me that maturity and experience outweigh the impulsiveness and ignorance of youth. Rationally, after over 20 years of venture investing, I've come to believe in the importance of eliminating unnecessary risk (note "unnecessary") from any project that I back. Generally, experienced managers are better at identifying risk, since they’ve been caught out in the past, and are better at prioritising time and effort on those activities that minimise risk and maximise business upside. However, looking around Cambridge today, I wonder if there's more to this than simply balancing energy and enthusiasm against wisdom and a steadier pace.

Over the past ten years most UK universities, and Cambridge has been in the vanguard of the process, have gone to great lengths to expose faculty and students to entrepreneurship and business skills training. Business plan competitions, entrepreneurship societies and bootcamps abound - and they seem to be working. Pangloss has been mentor to several student businesses, in his capacity as a visiting lecturer at Cambridge, and the recent crop of student entrepreneurs has been impressive. Typically in their mid twenties and usually on graduate degree programmes, they're steeped in the web and all it has to offer as a communications, learning and research tool as well as a source of business opportunities. Even if the idea they're pursuing isn't for a web or internet business, they make best use of all the resources and tools that the web has to offer (one life sciences start-up has its own group on Facebook to hook together the team, potential investor and other partners or collaborators).

In contrast, when I look at my own generation in Cambridge - both entrepreneurs and investors, I can't help feeling that they're pursuing a different agenda. Sure they use Google to find things out, like everyone else on the planet, but they don't have the web as part of the weft and warp of their lives in the same way as the graduate students do. This means they're often less well informed about what's going on outside their own domain - in business in general as well as in web related stuff. Moreover, this older generation - people from 40 to 60 - tend to be technology buffs, who were inspired by supersonic flight, the race to the moon and integrated circuits as children in the '60s and '70s. For that generation, technology is more than simply the source of business opportunity - it's the raison d'etre for being in business at all. It seems to me that this technophilia is so strong that it can subvert all the advantages of general business experience that being older confers. How can it make sense to continually seek out business opportunities which may, say, transform the global semiconductor industry but which are based on new and unproven technology, have no defined market opportunity, no management and no other infrastructure?

Amar Bhide in Venturesome Consumption, Innovation and Globalization (see Pangloss's article for a summary) points out that the massive productivity advantage of the US economy since 1990 or so, has not been through advanced technology industries but through the application of IT to improve the performance of pre-existing industries, especially wholesaling and retail.

It seems to me that the graduate students of today, while tech-literate (and capable of considerable enthusiasm about technology that interests them) don't see technology as some universal prerequisite for building great businesses. To the contrary, they see technology as one tool out of many that can help them develop a persuasive business model that is focussed on identifying and meeting real customer needs or wants profitably. Even if they are raw and have a lot to learn, I know who I'd back if I had to choose between web-savvy youth and technophile maturity.

27 November 2007

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