Investment Thesis: Warren Packard

Here’s an interview with Warren Packard, a General Partner at Draper-Fisher-Jurvetson. DFJ has funded Hotmail, Skype, Overture, Baidu, Interwoven, 411, and many others companies. Typically, they do a LOT of deals, and are less hands-on than many other firms who take on smaller portfolio, with a more active commitment to helping the entrepreneurs. They have also perfected the art of valuation without revenue, with both Hotmail and Skype being homeruns, so if you have something that’s a rocket traffic-wise, but without a clue about business models, DFJ will not hold it against you.

SM:Please describe your background, to help entrepreneurs understand your point-of-view.
WP: I have a BS and MS in engineering (Smart Product Design: a hybrid ME/EE/CS program) and an MBA, all from Stanford. I worked for four years designing the next-generation of medical devices at Baxter International. I co-founded a main-memory database company with a friend who developed the technology as part of his doctoral research. I’ve been in the venture business since 1996.

SM: What stage are you looking to invest in over the next 6-12 months?
WP: Primarily, I focus on investing in early stage companies; typically pre-revenue. I enjoy the company formation stage and working with the entrepreneurs to grow their venture into a significant business.

SM: What segment(s)?
WP: DFJ will invest in companies across the technology spectrum: Internet, software, hardware, nanotech, energy/cleantech, biotech, etc.

SM: What market dynamics do you look for?
WP: We look for entrepreneurs who are building businesses that address a real customer need, that have a substantial addressable market, that don’t face firmly entrenched competitors, that boast very favorable margins, and that have the advantage of a unique, defensible technology or business strategy.

SM: What size of investment are you looking to make?
WP: In any one round, we’ll invest anywhere from $500K to $8M and, in a few circumstances, more. In addition, we set aside funds for follow-on investments since we always plan on continuing our participation in subsequent rounds as a company is growing.

SM: What kinds of deals are you interested in seeing?
WP: We’ll take a look at any venture that is aimed at changing the world. [SM: C’mon, not every deal you fund changes the world … ]

SM: Describe, in some detail, the last deal you funded, and your rationale behind funding it.
WP: My last deal is about to launch, so I can’t divulge (yet) its name or specific details. Suffice it to say, we backed this venture due to the quality of the team, the utility of the product, and the efficiency of the business plan. Great businesses are relatively easy to identify because they are unique and immediately engage you when you first hear about them. This deal was no exception.

SM: Do you fund capital-intensive deals?
WP: We fund capital-efficient deals. Most deals do not require a lot of capital to succeed. [SM: Chip deals do. Many Content deals do. Telecom equipment deals do. That’s why we see less activity in some of those categories these days …]

SM: Do you fund built-to-flip deals?
WP: Anyone setting out to change the world is not looking to flip their company. That would simply be leaving value on the table.

SM: Do you fund “hits” businesses?
WP: We don’t set out to fund “hits” businesses, but we’ve certainly funded ventures which have become hits.

SM: Describe your ideal entrepreneur.
WP: The ideal entrepreneur exhibits energy, passion, intelligence, charisma, gumption, drive, curiosity, openness, fun, …

SM: Which VCs do you like to work with as part of a syndicate?
WP: The venture community is full of terrific, dynamic individuals and firms with whom we enjoy co-investing.

SM: What is your thesis on entrepreneurial / investment opportunities given the state of the market? What markets are likely to crash? What markets are likely to open up?
WP: If you’re setting out to change the world, you don’t have to wait for the right market environment. The market is always willing to reward innovation and creativity. Markets may crash and businesses may struggle, but a well run business pursuing a valuable opportunity with a great team always has a very good chance to flourish.

This segment is a part in the series : Investment Thesis