October 17, 2005 SDF William H. Draper III

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Venturing Abroad: From India to Skype
By DJ Cline

On Monday, October 17, 2005, William H. Draper III, Managing Director of , L.P. talked about his experiences in venture capital. International SIG chairs Jeannine Athas, Susan Lucas-Conwell and Alex Sousa organized the event. Bingham McCutchen partner Bart Deamer, which hosted the luncheon, introduced Draper.

When he started out in Silicon Valley in the 1950s, Draper said he would knock on the door of any business that didn’t grow prunes. It was fertile ground for orchards, not venture capitalists, but he recognized the right time, place and opportunity before anyone else. The same strategy would apply when he went international.

Draper’s experience with the United Nations Development Programme (UNDP) as well as the Export-Import Bank of the United States has made him a strong advocate for global investment. His limited partnership Draper International, invested in private companies with operations in India.

Draper chose India over China for a number of reasons. Witnessing China’s dramatic turnaround twenty-five years ago, he believes Deng Xiao Peng’s reforms changed the world in the twentieth century more than Albert Einstein. Despite that and China’s investment in infrastructure, he chose India for its democracy and rule of law. English speaking Indians had an advantage in developing software. Draper then rounded up the funds and found local partners to run the business. After six years they were able to return 16 times their original investment. Amazing as that was, Draper regrets not investing more in Infosys, which performed even better. He thinks India’s long-term growth depends on new infrastructure funded by an income tax. Developing countries with large agricultural populations would benefit if developed countries removed their own farm subsidies, creating incentives and opening markets.

It was through people he met in India that led to Europe and the creators of Kazaa. From that meeting, a business plan for Skype was born. It was not particularly capital intensive, which he believes is good sign for venture capital. After Tim Draper’s firm got involved, the E-Bay deal came through. It is this kind of thousand-for-one deal that keeps Draper in the game. Why play golf when this is so much fun?

Draper outlined some of his lessons for venture capital:
1. Get entrepreneurs who can take you all the way to the moon, half there doesn’t cut it.
2. Entrepreneurs should be able to quickly share the good news and the bad.
3. A good team will have the imagination, creativity and energy to solve a problem.
4. Entrepreneurs must be persuasive, persistent and passionate promoting a new idea.
5. Investors should keep perspective and not be hypnotized.
6. If you can’t make ten times your money, you don’t want to do this deal.
7. Investments and returns are not overnight transactions. They take time and work. Evergreen funds spread risk and promote teamwork at a venture capital firm.
8. Markets have limits. No one is going to make get rich selling all the asparagus in the world over the Internet.
9. No deal is as important as your reputation. Be aware of the slippery slope. People must trust you enough to invest again.
10. Have fun.

DJ Cline
Copyright 2006 All rights reserved.