Tim Draper profiled in Red Herring

Legendary investor Tim Draper talks about the return of VC and the second wave of consumer Internet.

Dec. 8, 2004

(excerpt from article)

Mind the curve

Tim Draper used to find deals by walking around Silicon Valley real estate developments and just browsing signs on the buildings. �Anything that said software, I�d knock on their door, go in, and see if they needed any money. Most of them did,� he said.

The venture capital world has matured by a few decades since then, and his firm, Draper Fisher Jurvetson, has grown up with its industry.

�It used to be that a couple of million people knew the venture capital game � now about two billion know it,� said Mr. Draper.

In a keynote address at the Red Herring 100 conference in Monterey, California, Wednesday, Mr. Draper spoke about the key areas of technology investment and the state of a VC industry finally recovering from the most recent high-tech boom-bust cycle.

Mr. Draper explained high-tech�s return from hibernation with his iS curve (a.k.a. �The Draper Curve�) � rapid boom-busts like the dot.com gold rush are followed by slower, more sustainable recoveries, which eventually surpass the revenue and revolution of the boom itself.

Consumer Internet was the flavor of the month in the late 1990s, then the market was depressed, but the new infrastructure and software developed paved the way for video-on-demand and communications companies like Mr. Draper�s favorite investment, Internet telephony company Skype.

While the return of venture capital to the high-tech sector will increase competition for investment, Mr. Draper believes it also will accelerate the growth of new technologies. Even the adoption speed of new consumer products, like Skype and Apple�s iPod, has increased. Within a few decades, he predicts �breakthroughs that seem crazy today� may arrive, such as man on Mars, fusion, and cures for health and social ills like AIDS and poverty.

Yet such innovations may not come from the United States. For example, in the last two decades, China has matured from a country with trivial technological activity and is now competing in several sectors with the U.S. Of more concern to Mr. Draper are the recent changes to accounting compliance laws, which may scare companies � particularly foreign ones � from going public on Nasdaq.

�Throughout the world there will be IPOs everywhere. But our country may not be competitive in the IPO market, because Sarbanes-Oxley was such a disaster,� said Mr. Draper.

Of course, if and when the EU and Asia adopt the same rigorous standards, the companies will have to go public somewhere.