India will emerge as a great opportunity: Steve Jurvetson
By: Namitha Jagadeesh
Dec. 31, 2007
Mumbai: Steve Jurvetson earned his wings as a top-notch venture capitalist (VC) in the US Silicon Valley when free Internet-based email service Hotmail was acquired by Microsoft Corp. for $400 million.Jurvetson was a founder investor in Hotmail on behalf of Draper Fisher Jurvetson (DFJ), the now legendary Menlo Park, California-based venture capital firm founded by Timothy Draper in 1985..
Since Hotmail and other Internet investments, Jurvetson’s consuming passion has been nanotechnology—a science that deals with matter at an extremely small scale—and at the turn of the century, he convinced his partners that nanotech was a space worth looking into seriously. That has translated into 15-20% of DFJ’s global investments being in the nanotech area.
For DFJ, being an early champion of nanotech as an emerging opportunity falls in line with the firm’s track record for spotting disruptive technologies early on.
Its earlier successful bets, apart from Hotmail, include Baidu.com Inc. and Skype Inc., later acquired by eBay Inc.
Overall, it has backed some 300 companies, has over $5.5 billion (Rs21,670 crore) in capital commitments and is the most globally diversified Silicon Valley venture capital fund—it has offices in 33 cities across the world.
The firm set up an office in Bangalore this year and has allocated $75 million out of its $600 million global DFJ IX fund to kick-start investments here. The local team is led by Mohanjit Jolly and Sateesh Andra.
Unlike other non-US markets, DFJ has chosen to invest directly in India instead of working with a local affiliate (it invested through DFJ ePlanet Ventures, an affiliate fund, earlier). It has invested in seven companies already, among them mobile advertising firm Gingersoft Media Pvt. Ltd (which operates under the mGinger brand), online DVD rental Seventymm.com Services Pvt. Ltd and electric car manufacturer Reva Electric Car Co. Pvt. Ltd.
Jurvetson, who builds supersonic rockets when he is not evangelizing nanotech, is headed to India for the first time in early 2008. In an exclusive telephone interview to Mint, he spoke about where India fits into DFJ’s plans and what going global means for Valley-based venture capital firms. Edited excerpts:
You’ve chosen to invest directly here. Where does that put India on the DFJ map?
India is very important to us. We have a similar strategy in China. I think India, along with China, will emerge as great an opportunity as the US. At some point, I see India also having many affiliate funds in different sectors.
What does ‘going global’ imply for the classic Silicon Valley-based model of venture capital investing, which has traditionally focused inwards?
Now a VC has to simultaneously be both, global and local. That’s why a lot of VCs have trouble adjusting to new markets.
When you are helping companies in a particular market, your partners should ideally come from those regions, but at the same time, tap into the global rolodex (networks and contacts) that the firm has. It has to be that way for the same reason why start-ups are tapping global markets.
You have your core headquarters in one location, but you service customers everywhere. VCs look at global start-ups, but haven’t looked at their own operations that way. We’ve got to be global too
How did you get hooked to nanotech?
In 1998-99, a friend invited me to a nanotech conference where people brainstormed about (technologies of) the future. It was one of the most intellectually stimulating conversations I’d had. Some discussions were borderline science fiction, but others spoke about current research in advanced materials and so on. I thought it was worth looking into, so I went to some more conferences, and told everyone in the DFJ affiliate network to keep an eye out for companies in the space.
Is it more difficult to start a nanotech company?
One thing unique to nanotech start-ups is, you can’t do it at home or in a garage. It requires heavy equipment, lab microscopes. Every single company we have invested in so far has come out of a research lab or institute.
The problem with that is unless there is a business person translating it, most investors see them as what they derogatorily call “a bunch of corporate science projects”.
Universities want more business people to be doing this (pitching the business to potential investors), but often it is a result of random connects—venture capitalists are not particularly helpful here. There may be a lot of innovation, but like any developing technology economy, nanotech needs ambassadors. I believe it will happen over time.
How are the elements of the nanotech start-up ecosystem different from other sectors?
First, it is hard to find human talent because a lot of the really interesting breakthroughs happen in interdisciplinary areas, such as biology and electronics, for example. So you need people who are either skilled in both or have experience in one but are willing to learn (the other).
For example, Zettacore, one of our investments, is a nanotechnology company focused on semiconductors, but it is also based on principles of organic chemistry, which perhaps has things in common with a bio or life sciences company.
Second, the challenge is what product you ship. If you fundamentally innovate at an atomic level, you might need an entire industry to be built around it, so that the physical world interfaces with the nano world.
From a business perspective, the question is, “Are you reaching out to an existing market yourself, or are you enabling other people to make money?” For this reason, we have avoided (investing in) a lot of companies at the transistor level. You have to move up the value chain.
If you can make the entire memory chip, then you can probably go to market.
What kind of VC involvement has nanotech seen in the US so far?
Exits are beginning to happen. Three of our investee companies were acquired for profits—they were not spectacular exits, but we made money on them. Another one is talking to bankers for an IPO.
More often, VCs will describe the companies according to the end-market they address. Nanotechnology as a term doesn’t describe a business, it is an area of technology which can lead to innovations in different spheres. Most VCs talk about battery or semiconductors, rather than call them nanotech companies.
I don’t have the numbers for dollars invested, but about 90% of investments have happened over the last five years. You can measure VC investments by tracking the growing number of nanotech conferences every year. Back in 1997-98, there were perhaps two or three investments. By 2000, there were maybe six investments. Around 2001, when the dotcom bust happened, VCs began to look for other opportunities and interest in nanotech grew.
Have you scoped out the opportunity in India yet?
Not proactively. But I like to think we have enough footprint in nanotech that ideas can find us. If we’ve succeeded, then entrepreneurs will know we are interested in the space and seek us out. This is so much easier than for us to go to every technology university in the world. We want to be the magnet that attracts the needle in the haystack.
Aside of nanotech, any other technology niches you find interesting that have not been tapped by venture capital?
Lately, I’ve been focusing on technology inspired by nature. The main insight we’ve had (with nanotechnology) is that borrowing from biology is the quickest path to the future. It is all around us.
A recent research showed that bacteria form nanowires between each other to communicate, by sending electronic signals to each other, similar to neurons.
As a firm, we are always looking for the next great innovation. In 1994-95, we invested actively in the Internet, at a time when most VCs were not looking at the space. We invested early in nanotechnology too. Similarly, we are now looking at synthetic biology as a promising space.
What rocket are you building now?
It’s an insane project, we are building a Mach 3.4 rocket. We’re using a booster to send it 22 miles straight up.
