Strategic Thinking is the Key

By Timothy Draper, Founding Partner, DFJ

Timothy Draper, Founding Partner, DFJ

• How do you work with the companies in which you invest? Tell us about your investment style.

I support the entrepreneur. I believe that the entrepreneur is the heart of the company and he or she should always be involved in the success of the company. I tend to invest early in companies that show promise to become transformative industry leaders.

I like to help entrepreneurs brainstorm. Often brilliant engineers have not thought of how best to deliver their product or service to the marketplace. Questions around one-time payment or subscription, around how to best reach their target markets, around how to make the product frictionless to the consumer are some of the thinking I like to help entrepreneurs with.

• How do you differentiate between the opportunities that you see?

I look for uniqueness and I look for companies that will have barriers to entry, where margins will improve as more services become available and where companies will control their customer experience. Brand is important to me. I like to back companies that have an end user brand strategy. I like companies that have people who have dedicated themselves to the vision, and where the people seem to have found a career that was “meant to be.” I like companies that have high margins and have figured out how to collect cash early—ideally before they have to deliver the service.

• What are the key attributes you look at when evaluating a deal?

I look for extraordinary people using unique technology to pursue transformation of large industries. I look for markets where existing incumbents are getting high prices and providing poor service. I usually see the plan before I meet the people, so I read for companies where if I do a Google search there are very few competitors listed. I look for founder backgrounds that match the mission. When I meet the entrepreneur, I look for enthusiasm for the mission, and a clear description of the company. An entrepreneur needs to be able to clearly tell his or her story.

"Brand is important to me. I like to back companies that have an end user brand strategy. I like companies that have people who have dedicated themselves to the vision, and where the people seem to have found a career that was “meant to be​"

• How do you work with clients post investment?

I tend to be helpful in business planning, general business advice, and strategic thinking. I have a large network, and I can make introductions that might have a large impact on the companies I back. I am not a “helicopter mom.” I let the entrepreneur run their own company.

My skill set is around brainstorming, I am not particularly strong in “process” building. I recommend that the entrepreneurs I back supplement my advice with advisors who are good at building systems and dashboards into the business.

• How do you think your current portfolio of companies has benefitted most from your guidance?

Well, I had an enormous impact on Hotmail and Skype. Viral Marketing was something I came up with that made it so communications companies could spread from customer to customer without the company having to spend marketing dollars. On some companies, I have given bad advice and they did not benefit at all. In general, I think we have a very positive impact on the companies we back, if for no other reason, for the brand association with Draper Associates.

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