Venture Capital

A 101 for anyone interested in VC

As tweet-stormed by Entrepreneur and Angel Investor, Tyler Willis.


Q: If you were starting as a first-time VC tomorrow - what should you read consistently to improve your thinking & analysis?

Check out the tweet-storm originally located here.

Invest Like a Legend: Tim Draper

Tim DraperFebruary 5, 2015 - Tim Draper, founder of DFJ and Draper University, is "one of the grand middle-aged men of Silicon Valley finance" and his investments have been behind successful companies like Hotmail, Skype, and Baidu. In this article, he shares his advice as "Silicon Valley's whackiest investor." Here are the main takeaways:

  • Best investments: Hotmail (1995) and Theranos (2003)
  • Winning traits: An entrepreneurs with big ambition and a unique quality
  • Losing traits: Not thinking big enough or having unique enough technology
  • What to invest in: Bitcoin
  • How to invest: Diversify heavily

Download the entire article on the world's top investors here: Legends 2015

Scott Nolan @ Draper University: How Much of a Difference Are You Making in the World?

scott nolan founders fund at duJanuary 28, 2015 - "When starting something, ask yourself: how much of a difference am I making in the world?" This is one of the truths that Scott Nolan lives by, one which inspires every aspect of his work - both as an entrepreneur and as an investor. This is why, as a partner at Founders Fund, Scott is constantly looking to back founders who work on solving complex problems by building companies working far into the future.

An Inside Look at Founders Fund

"We always ask ourselves this question: How do we make a difference as investors? That’s why we try to invest in  smart people solving difficult problems, especially those working with engineering-driven technologies." Usually, these "big problems" are less crowded places for investors. "When we invested in SpaceX, no one was doing anything like it, and it seemed too far-reaching. But we trusted the team tackling a difficult problem. We’ve created FF Science to make sure we invest a portion of our fund in deep technology that will make the biggest impact in the world."

Scott enjoys working at a venture capital firm that is willing to stand by the founders of their portfolio companies. "At FF, we believe in backing our founders. We have never replaced any founder in the company they started. We always bet on them, allowing them to run the company. We provide strategic support, but we are very hands-off."

When asked about the thought process behind his work, Scott said that FF tries to pick a future winner in an industry. They specifically seek out teams that will be leading a company in an industry that is not currently crowded because it's focus is on reaching for the future, not on current trends. Future and return come hand in hand.

Advice for Startups and Entrepreneurs

scott nolan founders fund du studentsEven as a young entrepreneur with little experience, going after difficult problems will allow a person to have more power when convincing others to be part of a team. Businesses should always think about the scope of what their trying to do; bigger and more complex problems make people think harder, ideate unique strategies, and make themselves more difficult to be copied in the future. "You want to make yourself unique. Find the right time to scale and then scale fast."

Here are Scott's tips for startup founders:

  • Despite experience and background, what matters is what you have done. Why should people join your team and dedicate years of their lives to build a company? How much have you accomplished? The team you build is critical, especially at early stages.
  • Don't work for a company you're not excited about.
  • Don't assume you can't do something.
  • Why you should tackle the difficult problems:
    • You can get more resources/specialization
    • You’re less likely to get competition
    • Motivation to bring talent
  • Ways to create a great company:
    • Create value
    • Capture the market (eliminate the possibility of someone copying it)
    • Build it to last

If you want to learn more from inspirational speakers like Scott Nolan, check out Draper University's entrepreneurship program where you'll meet over 50 guest speakers and mentors from Silicon Valley.

We’re now accepting applications for our Spring 2015 class. Visit our website to submit your application by the final deadline: February 20.

Scott Nolan of Founders Fund: The Fire Behind Our Future

founders-fundJanuary 22, 2015 - We’re excited to announce that Scott Nolan of Founders Fund is coming to speak to Draper University's incoming Winter 2015 class! First and foremost, Scott Nolan is a futurist, technologist, entrepreneur, and investor. He is also a partner at Peter Thiel’s groundbreaking venture capital 2.0 firm: Founders Fund where he works to see startups thrive by helping founders reshape the world of today and tomorrow. At Founders Fund, Scott focuses on investing in technology-driven companies across a wide variety of sectors. Recently, the firm invested in Privateer to become the first institutional investor in the marijuana industry, confirming their leadership in spearheading novelty in the world of venture capital. He is also currently a board member at Collectivehealth, Tachyus, Tribogenics, and two other stealth-mode companies.

Scott Nolan

Prior to Founders Fund, Scott was an early employee at SpaceX, one of Founders Fund's portfolio companies, where he helped develop the propulsion systems used on the Falcon 1, Falcon 9, and Dragon vehicles. After SpaceX, Scott spent time at Bain & Company working with its private equity clients, and later co-founded a startup focused on building social web apps on the Facebook Connect platform. Regarding his education background, Scott earned both a BS and MEng in Mechanical and Aerospace Engineering from Cornell University in 4 years, and received his MBA from Stanford University where he was co-president of the Entrepreneurs Club.

Founders Fund

At Founders Fund, a San Francisco based venture capital firm investing in companies building revolutionary technologies, Scott gets to be at the forefront of the startups and VC funds shaping our future. He is constantly looking for companies that push for a wildly more advanced future. Founders Fund invests at all stages across a wide variety of sectors, including aerospace, artificial intelligence, advanced computing, energy, health, and consumer Internet, with a portfolio that includes Airbnb, Knewton, Lyft, Spotify, Stripe, and ZocDoc. Founders Fund was the first institutional investor in Space Exploration Technologies (SpaceX) and Palantir Technologies, and one of the earliest investors in Facebook. In 2014, Founders Fund raised a $1 billion fifth suite of funds, bringing the firm's aggregate capital under management to more than $2 billion.

Scott Nolan will be speaking to Draper University's Winter 2015 class next week - check out our Facebook, Twitter, and Instagram pages for live updates!

A Brief History of Venture Capital for Entrepreneurs

January 20, 2015 - As the old adage goes, history often repeats itself, and speculators are always trying to figure out when the next bubble will burst. Entrepreneurs have a lot to learn from venture capitalists and the history and trends that inform their investment decisions. In this blog post, we summarize the history of venture capital as written by Jerry Neumann in this article. Read on for main takeaways and trends by decade - all of which may be a hint of what's to come.

1960s

As technology improved, time truly became an item of luxury. If a venture capitalist moved too slow, that VC might miss out on a deal of a lifetime. VCs knew they had to move quickly not only to keep up with the times, but also to secure deals.

venture-capital-time

Lessons of the 1960s

Time is a luxury. It not only affects VCs, but also entrepreneurs. The more VCs you know, the better - meet and stay in contact with as many as you can.

1970s

A change in government regulations allowed pension funds to be considered a “prudent” investment. This spurred change within the venture capital community because VCs were now armed with pension funds as extra money, which they then used to invest in early stage companies.

venture-capital-policy

Lessons of the 70s

You better believe venture capitalists stay up-to-date on government policies, and you should too. Information is power, and past, present, and future venture capital will continue to be influenced by government in some way, shape, or form.

As an entrepreneur, you can use the fact that venture capitalists are getting in early on your company to always ask for help and mentorship. Early VCs will be just as interested in your success as you are.

1980s

Venture capitalists realized what were once top returning sectors were no longer the top returning sectors. Something had to give, and VCs started to invest in different directions and new sectors. Many VCs ended up investing in later-stage companies and already-established markets, thereby going against what they had learned in the 70s about investing in early stage and not heavily established markets.

venture-capital-gem

Lessons of the 80s

Venture capitalists are always looking for diamond-in-the-rough sectors to invest in, but sometimes they accidentally miss them or just aren’t positioned correctly.

1990s

The Internet changed everything. After seeing the early successes of Internet companies like Amazon and Netscape and their IPOs, venture capitalists ramped up investments in Internet companies. An influx of VCs looking to invest meant an influx of money so that anybody and everybody associated with the Internet received investment from VCs.

venture-capital-internet

Lesson of the 90s

Venture capitalists are human and follow visible trends. If you stay up on the latest trends, you may literally be "following the money" is those trends become a reality. 

Early 2000s

The hype caught up to venture capitalists. Unfulfilled promises sent stock prices tumbling thus defining the 2000s as the era of the dot com crash. However, because of their investments, VCs helped usher in a new era of technology, and their failed investments may have actually helped humanity in the long run.

venture-capital-fail

Lesson of the early 2000s

Venture capitalists, entrepreneurs, and humans in general make mistakes all the time. Was believing the Internet hype justifiable? In a way, yes, but it did cost a pretty penny. By using and learning from your own and others' mistakes, you can bounce back and ultimately help others.

Late 2000s

Not all was lost in the 2000s. Social media took off like a rocket and created another market for venture capitalists to get into. VCs have backed well-known social media companies that now shape our daily lives and habits.

venture-capital-rebound

Lesson of the late 2000s

Just like entrepreneurs, venture capitalists will fail and fail again until they succeed. VCs were willing to give Internet companies another chance, and it was a good thing they did or we may not have Facebook and Google was we know them today.

Today

There are thousands and thousands of companies in already established markets seeking funding from venture capitalists. If this trend continues, VCs, entrepreneurs, and the rest of the world may face stagnation. VCs are in danger of returning back to the ways they invested in the 1980s.

venture-capital-risk

Lessons from Today

History seemingly repeats itself at will. Entrepreneurs and venture capitalists must be aware of history and use it to their advantage.

Recap of Lessons Learned by VCs

  • 1960s: Use time wisely
  • 1970s: Information is power and success is more likely with a team
  • 1980s: When opportunity knocks, open the door
  • 1990s: Trends might become future reality - stay at the forefront
  • Early 2000s: Learn from your mistakes
  • Late 2000s: Fail and fail until you succeed
  • Today: Be brave

KeenON: Venture Capitalist and Higher Ed Entrepreneur Tim Draper

December 17, 2014 - Technologist and author Andrew Keen sat down with venture capitalist and higher education entrepreneur Tim Draper to talk about his latest projects. They discussed how Draper University is "turning traditional education on its head" with its innovative entrepreneurship program, and how the next big thing to invest in is Bitcoin. Tim also shares that his biggest mistake was not investing in Google, but it's also the mistake he's most proud of because it has made him a better investor. Read the entire Techonomy article here or watch the interview with Tim Draper below: