Top 5 Takeaways on Innovation and Entrepreneurship from Tim Draper of DFJ
On a gloriously sunny Seattle afternoon, venture capitalist Tim Draper stopped by to impart some words of wisdom. The founder and managing director of Silicon Valley-based Draper Fisher Jurvetson gave the keynote today at the Washington Technology Industry Association’s Fast Pitch Forum & Technology Showcase down at the Bell Harbor conference center. He was hosted by local DFJ venture partner Bill Bryant and WTIA president Ken Myer.
Tim Draper has previously backed such companies as Skype (now part of eBay), Overture (bought by Yahoo), Hotmail (acquired by Microsoft), and Baidu (the Chinese search engine). He serves on the boards of Glam, Tagworld, SocialText, Meebo, Wigix, and several other companies with intriguingly weird names. Besides all that, the Stanford and Harvard alum is also a singer and songwriter. “I recently got to interview Carlos Santana,” Draper said. “I wrote some other words to ‘Smooth’ and sang it while he played it. It was kind of interesting. My singing career does have its moments.” (More on that in a minute.)
Despite what he called “an economic nuke” and subsequent “nuclear winter,” Draper was bullish on the prospects for entrepreneurs, and he gave some inspirational advice. “One thing has not changed—innovation just keeps going. Where there is a problem, there’s innovation,” he said. “Ultimately, it’s the entrepreneurs who solve all these problems. Entrepreneurs are heroes.”
Here are my main takeaways from Draper’s talk:
1. It’s the regulations, stupid. Draper criticized the many rules and regulations that can harm or slow down innovation. As examples, he cited Sarbanes-Oxley and the Investment Company Act of 1940, NASDAQ and NYSE acceptance hurdles and fees, and accounting rules like FAS 157. He also said monopolies block liquidity. “It’s like putting friction on a path, it slows everything down. That means there’s less money for investment in risky things, less money that goes to venture capitalists and entrepreneurs.”
2. It’s the best time ever to start a business. People need jobs, existing companies are reeling, and there are fewer startup competitors and newer technologies, Draper said. “It’s a whole new game,” he added. “You are as young as you feel.” He pointed to a long list of successful companies that were started during recessions or depressions: IBM, Microsoft, Hewlett Packard, Adobe, Coca-Cola, GE, Johnson & Johnson, to name a few.
3. It’s all about starting a revolution. Companies like Amazon and eBay were transformative in that they did away with institutions that most of us thought would be around forever—things like bookstores and trading posts. “What can we start?” Draper asked. “Moore’s Law is starting to accelerate, we’re getting double the compute power every 12 to 14 months. That’s happening all through science, all through technology.”
Draper predicted (as others have) that new technologies will change our lives at an ever-faster pace. The kinds of transformations we’ve seen from inventions in the past 50 years—air travel, cell phones, Internet, e-mail, credit cards, the pill—will happen again in the next 15 to 20 years instead of 50. “Things are going to change much faster than most of us can imagine,” he said. He urged the audience to explore the implications of such far-out concepts as unlimited energy, immersive 3D entertainment, non-invasive surgery, near-thought communications, new life forms, and novel food supplies.
So think big—really big. “A self-navigating electric car—that’s kind of boring. If this is in my imagination, you’ve got to go way beyond that. So go for a self-navigating flying electric car,” he said.
4. It’s about “zeroed business models.” In successful company pitches, Draper said he looks for entrepreneurs who zero out some key existing costs, like inventory and accounts (e.g., Amazon) or marketing expenses (e.g., Hotmail, Skype). But you don’t want to zero out sales or revenues, he quipped. Sounds like the practical side of a revolution to me.
5. It’s also about global collaboration. “Free trade is really important, but the only way to understand it is if you put a wall up,” Draper said. Saying we’re only going to hire American workers or buy American goods, for example, doesn’t help innovation anywhere. Without China, he pointed out, we’d essentially have no semiconductors, no flat screen TVs, and no memory devices. Things like tariffs, customs, quotas, subsidies— they “all get in the way of our deal,” he said.
Draper then tried to lead the audience in an inspirational sing-along of “The Riskmaster” (an entrepreneurial song whose lyrics he penned), but most of the room didn’t play along. Not sure what to make of that, other than that we Seattleites take our music, and our VCs, a little too seriously.
After his talk, someone from the audience asked how Draper’s home state, California, compares with Washington state in terms of rules and regulations. Interestingly, he seemed to think Washington is doing better than California in the realm of K-12 education—the grass is always greener, I suppose. “I’ve always thought competition in [K-12] education would be a really good thing,” Draper said. “I was on the State Board of Education, and it’s controlled by a very small group of people telling us all what we’re supposed to learn.” Education reform may take time, but it’s not too late, he said. “A kid who’s six now—10 years on, he’s going on to start Microsoft.”