Opinion: Breakfast at Buck’s and other Silicon Valley stories

William Draper III, The Startup Game: Inside the Partnership between Venture Capitalists and Entrepreneurs. Palgrave Macmillan, 2011.

Buck’s is one of those unique Silicon Valley institutions. A beloved restaurant in Woodside, Calif., it is also a hub of the Valley’s venture capital scene. In his opening chapter, Bill Draper refers to it as the place where great ideas meet smart money.

Buck’s has always been a good barometer of the Valley’s venture industry. I spent a number of early mornings there in the late 1990s when the industry was in its full bubble phase. One could watch business plans for concept companies being written over breakfast on the back of napkins, and financed before the bill came. For a few years, anyway, a lot of dumb companies were being financed by dumb money over breakfast at Buck’s.

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Present at the creation of Silicon Valley and its venture industry, William Draper III has seen all of its ups and downs. The founder of Sutter Hill Ventures – now one of the leading venture firms in the Valley – is a member of America’s first family of venture capitalists. His father, General William Draper, established the first venture capital firm on the West Coast and the first limited partnership anywhere. His son, Tim, was the founder of Draper Fisher Jurvetson.

His remarkable career has also included stints as chairman of the Export-Import Bank of the United States and as undersecretary general of the United Nations Development Program. He was also one the original venture philanthropists. All these stories are told in this book.

The Startup Game is part memoir, part history of the Valley’s venture industry, and part handbook for entrepreneurs. While it does not always move smoothly between these parts, it is a fascinating portrait of an individual and an industry, and is full of useful advice for entrepreneurs.

In particular, every aspiring entrepreneur should read chapters 2, 3 and 7. Together, they provide one of the most concise handbooks on startup financing to be found anywhere.

Chapter 2, titled “How It Works,” offers insights into how the venture industry works and the various players that inhabit it. It also has great advice on building the entrepreneur’s team, pitching to a venture capitalist (including how to judiciously use PowerPoint), accepting term sheets, managing stock options and dilution, and the nature of the partnership between entrepreneurs and venture capitalists.

In this chapter, Mr. Draper stresses the critical importance of having the right entrepreneurial team. He views this as being even more important than the business plan, and argues that it needs to be a key element of the pitch to investors to give them confidence that you can beat the odds and pull this thing off. His advice on what works and what doesn’t in venture capital pitches, and his list at the end of chapter 2 of the top 10 avoidable mistakes that entrepreneurs make, are alone worth the price of this book.

Chapter 3 provides his perspective on what it takes to be a successful entrepreneur using examples from the hundreds of entrepreneurs that he has seen over the years. In chapter 7 he advises entrepreneurs on exit strategies, going public and the questions they need to ask themselves in this area.

Other chapters look at his unsuccessful run for Congress, his years at the Export-Import Bank of the United States and his U.N. experience, where he sought to promote entrepreneurship to former Cuban president Fidel Castro, former Chinese Communist Party leader Deng Xiaoping and current Indian Prime Minister Manmohan Singh.

Not only was Bill Draper one of the pioneers of the Silicon Valley venture industry, he was also a pioneer of the international venture industry. In the 1990s he established Draper International, the first U.S. venture capital fund to focus on India. His son Tim took this to a global level with the establishment of the DFJ Global Network, a unique network of VCs from around the world. Mr. Draper draws on his son’s experience to provide some interesting advice on setting up an international venture capital network

William Draper III is a fascinating individual who has made a significant contribution to the growth of entrepreneurship and venture capital in the U.S. and globally. Anyone interested in either of these subjects will enjoy this book. If you are looking to raise money for your startup, read this book first.

Micheal Kelly is a professor and former dean at the University of Ottawa’s Telfer School of Management.

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