Photo: Boonsri Dickinson, Business Insider
Once or twice a week, Bill Draper comes to Buck’s Restaurant in Woodside, California to eat breakfast and close deals.Draper moved to the Bay Area in 1959 to join his father, William Henry Draper, who started the very first venture capital firm in the west: Draper, Gaither & Anderson.
Three years later, Draper decided to strike it on his own, and founded Draper & Johnson Investment Company with his friend Pitch Johnson.
Three years after that, Draper started Sutter Hill Ventures, where he financed several hundred high tech manufacturing companies. It is still a very successful venture capital firm today.
We talked about how he got started and what’s changed since then.
- The VC community used to be a lot cozier. “It’s not as cozy and not as nice and not as profitable as it used to be. When I was there, the returns at Sutter Hill were 42 per cent. We were the only game in town.” He also said, “The size and the lack of cooperation among venture capitalists [has changed]. It’s hard for them to get a 10 million dollar deal and divide it up and say to Sutter Hill or Sequoia, why don’t you take half of it? We used to do that all the time.”
- But more competition is great for entrepreneurs. “But it’s much better for the entrepreneur now. The entrepreneur has a chance to go to lots and lots of places. If he doesn’t like Draper, he has a chance to go to Valentine or some other firm.”
- How working in the steel industry is like working for a startup. Draper’s first job out of college was in sales at a steel company, Inland Stee. “If I was going to make a sale, I needed a lot of people behind me. Once making a sale, they have to deliver high quality steel.” Startups also require a great team. “Everybody who joins a brand new startup does a lot of things outside their job description. I have always focused first on people, second on the market and the competition. I look at the biographies first to make sure we have the right person running it.”
- You need empathy to succeed. Draper doesn’t like it when someone who comes in and never asks a question about his firm. “Even Steve Jobs had empathy, even though he has a reputation for being tough minded and abrupt. He was empathetic with the customer. That’s where he connected. And he understood that this thing,” Draper said, pointing to my iPhone on the table, “is going to be too heavy. Back to the engineering.”
- Working for the UN convinced him that VC needed more women. In 1986, he worked for the United Nations, where he led the multilateral development grant assistance program. “One thing I learned working for the UN is how underutilized women are — and how underprivileged they are in some parts of the world. When I got back to my home base, we at Sutter Hill had never employed a woman as a partner. I don’t know any venture capital firms, in those early days, that did. When I got back here, I decided I was going to have a woman as my partner… Robin Richards.”
On one of these trips around the world, Draper made a bet with Fidel Castro. He explained how that happened:
Most of his time now is spend working with the Draper Richards Kaplan Foundation. It picks a selective group of social entrepreneurs and gives them $100,000 for three years to start non-profits like they would a startup.
“This is more fun than venture capital,” Draper said. “One is Kiva.org, which handles loans to small business men and women — mostly women in the developing world. It had up to $100 million in loans last year.”
Before leaving, Draper walked out to his car to give us a copy of his book, The Startup Game: Inside Partnerships between Venture Capitalists and Entrepreneurs. The first chapter revolves around the deals that took place at Buck’s.