What Tim Draper Looks For In A Startup

Tim Draper 43
Last week, I attended the startup conference in Mountain View, CA. 

It was the center of the startup universe.  There was even Startup Village, a trade show meets speed dating center, where CEOs or techies pitched their ideas and prototypes.  At the end of the row was the Draper Fisher Jurvetson booth, with Tim Draper taking pitches.  Seriously.  

During the general session, Draper talked for 20 minutes about his experiences as a venture capitalst and angel investor.  The burning question for him was this: “What does it take for DFJ to green light an investment in my startup? Revenue? Uniqueness? User engagement?”  He pointed out that winning startups worth investing in must possess three qualities: 

1.  It Is Revolutionary – Your idea will change an industry, and kick a dent in the universe. He liked Skype for how it transformed telco and loved Facebook early on because of how it would redefine neighborhood.  So, if you have an “improve” value proposition, that will not get his socks rolling up and down.  

2. It Solves A Big Problem – He points out that the greatest products are solutions to problems the founder(s) personally experienced.  Your startup must address a big problem, because it’s the problem and not the existing players that define a potential market. (Now stop and think about that for a while…).  Tesla, he pointed out, raised a boatload of money because they went after one of the biggest problems in the world, energy shortages.  

HINT: If you want to go shopping for big problems, he pointed out, tune into the burning political issues.  They are usually the problems we care about, especially during an election year.  

3. There Are Healthy Zeros On The Balance Sheet – He talked about one of his most famous investments: Hotmail.  They have a healthy zero on their marketing column, because they used their product as marketing.  Remember, the hotmail email footer viral marketing phenom, where all the early users advertised “Get your free email at hotmail”?  He also liked how Amazon, early on, had zero dollars in inventory logistics costs…because their customers and partners carried all the freight.  

All of these cost-avoiding business model features are indicative of something truly revolutionary, he said in conclusion…bringing us full circle to his original point.  Big ideas kick a dent in an industry.

Does yours? You can email him at tim@dfj.com (PS – don’t tell him I sent you, unless you are going to make him a great deal of money.) 

As an encore, he agreed to sing a song acapella for us: The Risk Master. I shot this jerky video, just to share here with you!