Off to See the WizardIgnite Presentation
12/6/07
DFJ Portage Venture Partners, LLC
One Northfield Plaza, Suite 530 Northfield, IL 60093
847/ 446-9460
-2-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
Draper Fisher Jurvetson Portage
Network Resources35 offices100+ partners500+ portfolio companies$7B under management
-3-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
Cash Is King, Burn Is An Anchor
“All companies that go out of business do so for the same reason - they run out of money.”
-- Don Valentine, founder of Sequoia Simple framework for decision making:
• Determine when $0 cash (glue month in mind)• Understand key drivers of CF (WC, salary, rent, etc)• Bankrupt and profitable…how?• Evaluate how every decision moves the Ground Zero date• Use downside scenario for burn mngt ($0 rev??), and
upside scenario to drive sales team/compensation
-4-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
When To Go for Venture (or Not)?
Angel/Self Fund• Low cash needs• Life style business• Linear growth• Niche business• No plans to sell• No interest in biz partners
Venture Funding• Significant cash needs• Exponential growth• Large market opportunity• Cooperative w/investors• Finite exit horizon• Benefits from additional
domain knowledge & networks
Most in this room should not go for venture money-- not a good use of time, will end in tears
-5-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
How to Go for Venture
Get a qualified, personal introduction Do your homework on the firm, partner & industry
• You better know the industry/risks better than they Know the likely push backs & have responses
• Don’t get defensive! Don’t come across naïve
• We have no competition• Our financials are conservative• First mover/patents/etc are barriers
Maintain contacts, network like crazy• Most likely, won’t get $ that round or that company
-6-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
Like Hollywood, the Story Is Key
Grandmother test• Do industry friends (& granny) get your value proposition
You’re selling soap• How clearly do people see vertical application & use• “Aren’t you just like…” (must kill this in 30 secs or trouble)
Inertia is your enemy• Market inflection is the driver between hero & idiot• Ideal: don’t change routines, don’t change mental map
Study Spielberg & Bruckheimer
-7-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
The Mind of the VC
VC’s like to:• Run in Packs (themes)• Stay close to familiar domains (add value)• Avoid sectors of past failure• Use pattern recognition
- Graveyard test- Analogs/binder tab
• Need 10x return• SO, DO YOUR HOMEWORK…VISIT
WEBSITE/GOOGLE ON PAST DEALS & BIO
Gary Snoman
-8-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
Why 10x…Are VC’s Just Greedy?
Deal Invested $ Distributed $ Multiple IRRCompany 1 1,000,000$ 500,000$ 0.5 -29%Company 2 1,000,000$ 100,000$ 0.1 -54%Company 3 1,000,000$ 100,000$ 0.1 -44%Company 4 1,000,000$ 1,000,000$ 1.0 0%Company 5 1,000,000$ 1,300,000$ 1.3 7%Company 6 1,000,000$ 2,000,000$ 2.0 19%Company 7 1,000,000$ 3,000,000$ 3.0 44%Company 8 1,000,000$ 5,000,000$ 5.0 31%Company 9 1,000,000$ 6,000,000$ 6.0 57%Company 10 1,000,000$ 11,000,000$ 11.0 82% Total 10,000,000$ 30,000,000$ 3.0 31%
-9-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
Pigs Fed, Hogs Slaughtered
Aggressively concerned about dilution
Overpromise to get high valuation
Reality sets in…slow growth, niche market
Investors nervous about post-$, pissed about
overpromise
Management replaced, crisis hits (poor
numbers & no mngt)
Cramdown financing hurts everyone
ValuationDeathSpiral
• Don’t fool yourself• Don’t go VC when you should go angel• Raise just what you need• Valuation: don’t be penny wise…
-10-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
Enterprise Out, Consumer InWill Swing Back in the Coming Years
-100% -50% 0% 50% 100%
Telecom EquipEnterprise NetworkSemi EquipmentEnterprise HWSemiconductorApplication SWIT ServicesInfrastructure SWConsumer CommunMaterial scienceConsumer hardwareInternet/Consumer
Source: Goldman Sachs
-11-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
The Great Reckoning
The financial crisis … is back with a vengeance. I’ve never seen financial insiders this spooked — not even during the Asian crisis of 1997-98.
This time, market players seem truly horrified — because they’ve suddenly realized that they don’t understand the complex financial system they created.
- Paul Krugman, NYT
-12-DFJ Portage Fund I 04/24/23 05:28
Blog:www.vcconfidential.com
The Rebirth
Past 100 years: US highway system, microwave oven, antibiotics, recombinant DNA, airflight/jets, space program, global electric & phone systems, universal access to education, integrated circuit, articial heart, fusion/atomic bomb, polio vaccine, electron microscopes, cell phones, radio, television, air conditioning, lasers, imaging, fiber optics, nylon, radar, PC, etc…
Sources: TIME, April 13, 1998; genealogy newsletter, http://ftp.rootsweb.com/pub/roots-l/messages/01jan/141803
“The next 20 years of change will be equivalent to the past 100 years of change.” -- Ray Kurzweil Accelerating Returns
Destructive Capitalism Has Always Driven Innovation