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It began peacefully. Weblogs founder Jason Calacanis and venture capitalist Tim Draper sat next to one another smiling. Things quickly changed. Calacanis started the OnHollywood panel off by dropping the F-bomb and soliloquizing for 10 minutes about Weblogs and his decision to sell the blogging network to America Online for a reported $25 million last year. Investment banker Mike Montgomery eventually managed to reassert control and invited Draper to share his thoughts on the exit market.
The Draper Fisher Jurvetson founder said that big technology companies' failure to make the required investment over the past five years has forced them now to fill their product voids with startups. He said media companies, in particular, were desperate.
Calacanis took exceptiont. The rising AOL executive said, "It's not about desperation, it's about efficiency." He said big media companies can put a startup's asset into their distribution networks and watch it take off.
That was just the beginning of the fireworks. Calacanis, the son of a nurse in Brooklyn, N.Y., and Draper, the scion of a West Coast venture capital dynasty, were only getting started.
Draper (pictured at right in a more reflective mood) said it's a shame some entrepreneurs sell their startups too early in the belief that they'll take the money, be rich and just launch another startup later. Draper said, "The first one is the gem and the second one sometimes do and sometimes don't make it." Later on in the discussion, he added that he tells the entrepreneurs he backs early on in the process that if you achieve success, companies will try to buy you out and that you should be ready to decline the offers. "But if someone hits the number they had in the back of their mind, they say yes. There's nothing wrong with that but the number is not nearly as important as the mission."
Calacanis, who sold Weblogs soon after building it up, responded, "You have to look at how many swings at the bat you have." He noted that Draper has invested in more than 400 companies while most entrepreneurs only lead a few startups in their lives. Draper, a bit disingenuously, took exception to that. "I had one swing at bat and it was Draper Fisher Jurvetson."
Jason Calacanis is stunned by a zinger launched by a too pleased with himself Tim Draper (at left)
Photo by Dan Farber
Technorati tags: onhollywood, draper, calacanis, venture+capital, vc
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although i have a lot of respect for DFJ, i'd have to agree with Jason on the entrepreneur vs VC deal logic.
given a more limited # of swings, entrepreneurs are probably better off taking good deals rather than waiting for great deals. VCs on the other hand, can afford to play higher-stakes poker, since they have more hands to play.
an interesting strategy might be for VCs to give a small amount of fund 'vig' to the entrepreneurs they fund, as an incentive to 'go long' on their own venture... then the VC & entrepreneur interests are [slightly] more aligned.
that said, i do wonder if jason sold a bit early on WLI... same for Flickr & a few others. seems like they might have been able to run the business a bit longer and get a higher #. (however, not sure if there was also upside on those deals.)
btw, that's my shot of Jason at Gnomedex '05, in the Seattle Library. i like that photo of him too :)
- dave mcclure
http://500hats.typepad.com/