Venture Capital Course Written Assignment - A Conversation with John Doerr

7 Pages   |   2,756 Words

A Conversation with John Doerr

 

1.As one of the finest Venture Capitalist of all time, you must come across numerous startup plans and ideas every day. For you, how does the perfect plan originate? Where did your finest investment decision begin and how did it mature?

Reason:

As a student, it is a lifetime opportunity for me to get to know the secret of success of an established venture capitalist. John Doerr’s definition of a perfect idea will not only give a glimpse at his perception of an idea, but it will also help me to understand the perspective of a venture capitalist, when it comes to idea development and maturity after all the entire industry revolves around the pitch and execution of the idea.

Answer:

Honestly, if you ask me, there is no such a thing as a perfect idea. An idea is a thought that is born in a human mind, and most of us have thousand of such thoughts pouring in every moment. However, it is the way we project and follow up on these ideas that determine perfection. So, it is not only about coming up with an idea, but it’s more about refining it into an implementable business plan. It does not matter where that idea generates, and frankly, most business ideas are generated and developed in small places. The idea for Compaq originated in the house of Pancakes. The point I am trying to make is that as entrepreneurs, you must keep your mind and self open for ides every minute at every place, sometimes an idea can be the smallest of things but when translated it could end up being a million dollar project.
 

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So, if a group of friends calls you up in the middle of the night for a meeting at an informal fast food outlet, you should not hesitate. You must attend the meeting and listen to the business proposal. Once you have listened to the entire plan, you are free to discuss, analyze and evaluate the opportunity size of the venture. It is important that more attention is paid to the business plan. After all, an idea alone cannot be the winner. There has to be a plan involved in order to pitch the idea in the market. Also, the selection of the team is of prime importance, it is the team that may at the end of the day be the reason for the success or failure of the venture. Most venture capitalists, including me, pay more attention to the credentials of the team because at the end of the day, they will be running the show. Whether we hand them in a million dollar project, if they are ineligible the show will be a failure. The true definition of a perfect idea is incorporated in the definition of a perfect business venture; it must have a workable idea, talented team and a good business plan. Lastly, great leader is an essential element for success of any business idea. Great leaders have integrity, and they are great communicators. The energy and dedication they put in their work is reflected in the performance of the company.

1.Every year, hundreds of business graduates are taking up entrepreneurship as a career. With so many brilliant minds, the industry must be flooded with business plans. How do you differentiate between these opportunities, considering that your company did not invest in Facebook, which is probably the most successful venture of the present age?

Reason

To have an insight into the selection criteria and plus points of a renowned venture capitalist is a dream come true. It will help me to understand the dynamics of this industry especially during a time when new ideas are flowing in at a great pace. The quality of ideas along with the rate of success has made it pretty tricky for big venture capitalist to make the right investment decision. Some of the major start up plans were not able to receive praise at initial stages of development but ended up as one of the finest venture of all times. In such a situation, it is important to get to know the basic criteria that John Doerr sets for every proposal.

Answer:

I give a considerable weightage to the composition and the credentials of the team. The team has to be perfect or best suited to carry out the project. Yes, like every venture capitalist, I do have my favorite areas of investments too where I prefer making an investment. However, nothing to me is more important than the team, when evaluating a business plan. Rather, a good business plan comes from a great leader and the quality of a great leader is that he forms the perfect team. The definition of the perfect team can be summed up in one word, which is “smart”. The team must comprise of smart individuals. These individuals must not only have a passion for the project, but they must be able to improvise, innovate and think out of the box when required. The team must be well balanced and must not be concentrated in one area of expertise. This means that the educational qualification and expertise of the team must not be confined to one area.
The leader is another important element that we consider. The leader must be a dynamic personality with the flair to go the extra mile for the project. He must sell the value proposition of his company at all times. He must have great passion and should have that extra flair to keep everyone going. However, when looking at the project and evaluating the team, for me the heart of every team is the technical genius. If the technical genius is an able person than the project is to be considered. People like Steve Wozniaks, Bill Joy, Marc Andreessen and Scott Cook are the driving forces behind the success of their companies. Therefore, a perfect team has a perfect technical genius and leader.
Once I have gone through the credentials of the team, I want to evaluate their coordination while working. It is as important as their credentials because I want to understand how they will work together. This process might involve small tasks that I’ll assign them. These tasks will help me determine their coordination skills, and whether they qualify as a single working unit or not.
The fact that we, at KPCB did not take some good investment opportunities in the initial stages is strongly because of the fact that these proposals did not fulfill the criteria we set for our investment decisions. We have recently made some shift in our policy and made some late investments in companies like twitter. However, our main criteria for evaluation remain the same.

2.Recently, you have worked at the USA Economy Recovery Board along with prominent state figures, in the present scenario what role do you think entrepreneurs will play in the recovery process? Considering that there have been only a handful of ventures that have achieved success and those too are mostly the social networking sites.

Reason:

This question will help determine the future prospects for promising entrepreneur and the impact of their ventures on the economy in the present scenario.

Answer:

I have had a great time working at the USA Economy Recovery Board. Frankly, it helped me understand the importance of regulatory authorities in providing the perfect atmosphere for businesses to flourish. During my time at the board, I became familiar with major development in the world economy that is affecting the output of USA. The fact that every year more China is producing more graduates and that the number of graduates in our country id falling is n alarming sign for the policy makers. It if high time that we realize that it is important to educate the youth in order to produce quality businessmen and technical person. People from other nations come to our country, receive education and then they fly back to their country and serve there. This is negatively affecting our economy. The number of brilliant business minds is depleting every year.
Having said this, I believe that the market for venture capitalists is open like never before in the USA. This is because big firms have diluted and the only industries that have managed to survive and flourish during the economic downturn are those associated with technology. This is one area of expertise where we are unmatched by any country in the world. Every year more companies are being established din the USA.
The fact that we see social networking sites becoming the most promising ventures lately reflects that there was an unfulfilled demand for such products in the markets. With the passage of time, we have seen that companies have had to introduce and innovate new features in order to stay in competition. However, this does not mean that social networking sites are the only successful ventures in recent times. Other ventures have also received recognition and success, but they are not on a very large scale.
Despite of recent developments and increased importance of entrepreneurship ventures, it is important that we increased the number of graduates because the quality of our work will be determined by it. Also, this will ensure that entrepreneurs are trained for these ventures and thus they are able to deal with hurdles that come in their way. With proper training, they cannot only secure investments but can also grow at a great rate. 
 

3.Lately, you have been advocating the green technology and the importance of investing in this industry. Thus, after a long time, we are witnessing a shift in your focus from Internet and computers, to another industry. What future do you see for startups in green technology? Especially when there is no developed market for such products and heavy competition is expected. Also, in one of your conversations you said that it’s a little too late for such initiatives. What exactly this mean? Will these ventures fail to bring about a change and achieve targets?

Reason:

This question has been asked to assess the opportunity size for ventures in green technologies. John Doerr was amongst the pioneer investors in the Internet business, and now if he is advocating investments in green technology then there must be reasons other than clean and safe earth.

Answer:

He market for environment friendly products is till relatively underdeveloped an open for venture capitalists. I have been moved by the conversation I had with my young daughter and that led to my enthusiastic efforts in promoting green technology. My daughter’s view and I agree to it that my generation is responsible for global warming. Therefore, it is the responsibility of my generation to counter it is a wake up call for all of us. We must ensure that some steps are taken to preserve nature and save the Earth. Now according to me, fossil fuels are the major reason for earth warming; this is why my company has taken the initiative along with other prominent businessmen in setting up and promoting businesses for alternate source s of energy. The movement, as we call it, initiated after 9/11 and led to greater research on technology related products. Installation of wind energy turbines and solar panels was major successes of this movement. However, the economic downturn in 2008 has brought this movement pretty much to a halt.
The companies are facing major competition from European and Asian companies that have strong financial support to get them going. On the other hand, companies in our country have not been able to secure huge investments due to the economic downturn and thus research and development in this area has stopped, and the market has also slowed down as lesser umber of states and large corporations are willing to make such huge investments and install these energy sources. The focus has now shifted to small products. Fuel cells and solar panel cars are the next big things in this industry. It is time to welcome business plans and help them establish by investing in them. It will be one way of giving back to the environment.
The words that you have quoted are based on my realization that may be too much damage has been done, and it will not be possible for us to fully restore the environment. However, this must not stop us from exploring this field.

4.Lastly, how important are failures for a venture capitalist? Let’s say that a team of fresh graduates comes to you with an idea that you do not find compelling, and therefore, turn them away, but it ends up as a big success. Will you regret your decision for not being able to assess the opportunity accurately?

Reason:

This question tries to determine the factors for success that venture capitalists looks for. Also, how does a VC deal with a failure and I there a way to make amends. Most importantly, is any decision ever wrong? Also, it will give an indication of the mindset required to survive and excel as a venture capitalist. After all who can be better at explaining this than the person who has been the leader for the more than twenty years. 

Answer:

As a venture capitalist, the most important thing behind the success of any project is the belief. It is the belief that acts as the driving force and makes everyone work harder towards achieving his or her targets. So, the projects that we take are ones we believe in. This dos not mean that the ones we neglect are total failures and will never make it into the market or succeed. It means that maybe they are meant for other VCS who will share the belief with the team.
Sometimes, we all regret our decisions, but in our industry there is always a way to make amends. In our case, we did not take part in the initial investment in social networking sites like Facebook and twitter. However, following their success, we were compelled to participate in the latter stages of investments. Recently, we have made huge investments in twitter and plan on continuing exploring such opportunities in the earlier stages of development in the future. Remember, it is a business that we are in; we have to be competitive and yes sometimes, the decisions we make might not work or pay off or might be completely absurd but at the end of the day they may result in our best ones. It is all about making the best evaluation and following up on decisions.
Even for a team of graduates that has a business plan, there is no such word as failure, its only about trying harder. You need to make sure that you believe in the idea, you must think hardest when forming a team because those are the people that you will work for the next 5,10,20 years and lastly you must know how to market your idea i.e. pitch it to the venture capitalists. You must write and present with great conviction. Failure is only success delayed for the time being.

References

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Ted.com (2009) John Doerr | Profile on TED.com. [online] Available at: http://www.ted.com/speakers/john_doerr.html [Accessed: 24 Sep 2012].
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