Silicon Valley billionaire and one of the US’s leading venture capitalists, Tim Draper, has his sights set on Australian start-ups, having signed up Right Click Capital to be the first local VC firm in its Draper Venture Network.
In April Mr Draper raised $190 million for a new Draper Associates seed fund, and some of that capital could be headed to early-stage Australian companies. His reputation as a tech investor comes from various successes, including stakes in Skype, Baidu, Tesla and Hotmail.
“Draper Associates will often co-invest with Draper Venture Network (DVN) partners. Other network partners may also co-invest. We are very interested in Australian start-ups. There have been some great companies started down under,” Mr Draper told The Australian Financial Review.
“We’ve seen some great success stories from the region, like Atlassian and Xero … through the DVN and the DVN Beta program, we’re looking to back entrepreneurs who are building globally scalable companies regardless of where they are based and I see Australian founders as having great potential.”
Being the first Australian firm to join the DVN is a feather in the cap of Right Click Capital.
It will now have co-investment opportunities in global deals secured by other partner firms in the network, as well as the ability to connect its stable of companies with firms in the DVN for future investment and business opportunities.
“I like that they [Right Click Capital] are founder led, have a strong track record with Australian tech companies and have a global perspective,” Mr Draper said.
Right Click Capital joins DVN
Right Click Capital partner Ari Klinger met Mr Draper at the DVN summit in Austin, Texas, this year and was introduced by the managing partner at one of its partner funds, Paul Santos from Wavemaker.
Mr Klinger pitched to Mr Draper that the network should have a presence in Australia and in April the due diligence process began.
Mr Klinger said the primary reason for Right Click Capital joining the DVN was to let its portfolio companies access funding and opportunities in other markets and that the ability to co-invest was a bonus.
Australian venture funds that don’t have a presence on the ground in Silicon Valley often have difficulty accessing the best deals, but Mr Klinger was hopeful being part of the DVN would open up opportunities.
“There is a bit of a network, or a club, that goes on, especially in Silicon Valley and you do see it locally as well. It’s not a great thing, but it’s the reality of how it works,” he said.
“It really is about actually connecting in person, not via a conference call. There are all the serendipitous moments when you’re in a room and you get the chance to connect in person.”
Mr Draper, who is often credited with creating viral email marketing which was key in the success of Hotmail, Yahoo and Gmail, agreed with this sentiment, but posited that deals were becoming more global.
“We’re seeing more deals being syndicated between firms and across different countries,” he said.
“[But] having a local connection and perspective is important because one of the most important challenges is having a connection with the company’s founders and making sure the fit is mutual.”
As well as founding Draper Associates and the Draper Venture Network, Mr Draper was also behind Draper University, a school for young entrepreneurs, and VC firm Draper Fisher Jurvetson, which he stepped back from in terms of managerial duties in November 2013.
Despite his investment successes, Mr Draper said there are still some companies he regrets not having invested in when he had the chance.
“Google was competitive with one of the six search engines in our portfolio, so we didn’t back them. Now we will back teams who compete with each other,” he said.
“We were outbid in our efforts to back Facebook and Yahoo. And I met Jack Ma, and I saw his passion, I just didn’t understand Chinese.”
The Draper Associates new seed fund is particularly focused on finding start-up successes in the fintech, medical and education sectors, as well as tech companies making governments more efficient.
Earlier this year Mr Draper said he would deter a tech company from listing in the US with less than $US10 billion in revenue, but he believes the ASX could be a viable alternative for firms with a local connection.
“Listing in the US is an expensive and often distracting process for management. We would rather they keep building their business,” he said.
“My perspective is generally companies should IPO once they’ve reached a level of maturity of their business model and their is some certainty to future earnings … if you are a founder and you go public in the US, you’re laid wide open to critics and competitors which is often a rude awakening to founders. But, if set up well and without the Sarbox [Sarbanes-Oxley] rules killing the US markets, the ASX could be a welcome alternative for companies.”
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