Steve Jurvetson is a student of technology and new ideas. He taps into that knowledge base to identify investment opportunities. One of seven partners at Menlo Park, California–based venture capital firm Draper Fisher Jurvetson, which has $7 billion in committed capital, Jurvetson sits on the boards of SpaceX, Synthetic Genomics and Tesla Motors. Before joining DFJ in 1995, he was a research and development engineer at Hewlett-Packard. An optimist, Jurvetson thinks economic growth comes from technological advances and change will accelerate as more people join the worldwide intellectual conversation via computers, smartphones and other connected devices. “Three billion new minds are coming online for the first time in the next eight years,” says the 45-year-old, who holds master’s degrees in electrical engineering and business administration from Stanford. “Imagine those people contributing to the dialogue.” In December, Institutional Investor Senior Writer Julie Segal talked to Jurvetson about innovation and the venture capital business.
1. What are venture capital’s biggest challenges?
There is a surreal disconnect between the struggles of the industry — the issues around the financing of technology — and this incredible renaissance in breakthrough technologies that will change the fabric of society and how we live our lives. When I look at the industry, the basic model of traditional venture capital — investing in start-ups that want to change the world — seems fundamentally to be working. The only challenge is why so few groups are doing that type of venture capital rather than flocking to later-stage activities.
2. So what’s going on here?
In boom times the industry tries to absorb increased institutional investor interest by raising bigger funds. If all else is equal, the number of partners is the same and you go from a $200 million fund to a $1 billion fund. But returns suffer and the reasons are well explained, from the nature of the firm changing to having to write bigger checks per partner.
What is the obvious other way you can scale the venture business? Just grow. But how many venture firms have asked why they were killing it at five partners and why at ten people, returns suffered? Could it be that having ten people making decisions changes everything? You inevitably put hierarchies in place, you subdivide teams. The whole internal process changes dramatically. My guess is that if you had the data, you’d find a stunning analysis of why venture doesn’t scale and why small companies are more nimble.
3. You’re passionate about the impact of computing power on industries. How does that play out in a sector you follow?
As Moore’s law crosses a certain threshold, you can simulate something on a computer that you couldn’t before. That’s the pivot point when an industry changes. Biotech is hitting it today. Go inside any bio lab and ask them what they want more of. It’s compute power. It’s almost never more test tubes. Agriculture is just starting down that path. We’ve done a number of new investments in what I call ‘ag bio,’ from changing the seed itself to changing the microbial coating on the seed — the fungi and microbes that help a normal seed take root and fight off pestilence.
4 Tell me about a technology development you’re seeing and its investment opportunity.
Synthetic biology. You can simulate code, put this code in the computer, build the DNA — with no animals involved — using a gene printer, stick the DNA in a microbial cell, and it changes into whatever that code is supposed to be. It changes species. As recently as two years ago, when venture financed that, it didn’t seem possible. Now you can create trillions of offspring, reproducing living things that are doing something useful; digesting waste and making chemicals is the best. So synthetic biotech is a major technology vector that is making changes in materials, specialty chemicals, soon food, and eventually human health.
5. What’s a 2013 story?
Robots. Companies like Rethink Robotics are announcing products in this area. The lightbulb went off that robots aren’t really in the industrial workplace, except with automobiles, because they don’t work among humans doing things that humans normally do. For whatever reason the 30-year history of robotics has been to make them fast and really precise and make them do dangerous things like paint cars and weld cars. So they get cordoned off and humans don’t walk among them. But think of all of the mind-numbing work on this planet: people who lift boxes all day long, put things on a conveyor belt. Rethink said, ‘We want the robot to have two arms and a head, not because it looks cool but because how else will it replace a task designed for a human?’ It does nothing better than a human. But it does it all day and all night.
