A Slice of DFJ’s New $350M Fund Intended for Northwest Entrepreneurs
[Corrected 2/11/16, 9:00 pm. See below.] Bill Bryant is something of an anomaly in Pacific Northwest venture capital: He’s a full-fledged investing partner in a big, storied Silicon Valley firm—Draper Fisher Jurvetson, which just announced a $350 million 12th venture fund—who is based permanently in Seattle and focused squarely on investments in the region.
Bryant, a longtime Northwest entrepreneur and investor, is one of six partners in DFJ’s latest fund. As such, he’s expected to invest a proportional share—about $50 million to $60 million over the next three years—in companies based in and around Seattle; Portland, OR; and Vancouver, Canada—and elsewhere as he sees fit. It’s a substantial sum from a marquee venture firm for a region with a relative few locally based venture investors.
Being a remote partner in a venture firm means balancing relationships with the local startup industry and with partners in the home office. It’s not easy, and it’s not something that a firm can just decide to implement overnight.
Bryant’s relationship with DFJ goes back 17 years to when he was an angel investor sitting on the board of a company formed by Josh Stein, now a DFJ partner. After Bryant finished his last operating role at a startup in 2007, the firm approached him with a goal of broadening its connections to the Seattle market. He became a venture partner, sourcing eight investments over six years, including Redfin and NanoString Technologies. In 2014, Bryant became a general partner in DFJ’s 11th fund.
The advantages of being local are, in a way, old-fashioned. Bryant participates in local technology events—this week it’s the MIT Enterprise Forum Northwest and GeekWire Startup Day. He’s also a Seattle Xconomist. He knows the region’s entrepreneurs personally and spends time with them before they go out to raise capital. He has an active referral network including local service providers, angel investors, and accelerator programs that help DFJ get in early on investment opportunities, rather than reading about the next hot Seattle startup and trying to get into a later round.
“Without being out there and just being visible and pressing the flesh, we’d just be one of 700 funds, and it’d be hard to establish top of mind presence,” Bryant says in an interview.
He’s surprised more Silicon Valley firms haven’t followed suit, but also appreciates why: “Venture capital is a very localized business. It’s really critical to have the relationships and trust and confidence of your partners. And you can’t do that remotely,” Bryant says, adding that it has worked in his case because of his long-standing relationship with DFJ’s other partners.
(It’s worth noting that other locally based venture firms Ignition Partners and Maveron have offices in the Bay Area. But I’m hard-pressed to think of another Silicon Valley firm with an investing partner based in the Northwest on a permanent basis.)
So, about that fund, DFJ Venture XII:
Bryant says DFJ wants to invest early, but not necessarily at the seed stage. In the last 10 years, the proliferation of micro VCs, seed funds, super angels, accelerators, and crowd-funding platforms has filled that market. DFJ is looking to invest in companies that have already raised $1 million to $3 million in outside capital, and have made progress in their target market, he says. These startups should have their leadership team together, a clear understanding of the market, and a product offering ready, or nearly so, though they might not be generating revenue yet, Bryant says.
The typical first check from DFJ will be in the $6 million to $8 million range—with additional capital for follow-on investments—and will more often than not be part of a syndicated deal with other venture funds. Bryant describes the typical round designation as “late Series A.”
There are, of course, exceptions. DFJ was the first investor in Seattle-based DevOps software company Chef and has deep expertise in that area, meaning the firm would be more inclined to invest earlier in startups working on similar technologies. Likewise, it might make earlier bets on entrepreneurs with whom it has a history.
DFJ’s Steve Jurvetson, writing in a Medium post to announce the fund, says the firm is “excited by the opportunities we are seeing in autonomous transportation, digital health, enterprise transformation, artificial intelligence, and the innervation of most industries over time by machine learning—a powerful process to build complex systems that transcend human understanding.”
Beyond broad themes, Bryant says, DFJ is looking for “truly visionary entrepreneurs who are bringing highly disruptive approaches to large-scale markets.” He adds, “We get excited about whatever extraordinary entrepreneurs get excited about.”
These individuals are few and far between. Bryant takes frequent meetings in Seattle with entrepreneurs working on good ideas for businesses that might one day generate $30 million or even $100 million a year in revenue, but don’t have a view to growing beyond that. That’s still not at the DFJ scale, he tells them.
“We’re really out to build these iconic, enduring-type companies,” he adds, citing investments in SpaceX, Box, Baidu, and Skype. DFJ’s local portfolio includes Remitly, Resin.io, Z2live, and Varolii.
DFJ, founded in 1985, has raised some $5 billion and backed north of 20 “unicorns”—companies that went on to IPOs or acquisitions that valued them at $1 billion or more. [An earlier version of this paragraph said that DFJ had raised $4.5 billion, based on a number given in Jurvetson’s Medium post. That post was subsequently updated to the correct number, $5 billion.]