In this week’s Elevator Pitch, we chat with venture capitalist Rory O’Driscoll of Scale Venture Partners.
The Foster City firm began life as Bank of America’s in-house venture capital arm before spinning out in 2007. O’Driscoll himself began life in Ireland before earning a bachelor’s degree from the London School of Economics.
Q: How’d you get into this racket?
A: I was very lucky to get into venture and would not recommend this approach. I set up my own business in the U.K. after college and had the authentic entrepreneur experience — which is to say that after some success and getting up to 50-plus employees and single-digit millions of dollars in revenue, the business did not work out. I sold it for asset value and was broke.
Europe in general was not very forgiving of entrepreneurial failure, and so I struggled to get work and emigrated to the U.S. in December 1991 with only $200 in my pocket. My first job was as bookkeeper for a cemetery company. I was lucky enough to then get a job at a large financial institution (B of A) and within a year had transferred to their venture capital group. I have been there ever since, and we have been successful enough to buy out the original investors and raise a series of independent funds as Scale Venture Partners.
Q: What do you like about VC?
A: What’s not to like? This is a business where you can only do well by doing good, especially over the long term. You can only be successful as an investor, and thus make money for your partners and yourself, by investing in great companies that grow big and make a difference.
Sometimes what the venture industry says about providing jobs can sound like special pleading, but almost every high-paying technology job in Silicon Valley — and most across the U.S. — comes from companies that were funded by venture capital. This is an industry it’s easy to be proud of.
Q: What kinds of pitches are you looking for now?
A: I focus most of my time on software companies that address the business or enterprise user. Companies I am involved with right now include DocuSign and Box. What I really like about these companies, and about new opportunities I am looking for, is that they make software products that can be used by everyone. And they can have customers at companies that range in size from a grocery store all the way to Exxon.
The more broadly a software product can be adopted, the easier it is to contemplate building a multibillion dollar company from it.
Q: What’s the biggest mistake entrepreneurs make?
A: If you focus on the negative, everything an entrepreneur does is a mistake, because the entire act of starting a company is an insane gamble against daunting odds. However, that’s the wrong way to think about life in general and entrepreneurship in particular. Entrepreneurs start companies because they see something in the world that is not but should be, and they set out to make it so.
If the mission of the company is something you really care about, then you cannot make “a big mistake,” just lots of little ones. If, however, the mission of the company does not float your boat and you are doing it to make money, you’ve already made your big mistake. Instead, go trade the long bond for Goldman Sachs. It is a surer way to make more money with a lot less effort.
Q: What’s the next big thing going to be?
A: I don’t subscribe to the “next big thing” school of thinking. I believe that the technology industry actually moves in a fairly consistent forward direction, driven by well-understood and still-continuing improvements in enabling technologies like Moore’s Law.
By paying attention to what is actually going on in the market right now, you can usually have a fairly clear sense of what the range of the possible is for the next three to five years. That is where the opportunities will come from. Expecting to be struck by inspiration from a clear blue sky is not, I would argue, the way the world works.
Q: Many VCs say venture investing is all about backing the right people. Would you agree?
A: This is an enduring discussion but of course an idle one, because the answer is both the right people and the right market. Markets make outcomes, and even great management cannot build a big company in a small market. However, what management does determine is where a given company ends up ranking in a market.
Search was a big opportunity for many companies; management, with a dollop of timing and luck, was what made Google (GOOG) the winner, Yahoo (YHOO) the runner up and companies from Alta Vista to Infoseek, Lycos and Ask Jeeves further down the rankings. There are very rarely one-dimensional answers to investing questions.
Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.
