Firm in flux: DFJ raises $325M early stage fund, sets out to prove it’s more than just its name

By Michael Carney , written on February 4, 2014

From The News Desk

Draper Fisher Jurvetson (DFJ), the three-decade-old VC firm that carries the name of one of Silicon Valley’s great investing dynasties – the Drapers – is announcing that it’s closed its eleventh early stage fund, bringing in $325 million in new capital. It’s a respectable sum that comes on the heels of a $350 million tenth fund raised in 2010, and can be seen as proof that LPs still have faith that the DFJ brand can attract talented young entrepreneurs.

But make no mistake. This isn’t your father’s DFJ. The firm is in a period of great flux.

As we learned following the firm’s November limited partner (LP) meeting, both Tim Draper and John Fisher have stepped back from their day-to-day roles and neither will be investment partners in the new fund. Fisher will remain an MD of DFJ Growth, the firm’s later stage fund, while Draper will focus on his superhero-themed entrepreneur university and invest out of his personal fund, Draper Associates. The three general partners of the new fund, DFJ Venture XI, are Steve Jurvetson, Josh Stein, and Andreas Stavropoulos.

In addition to the above leadership changes, two veteran managing directors, Don Wood and Jennifer Fonstad, have also transitioned out at the end of last year, a gentle euphemism for being shown the door. The same is true of the firm’s head of China investments, Hope Chen.

The firm writes in a statement announcing the new fund:

We also strive to be a dynamic team that learns and evolves over time.  For example, we have realized that managing a global venture investment network is best done as an independent, dedicated endeavor.

This can be read as an explanation for why the firm decided to close its China and India offices, or why Draper’s increasing focus on his University meant that he couldn’t be the face of the firm during the latest fundraising roadshow.

Draper may be the a third generation venture capitalist – his father co-founded Silicon Valley’s first VC firm –  and one of the technology industry’s most public figures. But he’s also been a controversial figure on more than one occasion. He’s repeatedly advocated for splitting California into six states, and once starred in a TV show on Nickelodeon called “The Naked Brothers Band” (where his daughter Jesse, now of Valley Girl fame, got her on-camera start).

DFJ has always been a firm willing to bet big, whether that meant funding Elon Musk’s moonshot electric vehicle, space exploration, and solar farm ventures, or opening a stable of loosely associated global affiliate offices under its once-marquee brand. Betting on Musk has paid off handsomely. Its international expansion did not and has been, by all accounts, a failed experiment that resulted in a massive restructuring. In many ways, the firm was a victim of trying to do too much in too many markets.

DFJ’s bets on Musk alone likely generated enough return and cachet to raise this new fund. It’s no surprise that Jurvetson is keeping his role, as he’s the partner known for making the boldest bets in headline-grabbing categories like robotics, space, and quantum computing. Stein, on the other hand, has picked his fair share of enterprise winners, including Box and Yammer, while Stavropoulos is the consumer guru best known for investments in MeetUp and SugarSync.

Add in early stakes in Baidu, Redfin, SugarCRM, PubMatic, Flurry, and FundersClub, and the firm likely generated handsome returns over its last few funds. Over its lifetime, DFJ has backed 22 companies that have each exited, either via IPO or M&A, for north of $1 billion – a group the firm refers to internally as the DFJ Ultimate Club.

Despite this, however, DFJ is hardly the brand that young Stanford grads and Y Combinator alums think of first when contemplating their dream lead investor. That crown goes to Andreessen Horowitz, Greylock, Accel, Sequoia, Benchmark and Kleiner. Even the next tier is crowded, arguably including firms like Lightspeed, Battery, USV, and NEA. The venture game is hyper-competitive and DFJ, despite its legacy, is looking up at a dozen firms with greater panache.

For DFJ to rise again, the firm must decide what image it wants to project to the rest of Silicon Valley. With Draper no longer the face of the firm, and Fisher focused on late-stage bets, DFJ will need a new narrative. Reminding the world, particularly those who say startups are largely iterative and uninspired, that it’s the firm that made Tesla, SpaceX, and ReThink Robotics would be a good place to start.

[Image adapted from TeeTillDeath]