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THE BIG INTERVIEW
The rollerblading, windsurfing money-making billionaire
Bill Boyle interviews Professor David Cheriton, one of Stanford University’s most famous academics and a leading venture capitalist. Cheriton talks about how to build winning teams, how to spot great investments and why you should always play the long game
Senior Editor Bill Boyle
W
hat is the secret of being a successful venture capitalist? This was the first question put to Professor David Cheriton. His answer? Luck.
“I think there’s a saying on Wall Street: ‘I’d rather be lucky than smart’. I think I have been pretty lucky along the way,” he says. “To me it’s been one of the scariest rollercoaster rides you can go on but it’s also a lot of fun. So, I look for more than one reason to do things, especially now when I still have my academic inclinations.
“I believe that you always should have people bring something besides just a chequebook to a start-up. I seek out opportunities where I think they add real value to the world. It sounds a little hokey it’s fundamentally true.”
It clearly works. Cheriton only goes for investment opportunities where he thinks he can add real technical value. If it’s a big technological challenge, and if he think he is ‘up for it’ and knows other people who are too, he will build a team that can perform. He says it becomes a competitive advantage because there are relatively few other teams on the planet that are designed in the same way.
He says: “Then rather than just ‘spray and pray’ which many VCs do, in effect across many companies, I invest the time and money in a company to make it successful rather than just see if it’s successful. I treat it as kind of my baby, not just one of the horses that I’m betting on. Then the final element is that I think – given I don’t have anybody waiting in the wings looking at my return on investment and when do I get the fund – the lifetime of the money
– I can afford to be patient and produce a really good product that ideally sells itself. So, I’m not ruled by time to market or fund RoI and so on. A number of the things I’ve been involved in took a long time – some people forget how long the gestation period was from when something was founded to when it actually was recognised as a success.
“So my investment view is that I put my eggs in a small number of baskets and try and take very good care of all of those baskets. I think that is also a philosophy I apply in technical areas.”
So how can he afford to fund these companies?
“Well I think I’ve been very fortunate,” he says. “I came to Stanford in 1981 as an assistant professor. It was a crazy place at that time. I encountered a student there, Andy Bechtolsheim, who was doing this cool stuff building what was then the Sun workstation. He was doing really neat stuff so I started working with him and developed some software for his hardware. Then I turned around and bought a bunch of the early Sun workstations for my research project.
“Then Andy went off and founded Sun Microsystems, which became the leading workstation vendor in the 1980s. In 1994 Andy called me up out of the blue while I was trying to do a sabbatical – as academics do – and talked me into doing this start-up. We both hated this technology called ATM at the time and thought Ethernet was the right way to go. He knew hardware. I knew networking and software.
“We put ourselves together and developed this technology. It was bought by Cisco. They just brought us in-house, gave us the freedom
www.ibsintelligence.com | © IBS Intelligence 2018
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