Bill Draper and “Pitch” Johnson Look Back On Simpler Times

As two of the venture industry’s founders, they were a hit Wednesday night in the showroom of Tesla Motors, where Johnson received the first annual Innovation Catalyst Award from the VC Taskforce and a standing ovation from around 100 VCs.

But the most entertaining part of the evening was a long speech by Bill Draper, age 81, on how he and Johnson, who met working at Inland Steel in Indiana in the 1950s and are still best friends, borrowed $75,000 each from their families and started Draper and Johnson — one of the first venture capital firms in Silicon Valley — in 1962, when “venture capital” was a word that most people had never heard.

“We drove into the orchards — we’d each leased a Pontiac — and knocked on doors. We said, ‘We’d like to talk to the president,'” Draper said. “If it had a sign that said ‘lemon distributor’ we avoided it, but if it looked like something electronic, we’d give it a shot.

“We’d say, ‘We’re in the venture capital business,’ and they’d say, ‘What’s that?’ There was no term like venture capital that anybody was aware of. So we’d say, ‘We buy a piece of your business,’ and explain. Eventually we built a name for ourselves in San Francisco because we knew enough of the little startups. They were so excited about their companies — sometimes we’d spend a whole morning talking to one guy. But they didn’t have much else to do, and we didn’t either.”

Their first investment was for $60,000, Draper said, and it bought 25% of the company. Since then, he said, life has gotten harder.

“Wall Street learned about (venture capital) and ruined our returns,” he said. “Our highways are choked and our wallets are fatter, but our returns are down.”

Draper remembered when he and Johnson got in the Palo Alto Times, a story they could show to their wives as proof that they were doing something, and how they would sit in the window of their office on Welch Road and “try to look important” when their wives drove by and honked.

The standard for VCs in the 1960s was integrity, Johnson said in accepting the award. “Handshakes were good, you were open about what you were doing and you told people what you needed to tell them.”

Otherwise, he was far briefer than Draper. He just said “thank you.”