REDWOOD CITY, Calif. – Most venture capitalists like to say they are ready to roll 24 hours a day, seven days a week. While some VCs just say that, Jennifer Fonstad’s career history – which includes closing a deal while she was in a hospital delivery room waiting to give birth to her daughter, proves she really means it.
“I definitely focus on being a 24/7 VC. That is definitely part of the game and it is also a lot of fun,” says Fonstad, noting she devotes a significant amount of her energy to managing her time and her work so that she can be a good parent. “It is important to make sure you focus on your child,” she says.
Prior to joining Draper Fisher Jurvetson from business school in 1997 as a Kauffman Fellow, Fonstad spent seven years working in the strategy consulting business, where she began her career at Bain & Co. Her background in consulting proved to be a good training ground for her current career as a VC, she says. “In the strategy consulting business you really develop strong business judgement and business management skills very early on in your career. You also learn to get up to speed very quickly in different sectors and segments, because that is the nature of consulting,” she says.
Fonstad decided to jump into the VC world while she took some time off from her consulting career to work on Mitt Romney’s 1994 Senate campaign in Massachusetts. Fonstad says hearing Romney, who founded both Bain & Co. and private equity firm Bain Capital Inc., speak about his experience as an early-stage investor with Bain Capital convinced her to change careers. “That really captured my imagination as something I felt I could really enjoy and be really helpful to entrepreneurs in that respect,” she says.
Working the Deals
While a VC has to serve a number of constituencies – from entrepreneurs to colleagues to limited partners – in the course of a typical work day, a successful VC always puts entrepreneurs first, Fonstad notes. “The number one thing is the entrepreneur and being an effective partner and champion of the entrepreneur to help build their business successfully,” she says, adding “because if you do that successfully you serve the rest well, too.”
Before becoming a champion of a particular entrepreneur, Fonstad considers a number of factors in evaluating a potential investment opportunity. “I look for a strong technical team with clear breakout capability, experience and a real passion for re-inventing the world,” she says. These considerations are of the utmost importance, she adds, because as an early-stage information technology investor, DFJ is often making investment decisions without the benefit of a lot of data to sift through.
“This means we are making bets on people first and foremost and we are making bets on our judgement about market spaces that are emerging,” she explains. “We are looking for investments where we think the opportunity is a limited open window to becoming a multi-billion dollar enterprise.”
While there has been a lot of news in the marketplace about companies achieving billion-dollar valuations, Fonstad says in reality that is an incredibly difficult accomplishment. Achieving this level of success requires a very delicate mix of interaction between the entrepreneur and his or her partners, she says. “We view our key skill set and the key value we are bringing to the table as being able to help build out that delicate mix,” she adds.
The Current Market
Despite the current gyrations in the public market and the bursting of the dotcom bubble, Fonstad says she does not believe the venture marketplace overall is heading for a dramatic downturn. “While there is a general market signaling effect that is indicating if you were one of those folks that jumped in for a quick buck, you are probably not likely to stay long or continue playing the game at all,” she says. However, early-stage VCs like DFJ are relatively insulated from the public markets because they are investing in companies that are three to seven years away from the public domain, she notes. “We haven’t really changed our philosophy from three years ago to now in terms of the type of folks we are looking for and the type of breakthrough opportunities we are looking for. If they aren’t there, you don’t invest and if they are, you do. And we are continuing to see some great stuff,” she adds.
Even though investment opportunities are not drying up, the current state of the marketplace is having some effects on the lifecycle of developing companies. “There is an increase in the amount of time it takes before a company reaches a liquidation event and, therefore, the derivative of that is it increases the amount of capital a private company may require in order to achieve that event,” she says. “Or, these companies might have to change their business plan in order to manage their capital more dearly. So they may have to go on a slower growth trajectory,” she adds.
Good companies will still build real value over time, Fonstad comments. Right now what a solid company should do is raise money for their war chest, she adds, so they can have enough cash on hand to make it to the time when they reach cash flow positive.
A Man’s Game?
Fonstad says being a woman in a traditionally male-dominated business environment has not been an issue that has entered into her career at all, because she has never really been focused on gender. “Ours is very much of a performance-based business,” she notes. “So for gender to enter into the picture, I think, would cloud one’s judgement; just as I would expect race and any other ethnic issues to cloud judgement,” she adds. A VC who would not invest in another ethnic group’s deals would be an almost certain failure, because so many of the best deals in the marketplace are coming from all over the world from entrepreneurs with diverse ethnic backgrounds, she notes.
As for her long-term career goal, Fonstad says it is simply to continue to refine and to improve her skills as a VC. “That means building the skill sets that serve those entrepreneurs and to constantly scan the horizon and be on the cutting edge of different trends that are emerging, so I can serve my partners and limited partners well.”