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Ugly Duckling or Black Swan? Ignite Presentation 12/6/07

Ugly Duckling or Black Swan? Ignite Presentation 12/6/07. DFJ Portage Venture Partners, LLC One Northfield Plaza, Suite 530 Northfield, IL 60093 847/ 446-9460. Draper Fisher Jurvetson Portage. Network Resources 35 offices 100+ partners 500+ portfolio companies $7B under management.

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Ugly Duckling or Black Swan? Ignite Presentation 12/6/07

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  1. Ugly Duckling or Black Swan?Ignite Presentation12/6/07 DFJ Portage Venture Partners, LLC One Northfield Plaza, Suite 530 Northfield, IL 60093 847/ 446-9460

  2. Draper Fisher Jurvetson Portage Network Resources 35 offices 100+ partners 500+ portfolio companies $7B under management

  3. Audible at the Line • Was going to do a presentation on how to raise capital • Decided on a topic change this AM • Original Fundraising Pitch will be on my blog: • www.vcconfidential.com • Many thanks to our partner, Steve Jurvetson

  4. What Is A Black Swan? • A black swan is: • A rare event • With high-impact • Hard to predict (pattern attributed post event) • Examples include: • 9/11 • 1987 stock market crash • Penicillin • eBay, Paypal

  5. Why Are They Important • A small number of events explain most of the world’s developments • Infinite white swans prove nothing, but one black swan negates entire theories • Unstructured randomness, not planned approaches, have led to all significant discoveries • Negative black swan’s have cataclysmic & dire consequences • Positive black swan’s drive exponential improvements in life • Evolution occurs on the fringes (mutation)

  6. What Does This Mean for Entrepreneurs? • Payoff is inversely proportional to predictability • Everyone sees it, dozens of competitors arise • At the time, everyone thinks the idea is crazy or dumb • Can lead to years in the wilderness • Visibility is uncertain as is success • One must expose oneself to as many black swans as possible • This means iterating often and killing ideas quickly • It also means creating a culture that embraces failure • It is a necessary part of success if you don’t labor on it • It also means thinking revolution not evolution

  7. The Two Worlds • Mediocre world • Routine, obvious & planned • Governed by bell curves & reversion to the mean • Extreme (or Black Swan) world • Unexpected, unpredictable • Governed by chaos theory and fat tails • Experts & Nobel laureates are dangerous (LTCM) • “It takes a 28 year old to lead a revolution” -- Tim Draper

  8. Implications • Being agile & open-minded is much more valuable than being smart • Realize that you will have no idea where success will come from • Iterate & make your own luck, don’t stop moving • Pull analogs & approaches from other disciplines • Seeing chemistry, biology & computers merging • Be humble, be hungry, be open

  9. The Great Reckoning • “The financial crisis … is back with a vengeance. • I’ve never seen financial insiders this spooked — not even during the Asian crisis of 1997-98. • This time, market players seem truly horrified — because they’ve suddenly realized that they don’t understand the complex financial system they created.” • Paul Krugman, NYT

  10. You Ain’t Seen Nothing Yet… Past 100 years: US highway system, microwave oven, antibiotics, recombinant DNA, airflight/jets, space program, global electric & phone systems, universal access to education, integrated circuit, articial heart, fusion/atomic bomb, polio vaccine, electron microscopes, cell phones, radio, television, air conditioning, lasers, imaging, fiber optics, nylon, radar, PC, eBay, online payments, etc… Destructive Capitalism Has Always Driven Innovation “The next 20 years of change will be equivalent to the past 100 years of change.” -- Ray Kurzweil Accelerating Returns

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