Industries dominated by "fat and lazy" companies are among today's juiciest investment targets, according to venture capitalist Timothy Draper.
"[We're] looking for opportunities in industries that are getting fat and lazy," said Draper, founder and managing director of Draper Fisher Jurvetson, a venture capital company based in Menlo Park, Calif., said recently at the annual conference of Tiger 21, a networking organization of high-net-worth individuals. Bureaucratic companies that have been doing things the "same way forever" provide entrepreneurs with ideal targets to compete against, he said.
As examples, he cited FedEx and Hotmail, both of which successfully challenged the U.S. Post Office, and Google, which provided an alternative to traditional libraries, as well as established Internet search engine companies such as Yahoo!.
Some finance companies fit into the "lazy" category, he noted. His company funded the peer-to-peer lending marketplace Prosper and started Xpert Financial to challenge the financial sector.
When considering investment potential, Draper says he looks for entrepreneurs who have an enthusiasm for life.
"They have had to feel their way through life, know there is a circuitous path to success and just love life," he said. "It is hard not to invest if you see this in them."
Draper said he considers investment risk to be fun, although he acknowledges that big returns do not always follow big risks. Further, he advises investors to look for heads of companies who have an enthusiasm for life when considering where to invest money.
The last three years have seen a flurry of entrepreneurs starting new businesses and a frenzy of angel activity, which signals a beginning of a wave of venture capital investment, Draper said.
Investors should be willing to look internationally for potential investments, he added, noting as examples Swedish-based Skype and Chinese-based Baidu.
Draper also advised investors to look for entrepreneurs starting new businesses that challenge established industries.
-Karen DeMasters