10-05 FIS-VC DFJ Affiliate

REPRINTED FROM ! TECHNOLOGY EDITION Venture CapitalAnalyst TRACKING INNOVATION AND THE MONEY BEHIND IT » OCTOBER 2005 | VOLUME IX | ISSUE 10 VENTURETITLE PROFILE DFJ Affiliate ePlanet Winning Over Doubters DRAPER FISHER JURVETSON FOUNDER TIM DRAPER SAYS BAIDU, SKYPE ARE ‘TIP OF THE ICEBERG’

By Michelle Tsai peer Internet phone service in which ePlanet co-led a Series B round in 2004, has become a $4.1 billion acquisition aidu.com Inc. and Skype Technologies SA “are target snatched up in September by one of the Valley’s best only the tip of the iceberg,” said Tim Draper, the and brightest, eBay Inc. B venture capitalist known in Silicon Valley as a man The hits came none too soon and appear to be righting rarely at a loss for words. the reputation of a firm that has caught some flack in recent Indeed, Draper, co-founder of Draper Fisher years for an investment strategy that some in the industry Jurvetson, is beaming, if not gloating, these days with those viewed as superficial or, with its focus on nanotechnology, two blowout successes from joint venture DFJ ePlanet. too far out in the future. Chinese search engine Baidu, in which ePlanet has a 25% “In 2000, people said their franchise model was dead. stake, delivered the biggest one-day gain of an IPO since They haven’t had a lot of exits in the last four to five early 2000, more than quadrupling its offering price of $27 years, and they do take some outlandish risks,” said Jim per share. Meanwhile, Skype, a Luxembourg-based peer-to- Robinson IV, partner at RRE Ventures in New York. Skype, for instance, is a company that RRE passed on but DFJ ePlanet Ventures found funding from ePlanet, Bessemer Venture Partners and others. “There aren’t many firms that would decide to HEADQUARTERS back a company where the CEO was wanted in America. 400 Seaport Court, Suite 102, Redwood City, Calif. 94063 That took guts.” Skype founders Niklas Zennstrom and Phone 650-701-8500 | www.dfjeplanet.com Janus Friis haven’t set foot in the U.S. for years because of a copyright infringement lawsuit brought by record labels KEY TECHNOLOGY INVESTORS and movie studios over their previous pet project Kazaa, Asad Jamal | Managing Director the file-sharing service that enabled consumers to illegally Neil Adams | Jixun Foo | Saad Raja | trade music, movies and software. Ayaz ul Haque | Directors To Robinson and other investors, it looks like DFJ’s Dennis Atkinson | Jerry Ilhyun Cho | Senior Vice Presidents swing-for-the-fences global strategy is finally paying off. Mark Bailey | Donald Fitzmaurice | Mir Imran | In 1999, when most other firms were chasing Internet Roderick Thomson | Venture Partners deals in Silicon Valley and Silicon Alley, DFJ broached the Finian Tan | Non-Executive Director market with a different strategy. It branched out and launched a program with 15 regional venture firms in BRANCH OFFICES places like Salt Lake City, Pittsburgh and Northfield, Ill. Beijing Representative Office The crown jewel in that constellation: DFJ ePlanet, a Room 2113-2114, Tower I 12-member firm headquartered in London. At the helm is China World Trade Center No. 1 Jianguomen Wai Da Jie, Beijing, 100004 Managing Director Asad Jamal, who was previously a senior People's Republic of China executive at Hong Kong merchant bank Peregrine +86 (10) 6505-9398 Investment Holdings and head of interest-rate derivatives trading with Chase Manhattan Bank in London. > over please

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“I had a firm belief that the technology and Internet business slowly and regionally first,” said Draper. “The revolution could spring up anywhere in the world, whether testing period varies, but they only really need to go global China or India or Europe, provided you give the right when they have proven that they have a real business.” assistance to entrepreneurs,” said Jamal. Neil Adams, ePlanet’s chief operating officer, pointed to EPlanet has invested globally from the beginning. When broadband content firm Jeboo.com as an example of how VCs still took “global” investments to mean Western Europe, today’s new Internet companies have China-specific nuances. ePlanet was already wrestling with the logistics of running an The start-up modeled itself after premier services in the U.S. investment partnership with offices in six countries. like Yahoo Platinum and media player Realplayer to provide Since it launched six years ago, ePlanet, which has a compendium of video-on-demand, music downloads and $650 million under management, has made more than 55 live broadcasting services to Chinese broadband users. investments primarily in wireless and consumer Internet As VCs are heading to Asia, ePlanet, with 15 companies technology and will invest in another seven to 10 deals, already in the region, will stay ahead by opening an office in according to Silicon Valley Director Ayaz ul Haque. India within six months, said ul Haque. The firm is hiring for The firm invests as a single fund and splits returns one or two investment professionals to spot deals in India, with DFJ, though not with DFJ’s limited partners - which has become quite active in manufacturing, hardware ePlanet has its own investors. “Our team members get a and providing outsourced services to financial services firm perspective in what is happening across the world in and consultancies. Korea, with its strong technology and different industries and thereby have avoided a lot of the ability to target the Chinese market, has also emerged as a repeat mistakes,” said Jamal. new interest for ePlanet. These days, Draper sits on the investment committee for In July, Focus Media Holding Ltd., an outdoor the global investment firm. EPlanet’s 25% stake in Baidu advertising company in which DFJ ePlanet holds a 4% stake, was worth a cool billion on opening day. The firm stands to also held a successful, if more modest public offering, with profit handsomely from the Skype sale, too; Series A investor shares closing at 19% above offering price on the first day of Bessemer saw returns of more than a hundred times. trading. The firm’s investments are intended to capitalize on As U.S. venture investing in Asia has taken off the past “transmigration,” the movement of technology, people and two years, and talk of a VC bubble grows, ePlanet has ideas from one market to another. Some business models slowed its investment pace from seven investments each in translate directly – Baidu is an example – while others need 2002 and 2003 to just two deals in 2004. to take local factors into consideration. Not all of the venture firm’s exits have been so EPlanet’s experience with Mforma Group a wireless successful. Longcheer Holdings, a mobile-phone handset content company with offices on the West Coast, for design house, saw its stock fall 27% on opening day because instance, helped the venture firm move into the wireless of a mix-up over a technicality related to its listing market in China with investments like KongZhong Corp. structure. The company provides 2.5G wireless interactive The venture firm also lost its lead partner in China, entertainment. Likewise, when one market doesn’t work Fan Zhang, who is rumored to have joined Sequoia Capital. out, ePlanet’s companies can target another part of the EPlanet said it will look to add a partner in China, though world. When IXI Mobile Inc., Redwood City, Calif., the firm declined to say why Zhang left. which makes software for personal computing devices, Given that most of the firm’s exits have come from discovered the domestic market in Israel wasn’t large China, it’s no surprise that ePlanet sees exciting times ahead enough, ePlanet helped the company target the U.S. and for Asian venture capital. “The risks in China are overblown,” Europe. said Draper, adding that he believes most Chinese technology The global philosophy doesn’t translate into plug-and- companies remain undervalued. He said price-to-earnings play deals, however. “Start-ups need to develop their ratios are about a third of equivalent U.S. companies. ●