Dyson and McClure: Different investors with a common theme -- VC as auteur

Reuters

Entrepreneur Esther Dyson of Switzerland signs on a photograph at a local museum at Baikonur, March 15, 2009. Dyson is part of the back-up crew for the Soyuz TMA-14 space mission scheduled for this year.

I’m especially excited to have the opportunity at next week’s Rock Health’s Health Innovation Summit to moderate a panel discussion featuring angel/seed-stage investors Esther Dyson and Dave McClure.

Dyson and McClure have conspicuously different stories, and radically different approaches to investing.  At the same time, they share an underlying and inspiring idealism, authenticity, and sense of mission that seems to set them apart from many of their investing peers, and put them in a category shared by few others: VC as Auteur.

Dave McClure, 500 Startups

The son of an elementary school music teacher, McClure grew up in West Virginia and Maryland, studied engineering and computer science at John Hopkins (as discussed in this recent TechCrunch profile), and spent a number of years as an programmer, entrepreneur, and marketing at several Silicon Valley companies including Mint.com and PayPal, where he evidently became a made man in their Mafia.

More recently, through his innovative VC fund 500 Startups, he seeks to leverage portfolio theory, and put a relatively small amount of money ($50K-$250K) to work in an unusually large number of narrowly-focused tech companies.  As McClure recently told TechCrunch, “There are thousands of ‘small’ businesses, $10M-$25M revenue businesses that solve real problems.”

To date, McClure has made very few healthcare-related investments, and I’m looking forward to discussing with him next week how (or whether) going forward he sees healthcare opportunities fitting into his investment strategy.

Esther Dyson, EDVenture

Dyson’s story is a bit different: the daughter of two world-renowned scholars (her father is the theoretical physicist Freeman Dyson, her mother is the mathematician Verena Huber Dyson), she studied economics at Harvard and then began her career as a fact-checker and later a reporter at Forbes.  She then became a technology analyst on Wall Street, eventually running her own newsletter and conference company, which she ultimately sold to CNET.

Dyson currently operates as an angel investor (and as a journalist-turned-investor, she’s in good company – see here).  She is  active in “Air/Space 2.0” (again, in good company) and in IT, especially as it relates to health.  She typically makes investments on the order of $25K-$50K, and has invested in a number of healthcare companies including 23andMe, PatientsLikeMe, Healthtap, Keas, Genomera, Omada, and Organized Wisdom.

Dyson is a strong believer in “preemptive” health, and I’m looking forward to discussing with her how she views the balance between the potential benefits of preventive care and the potential harms of excessive care, a tension I suspect will become increasingly evident over the next decade.  (In a nutshell: it makes sense to prevent disease rather than treating it after it develops – but prevention by definition involves healthy people, so the concern – articulated by Nassim Taleb among others – is whether the [often unknown] risk we subject healthy people to exceeds the likely benefit.  Eric (#CDoM) Topol made a related point in this NYT op-ed he wrote about statin use this past March.)

VC Auteurs

Despite their many obvious differences, both McClure and Dyson share a quality I’ve previously discussed in the context of entrepreneurs – as well as auteurs such as Ira Glass and Woody Allen: the ability to author one’s own life.

McClure  — combining the urgent upbeat dynamism of Tony Robbins with the savvy earthy critical faculties of David Mamet – comes off as a force of nature, pursuing an ambitious strategy that would seem to require a relentless energy and optimism few could maintain.  And while the investment approach certainly has strong mathematical support (as well as eliciting significant real-world skepticism), it seems obvious that he absolutely loves what he is doing, and feels that it’s a natural expression of what he most enjoys – his job is his passion.

Similarly, Dyson unapologetically pursues a range of interests and investments – including six months of cosmonaut training in Russia —  because it’s what she’s passionate about, and what she loves to do.  Like McClure, Dyson can articulate cogent investment theses, and provide sophisticated justification for supporting the companies she backs, but it’s also abundantly clear that she’s following her heart, and investing in the ideas, people, and regions that excite her the most.

A critic might scoff that it’s inappropriate to place McClure and Dyson on pedestals without more data on their actual success as investors.  Perhaps they are simply vanity investors with a gift for good publicity.

My view is somewhat different.  I seem to know a lot of investors (including many VCs, surprisingly) who strike me as personally unfulfilled, even if they have managed to do quite well financially.  Investing, for most, remains a difficult, strenuous task, and many strive to maximize returns through a highly disciplined process that seeks to be as analytical and depersonalized as possible – and I appreciate the logic behind this.

In contrast, McClure and Dyson seem to view investing as an extension of their personal, entrepreneurial vision, a way to pursue the ideas that most excite and captivate them.

Will their passion and commitment to pursuing these interests lead them to foolishly stick with bad ideas that a more detached investor might avoid or more rapidly exit?

Perhaps.  But I can also imagine that their apparent degree of emotional investment might also contribute to the success of their portfolio companies – and all the while, making the journey itself as valuable and as engaging as the ultimate destination.

As Gershwin said, “Nice work, if you can get it.”

Correction 8/22/12: Dyson biography revised – I had incorrectly transcribed the amount of her average investment, now correctly stated.  Also, description of the business Dyson sold to CNET has been amended.

 

 

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