Draper Cashes In on Billion-Dollar Skype

First Baidu, now Skype Technologies. Tim Draper is having a ridiculously good year.

While Silicon Valley insiders have been busy scratching their heads over the 10 or so nanotechnology investments that Draper Fisher Jurvetson (DFJ) has made in recent years, not to mention clean technology, where it has a handful of investments, Draper and other DFJ general partners have been bounding around the globe, scouting out deals and pulling the trigger on investment opportunities.

That strategy is paying off in a big way. Last week, for example, eBay revealed itself as the final suitor of DFJ-backed Skype Technologies, agreeing to pay up to $4.1 billion for the 3-year-old Luxembourg-based company. Skype allows anyone with a microphone and a computer to make free calls over the Internet. DFJ and Index Ventures had given Skype practically all of its VC backing in a $18.8 million round in March 2004.

Draper Fisher Investments, headed by Draper’s father, Bill Draper, provided seed funding for the company in October 2002 with $250,000. Bessemer Venture Partners of Larchmont, N.Y., and Mangrove Capital Partners of Luxembourg had conducted Skype’s second round – which that one source puts at $1 million – in November 2003.

No one is breaking out how much of a payout the VCs will receive. Says Danny Rimer, a London-based general partner at Index Ventures, a top European VC firm based in Geneva: “You have to sort of glean from [the $18.8 million investment that Index and DJF co-led] what you will.”

Dave Cowan, a general partner with Bessemer, wrote on his blog that it [and presumably DFJ and Index] will receive a 150x ROI while Draper the elder, whose $250,000 bought him a 5% stake in the company, made a more lucrative return. (The San Jose Mercury News reported that Draper and Howard Hartenbaum, the Draper partner who led the investment in Skype, sunk money into the company when it was valued at less than $2 million and thus likely will see close to a thousand-fold return.)

Any way it’s sliced, eBay’s acquisition of Skype represents one of the best investment returns.

“I must admit, I don’t know of anything else like it, not in this era,” says Rimer, responding to whether he’s aware of another company that has received Skype’s asking price at such a young age.

More astoundingly, for the younger Draper, it’s the second trailblazing event in which he has been front and center in the last two months.

Draper Fisher Jurvetson ePlanet Ventures – a DJF affiliate that focuses on IT and life sciences in Asia, the United States and Europe – owns 28% of Baidu, a Chinese search company. Baidu launched an IPO in August and saw its stock rise from $27 to $122.54 a share, on the first day of trading. DFJ ePlanet invested in Baidu alongside Google, Integrity Partners, Peninsula Capital, Bridger Management, China Equity, China Value and Venture TDF. DFJ ePlanet’s stake in Baidu, which varies depending on stock market gyrations, is worth about $1 billion.

Draper, who celebrated Skype’s sale to eBay at a lavish party in London last week, couldn’t be reached for comment before PE Week’s deadline.

But it appears that for the short term, at least, he may soon spend more time stateside. Draper sits on the boards of enterprise social software startup SocialText, in Palo Alto, Calif.; Project Y, a shopping site for women that is currently in beta mode and based in the Bay Area; and Chroma Group, a Sugarland, Texas-based oil and gas exploration company.

Draper and Rimer have been board members of Skype since their firms’ investment last year, though the future of their seats after the eBay acquisition is approved is uncertain. Rimer says that nothing has been disclosed in regards to his and Draper’s board seats.

But Bessemer General Partner Rob Stavis, who led his firm’s financing in Skype, says that the VoIP provider would likely continue to operate as a standalone business. As such, Skype may maintain its own board.

Email Constance.Loizos@thomson.com