Clearstone Venture Partners
Age: 42 - Residence: Manhattan Beach
Years in Web Finance: 13
Companies Funded: About 30
Value of Fundings: $200 million
From the zenith of PayPal to the nadir of Jobs.com, Jim Armstrong has experienced the extremes of venture capital investment.
As managing director of Clearstone Venture Partners in Santa Monica, he estimates that his total investments of $200 million have returned about $600 million.
The capstone of his career occurred at an unlikely moment at the depths of the dot-com crash in 2002, when eBay purchased online payment site PayPal for $1.5 billion.
"PayPal was a shooting star in a nuclear winter," Armstrong recalled.
In 1999, Clearstone acquired one-fifth of PayPal for $5 million, although its stake was later diluted when other investors contributed money. Armstrong served on the board when the product was first launched and began to take off.
But not every investment ended in a shower of gold. Armstrong funded online employment site Jobs.com, an ill-fated venture that was eventually sold for scrap to Monster.com.
"It was a great opportunity," he said. "How could a company like Jobs.com not make money? It was blown in every possible way."
For Armstrong, the principles of venture capital investment boil down to basic fundamentals: invest in people first, markets second, technology third.
"It's not about technology, it's about giving people an easier way to do things," he said.
Armstrong broke into the world of venture capitalism as an intern at Austin Capital Ventures while studying for his MBA at the University of Texas. He moved to California in 1998 and joined a venture fund that became Clearstone. Since then, the company's funds under management have grown from $30 million to $650 million.
His advice for entrepreneurs seeking venture funding is simple: communicate who you are and why you have a passion for your project. "If you are starting a company and raising capital, you are putting your career and the opportunity cost of your time on the line. So I need to understand why you are doing this," he said.
And the next wave of Web businesses? He predicts those that make the Internet more friendly. "There is information everywhere. Who is going to make it usable? Why is it still a pain in the rear to comparison shop online?" he said.
"Ten years from now, the way you buy a car will be the same, but the way you get information from the Web will be a lot different."
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