Accidental capitalist

A phone call in the 1960s helped transform the venture capital industry

When Paul Wythes was an engineering student at Princeton University in the 1950s, he had no idea what venture capital was.

Little did he know that a few years later, a fateful telephone call would change his life and make him one of the pioneers of venture capital and Silicon Valley’s startup heritage.

With a stroke of a pen, as co-founder and chief venture capitalist of Palo Alto-based Sutter Hill Ventures, Wythes has controlled the fates of billions of dollars worth of investments over the years. That’s a far cry from a relatively modest childhood growing up in southern New Jersey.

“I studied and did well in high school and it opened up a whole new world to me,” Wythes said.

Wythes radiates a calm confidence, while his solid posture, tall stature and playful spirit hint more at his basketball-playing youthful past than reality: Wythes will celebrate his 70th birthday in June.

Looking into Paul Wythes eyes, you see into a man who loves
learning.

After a land-based tour of duty in the Navy, which he ironically joined thinking he’d see the world, Wythes enrolled at Princeton to study engineering as a scholarship student.

“I liked engineering, but experienced the business world through summer jobs,” Wythes says, explaining why the business world held an allure for a young man who yearned to see new and exotic lands he’d only read about as a child in New Jersey.

“The dean of the engineering school told me to look at a business school on the West Coast called Stanford. I’d never been west of the Mississippi River,” he says.

At 26, Wythes graduated from Stanford University and took a job with Honeywell International Inc. in technical marketing.

“In those days, most graduates were getting jobs at big companies,” says Wythes, contrasting his life to the current trend of Stanford graduates striking out to join startups.

Like many single, fresh Stanford graduates in 1959, Wythes found a roommate and moved to San Francisco, a continent away from his boyhood home, where he met his future wife.

“She’s from Hawaii,” Wythes says, a passing reference proving that at least one southern New Jersey boy could land a mate from an exotic locale. The couple married and moved out of the area as Wythes’ career took him to Southern California.

Then things changed in 1964.

“I got a phone call from Greg Peterson, a Stanford classmate of mine and a co-founder of Sutter Hill,” Wythes says.

Back then, Sutter Hill was in the real estate development business and specialized in shopping centers, giving many of the valley’s suburbs their trademark strip-mall look.

“[Peterson] said, ‘I want you to come up here and start us in the venture capital business.’ At the time, I didn’t know what the venture capital business was about and I’m not sure he did either,” Wythes says.

Using the study skills he honed as a child in New Jersey, Wythes not only learned the definition of venture capital, he helped shape an industry.

“Sutter Hill Ventures has been around since the mid 1960s; it’s been a firm for 40 years,” says Mark Heesen, president of the Washington, D.C.-based National Venture Capital Association.

On May 1, the NVCA awarded Wythes with its lifetime achievement award.

“When you look at the venture capital industry as a whole, most people put the beginnings of VC at the late 1950s, so he’s been at it from the very beginning and is still at it. Paul’s literally one of the people who invented venture capital as we know it today,” Heesen says.

During Wythes tenure, he helped launch such startups as LSI Logic Corp., Nvidia Corp., Palm Inc., Linear Technology Corp., Network Appliance Corp. and Avid Technology Inc.

“Look at the number of companies he’s founded over the last 30 or 40 years. More important is the number of young venture capitalists he’s helped to mentor through this entire period,” Heesen says.

Wythes points out that he knows what it is like to be in the position of getting a startup off the ground, since he had the same experience launching Sutter Hill.

According to those at the receiving end of Sutter Hill’s investing, Wythes never let his powerful position go to his head.

“We ran into a situation at one point when Xidex was essentially going to run out of money and not be able to meet Friday payroll,” say sLester Colbert, former CEO of one-time Sunnyvale startup Xidex Corp.

“My CFO and I went over to Paul and told him we needed to have a check or we weren’t going to meet payroll the next day — it was as simple as that,” Colbert says. “And with no more questions, Paul sat down, wrote the check and gave it to us. We made the payroll and eventually the company made itself into a very substantial success. That’s the kind of support you get from Paul Wythes — the kind that you are deeply grateful for getting.”

Xidex was acquired by Anacomp Inc. of San Diego in 1988.

NVCA says Wythes is leaving his mark on the next generation of venture capitalists.

“As part of the old guard, Paul Wythes is very candid, very open and honest. It’s a breath of fresh air for young people who are searching for how to work within the venture capital environment,” NVCA’s Heesen says. “He’s very well-grounded. He’s seen technologies come and go and understands that technology that’s hot today may not be hot tomorrow.”

Whether the NVCA considers him part of the old guard or not, Wythes says he is as excited about venture capital as ever.

“I told them in New York when I got the award that I wish I was 50 years younger, so I could do it all over again,” Wythes says.