John Backus is a man who understands the value of perspective. He was raised immersed in diverse points of view, moving all over the country and across South America as a child and then landing his first job at Bain & Co., which focused on helping companies expand their playbooks by providing strategic views that might not be available from inside of a business.
In 1996, however, he lost sight of that perspective just long enough to miss out on what could have been a life changing business venture. He had co-founded InteliData’s predecessor, US Order, which was focused on electric banking by combining phones with screens and debit card readers. It had been a moderately successful business, which he sold to Visa for a nice price; however, when he left, in 1998, AOL was just starting to get big. “What we did at US Order was pre-internet, but we completely missed the internet movement because we were looking at delivering information to the phone rather than to the PC,” he recalls. “We had our blinders on, and what really struck me about that experience was how valuable an outside perspective is to a business that’s running full speed ahead. We had the best UNIX and TCP/IP programmers in the area, so we could have been a major player in the internet movement.”
John may have missed that boat, but the experience inspired him to build an entirely new ship—one that would transform the horizons of dozens of businesses and leave a legacy that has been compounded many fold. “I realized there were tons of other companies with the same issue, so it hit me that we had to bring a Silicon Valley investing mindset to the Washington Area,” says John. “I saw the opportunity, and co-founded Draper Atlantic in 1998.”
Now, John is the co-founder and managing partner of New Atlantic Ventures. The venture capital firm, which he runs with his fellow co-founders Todd Hixon, Scott Johnson, and Thanasis Delistathis, invested in its first company in 2008, and has since invested in twenty five more, resulting in a pace of about six companies per year. The firm invests in early stage companies, looking to back small, young businesses with the potential to become big companies. On average, they begin by investing about $1.2 million in a given company—a relatively small amount—to see how it will fair. If the company is successful, they could invest up to $7 or $8 million total over several years. “Most people think venture capital is about picking the right company to become the next big thing, but that’s the easy part of the job,” John explains. “The hard part is what you do with the company after you invest in it. Our average hold time for successful companies after we invest is eight years, so we spend a lot of time helping the CEOs and management team build the company. Our business is really about helping entrepreneurs with a vision take their small business and turn it into something big.”
With this goal in mind, New Atlantic Ventures aggressively searches for entrepreneurs and their businesses to invest in. “Right now, we have to think about what might be big and important in 2020,” he explains. To do this, New Atlantic Ventures focuses on six main sectors as their investing themes. The first is advertising technology, which focuses on how people’s time is moving from legacy media to new media. “We spend less time watching TV or reading the newspaper and more time online,” he points out. “The easy advertising money has already moved online. What’s waiting to be solved is how to move a brand online that isn’t focused on driving traffic to their website, like Coca Cola. They base their ads on emotional connections, and the internet is bad at emotion.”
The second theme is focused on how mobility will transform entire industries. “Music and movies have already moved to a virtual, digital medium, but radio hasn’t changed much over the years,” he explains. “The concept of TiVo or DVR hasn’t happened in radio yet.”
The growing prominence of e-commerce comprises New Atlantic Ventures’ third primary theme. “As of 2011, only 4.5 percent of retail sales in the US were transacted online. There’s a long way to go there,” he explains. “The easy stuff has already moved online, like the digital content of music, TV or movies, so you have to reason that the next wave is coming from the more complicated, high end of the spectrum. 10 years ago you couldn’t buy an $800 suit or designer dress online, for instance. But that’s starting to happen. Women are willing to do that today because they are unhappy with the lack of selection at department stores compared to the vast selection online, and because they’re tired of the cumbersome experience.”
Next, John identifies the fourth theme as cyber security. “Historically, a business looked at security from the perspective of playing defense,” he explains. “We didn’t want the bad guys getting in. That’s still a problem, since the bad guys get smarter, but now we are beginning to play offensive as well. Warfare in our lifetimes will move from bullets and bombs to bits and bytes. As a result, you’ll see the defense budget move in a fairly dramatic way over the long term, investing less in pyrotechnics and more into cyber.
“The fifth theme is focused on education reform,” he continues. “The cost of college has gone up dramatically, outpacing inflation threefold over the last 35 years, and the result, thanks to the internet, will be a dramatic reduction in the number of schools with physical campuses. Right now, very few schools are investing in online education, but MIT, Harvard, and Stanford are beginning to. At some point, you’ll have university brand extensions. Instead of just admitting 1,500 kids each year to study on-campus, they might turn out 100,000 global online graduates. Some people will still want to go to a campus for the social experience, but others will just be concerned with getting prepared for a career.”
Beyond education, John identifies the sixth theme as a fundamental reform of the healthcare delivery system. “We need to spend more time on prevention, and catching things early, and less on end-of-life issues,” he says. “Today, primary care doctors see thirty-five patients a day for an average of seven minutes per patient because it’s the only way doctors can make money in the “fee-for-service” insurance model. An emerging theme is primary care where you pay a flat monthly fee, and for that fee you get complete access to and unlimited care from your doctor 24/7. You can have ten appointments with your doctor for that fixed fee. Beyond primary care, health care reform will force doctors to be more accountable and transparent. You will want to know the price of a procedure or a test, and all of a sudden patients will begin to act like customers.”
It takes an innovative and outside-the-box entrepreneurial mindset to achieve the kind of success John has seen, and both stem from an often-overlooked but priceless attribute—optimism. “I’m really good at finding opportunity where others see problems,” he affirms. Similarly, he credits his parents, who are both creative and adventurous. John was born in Bloomington, Indiana, to his mother, a working woman with many careers, and his father, who worked as a lawyer for ExxonMobil. Due to the nature of his father’s job, they spent much of John’s young life traveling. The family had moved three times before John was old enough to attend school. They finally settled down in Caracas, Venezuela, where they lived for four years during John’s elementary school years. They then returned to the United States, where they lived in New York for two years and then Texas for six. “As a kid, I didn’t like moving so much since I had to leave friends behind and constantly make new ones,” John remarks of this childhood. “But as an adult, I’m so glad we did. I learned to speak Spanish at a young age, and I got incredible international exposure. Moving also made me more outgoing and comfortable with change. I learned to not be set in my ways, which made me more comfortable with change.”
When he was in fifth grade, he began working his first job delivering newspapers in New York on his bike. He entered a subscription-selling contest, outsold his competitors, and won a new bike, lending him new perspective on the interplay between hard work and success. He landed his second job while in Texas when, though he was technically a few months underage, he was tall enough to pass for a fifteen year old and began working as a pot washer at a Mexican Buffet. John worked hard, and within a year, he was promoted from pot washer to dishwasher, to busser, to cook, and eventually to waiter. “That year really reinforced the value of hard work,” he avows. “I learned that, whatever job you’re given, you can probably get promoted if you do it well. If you complain and drag your feet, however, you’ll probably continue doing that same job for a long time.” As he progressed through his career, John has seen how few people have actually learned that same lesson. “People would come to me asking for a promotion all the time,” he elaborates. “I always tell them that rather than ask for the job, they should excel at the job they have. Eventually I’ll recognize you as the person qualified for that higher role, but I won’t just give it to you because you asked for it.”
For most of his grade school years, John assumed he would become a lawyer like his father, which seemed a likely possibility due to his strong academic performance and his love of debating. He attended Stanford University, where he attained his undergraduate degree in Economics with a concentration in Political Science. Though he was still drawn to the idea of becoming a lawyer, he had a series of defining experiences that led him to believe he may be happier pursuing a career in the world of business.
The first happened when he was sixteen, looking to buy a new car. His father was planning to sell the family’s old Ford Maverick, which the dealer told him he would get $400 for as a trade-in. John offered to buy the car off his father for $400 from money he had saved, which his father agreed to. Six months later, however, after fixing up the car, John resold it for a thousand dollars, allowing him to buy the ’67 Firebird he had been really hoping for.
His inner entrepreneur continued to shine at Stanford, where he undertook two business ventures. In the first, as a junior, he took over publication of Stanford’s Fraternity Rush Book. After he covered the printing costs, he would be able to keep all of the additional advertising revenue. He recruited several friends to help and ended up making $8 thousand within only a few weeks. Then, in his senior year, he and several friends ran a movie series on campus every Sunday night, from which they generated an additional ten thousand dollars.
After he graduated, John took the entrance exams for both law school and business school and was accepted to outstanding institutions in both fields, including Stanford’s Business School. “I remember calling my mom and asking what to do,” he remarks. “She said, ‘Think of what you’ve done. What’s excited you the most?’ I realized it was all the business ventures I had undertaken, so I returned to Stanford for business school.”
Before returning to Stanford, however, he took two years off, during which he worked at Bain & Co. “I received my undergraduate degree a quarter early,” he relates. “Working at Bain & Co. then was the hardest job I’ve ever had, because I was getting to work by 8:00 AM in a jacket and tie while living in a frat house and celebrating the final weeks of my senior year. “
Despite the struggles of balancing college and work, he notes Bain as being an incredible experience. “They have a great training program,” he explains. “When you work there, you think of business issues from a strategic level. They taught me to look at things over time rather than focusing on a dramatic graph showing a drop over the last three months, which in the grand scheme of things is not a big change. We would give the client context and data, which gave them wonderful insight and was sometimes very counterintuitive. For example, we were working for a restaurant at one point that always had long wait times on weekend nights. We went to them and told them to stop promoting their appetizers so strongly, since it slowed down business and gave the restaurant only three table turnovers a night, rather than four or five. It was completely counterintuitive, but it greatly increased their revenue.”
After two years of working, John returned to Stanford for Business School, graduating with his MBA in 1984. He returned to Bain after graduation and he was immediately relocated to Malaysia, where he worked on an assignment for Guinness Malaysia Brewing. At the time, Mitt Romney had just cut a deal with Bill Bain to handpick five people to come work for Bain Capital. Six months into his stay in Malaysia, a partner at Bain offered John a new assignment in London. Shortly after, however, John received a call from Romney, urging him to come work for him at Bain Capital’s first investment, Key Airlines.
Before long, Bill Bain, the revered founder of Bain & Co., also called John. “He told me, ‘I don’t know you, but I have several of my partners fighting over you, so I should get to know you,’” John recalls with a laugh. “He asked me what I wanted to do, so I decided to go work for Key Airlines.” Within six months, John moved to Las Vegas, where the small company ran a fixed-based operation. Bain had guaranteed the loans of four 727 planes for $5.6 million to bid on a contract with the military flying troops as part of the stealth aircraft program. The company grew from $6 million to $50 million and was then sold to World Airways in 1987, after which John ran the company’s military business, which brought in two thirds of its revenue. “I could have made a fortune at Bain Capital, had I stayed, but I followed one of Bain’s partners, Coleman Andrews, to World Airways out of loyalty, which I’m very proud of,” John explains.
Life was good, but after a time, he realized he did not want to work in the airline business forever. This realization led him to create US Order. He was then able to sell part of the company for $15 million in 1995 and continued to serve as its CEO for a year, but quickly realized he was more interested in start-ups rather than running big companies. It was in the stillness and reflection of the several months he took off after leaving the company that he realized the massive opportunity they had missed by allowing the popularization of the internet to pass them by.
It was a defining moment in John’s career when he realized the importance of offering the essential outside perspective to businesses. With that, after all he had seen and learned at Bain & Co. and through his own experiences, he took the opportunity to launch the Draper Atlantic Venture Fund in 1998. The company grew into a success, and in 2006 John co-founded what is now New Atlantic Ventures. Only through missing out on the internet boom was John afforded the epiphany that has allowed him to garner so much success, growth, and prosperity through his current work, to which he plans to dedicate the remainder of his notable career.
In advising young entrepreneurs entering the business world today, John stresses the importance of reflecting early about what career one wants to enter, and streamlining one’s education around that. “It’s a crime that so many students graduate with liberal arts degrees when there are no jobs that match those degrees,” he explains. “Colleges should be honest with students and set forth a career path freshman year. College is a training ground for the real world, so think about what your degree will say about you when you go out and look for your first job.”
This piece of advice plays into the larger philosophy that has guided his life, which is the value of perspective. Whether it’s the perspective of his loving wife, Caren, and his three children, the perspective of experts in various fields who have unique knowledge to offer about what’s to come, or perhaps the perspective of his own inner voice as it synthesizes past experiences into new solutions, John draws on an array of sources to forge the best possible path forward for himself and his family, just as he does for every business that looks to New Atlantic Ventures for a better point of view.