There is lots of competition for the title of most influential venture capitalist of all time. But there is no disputing that the Drapers are the industry’s first family.

William Henry Draper launched the first Silicon Valley venture firm in 1959. His son Bill co-founded Sutter Hill Ventures and later created the first U.S.-India venture capital partnership. Bill’s son, Tim, is one of the founding partners of Draper Fisher Jurvetson, a Silicon Valley shop with affiliates all over the world. And there even may be a fourth generation, as Tim’s son Adam is VP of business development at a new private company exchange called Xpert Financial.

But back to Bill. He recently wrote a book called The Startup Game, which reads like a first-person history of the venture capital industry. It includes lots of exposition for those not familiar with venture capital, a generous dose of advice and anecdotes that range from making a $20 bet with Fidel Castro to not understanding why his partners were so amused after being pitched by a high-end vibrator company (Draper assumed they made vibrating chairs).

We spent some time on the phone in advance of the book’s release, and what follows is an edited transcript:

Fortune: Why did you choose to write the book?

Draper: I believe venture capital is one of the world’s most importantly economic driving forces, so I wanted to tell the story of venture capital as it started and unfolded through three generations. To my knowledge, we’re the only three-generation family in the industry. The people I want to reach are entrepreneurs thinking about starting up a company, VCs trying to do a better job or those thinking about venture capital as a career.

The book is largely structured as autobiography, with specific events in your life used to illustrate larger points.

Yes, but I tried to be very careful not to write an autobiography. Maybe someday I’ll write a whole other book about my UN days or something like that. But I did want to use my life where it was important, like meeting with Deng Xiaoping, who did more for entrepreneurs than any other man in history, by opening up China. And the same goes for Manu Singh in India. Those stories show where a leader at the top can make a huge difference. Indira Gandhi and that family had a stranglehold on India for 40 years, and kept entrepreneurs from openly and aggressively growing. Now that has changed.

Median venture capital returns have been negative or around break-even for more than a decade. Are you concerned that it won’t be considered a legitimate asset class for much longer?

My take on venture capital’s problems is that there has been so much money thrown at it that it’s been overwhelming. There just haven’t been enough Facebooks and Skypes.

Yes. In the early days of VC, the returns were so attractive that they got Wall Street’s attention. But then perhaps it was too much attention. On the other hand, I really want to stress that this has been good for the overall economy, because it has meant more entrepreneurs could get started. If there were many fewer venture capitalists, perhaps a company like Facebook or Skype wouldn’t have been created in the first place, or been able to get funding.

Is it possible that part of the VC return problem is that there are too many lousy VCs?

No. I really take issue with those who disparage the quality of the people in venture capital. Most of them are really fine, competent and direct people. I know lots of them, and they are extraordinarily talented. Obviously there are some real devils to avoid, but my overall point is that even if lots of great people are searching for the next big thing, there might not be enough great big things to go around.

You mentioned that there are some devils. What’s your advice to an entrepreneur who might have multiple funding options?

My advice to the entrepreneur is to be sure that you have sophisticated support that will back you as times get rough. I’m not talking about stupid money – the best VCs don’t throw good money after bad – but smart money coming from a competent team of VCs with a good record who seem compatible with you. Don’t just go to Sequoia or Kleiner Perkins, because it may not be the best fit for you or your particular company.

Also, it’s important to identify the person at the VC firm who will be working with you. A great firm name isn’t worth much if the actual partner on your board isn’t very good.

Your story mostly focuses on Silicon Valley. Why do you think that venture capital has thrived there, in ways that it hasn’t in other places, like Boston, where it’s been around for just as long?

I think there’s just lots of structural support in Silicon Valley. It’s the old west mentality, where people take risks and failure is just considered experience. Get back up on the horse and keep riding. In the east, there’s a bit less encouragement and risk-taking appetite.

We obviously have Stanford, but Boston has MIT and Pittsburgh has Carnegie Mellon. There are environments growing around those centers of high tech, but Silicon Valley is a little like the mother church.

You’ve spent lots of time investing in China and India. If you were to target a new country, what would it be?

I think Brazil. It’s the biggest country in Latin America, has good infrastructure and its political direction seems to be encouraging to free enterprise.

You were one of the original seed backers of Skype. What are your thoughts, now, on the sale to eBay – which your son opposed – and its new plans?

Now it’s really a new beginning, and I’m optimistic. I really believe Skype has the ability to become the next AT&T, or better. It’s a marvelous communications system. Like with most companies, it will come down to management. Good management early on is why it was successful in the first place.

Do you plan to write another book?

Maybe. Completely depends on how you review this one.