It’s true, Tim Draper picked losers. He tells me that even before I ask him. The VC legend, who has endorsed Hotmail, Tesla, SpaceX, Coinbase, Ledger, and many other successful companies, willingly coughs that he invested in lemons. Some, he says, went out of business completely, others just didn’t give him the money back.
“By the same token, there are winners who get us paid a few times and then some who give 1000x the investment,” he told the magazine during a rare face-to-face appearance at the Web Summit in Lisbon, Portugal in early November.
It’s a question he’s often asked to be fair. His investment success rate is impressive, even his lemons are impressive – think Theranos, for example – but he always manages to find good projects. Of course, a successful VC can choose from the crème de la crème and that can turn the results on the positive side, but Draper attributes this to his four-step evaluation process.
On our Q&A stage today, we heard from a man with the Midas touch, VC legend Tim Draper, as he was taking his reality show – Meet the Drapers – on the go at the Web Summit. pic.twitter.com/P7eY1r0Rlp
– Web Summit (@WebSummit) November 3, 2021
According to Draper, the greatest single person in any successful company is trust. Another crucial factor is that there is only one decision maker in the company – with the team’s trust in this leader.
A definite corporate killer is when co-founders don’t get along, maybe both of them believe they should become CEOs, which can lead to a lot of doubts and delays.
The market in which projects want to operate must also be free from restrictive restrictions or excessive regulation.
“If the US government had regulated the Internet in the 1990s, we would not have had the same success in Silicon Valley and beyond. Companies need to feel free to be innovative. And they mustn’t feel overwhelmed by government regulations. “
Its fourth criterion is curiosity. Yes, eccentricity is good for business.
“A lot of the winners are often a little strange. Your ideas are sometimes left of center and I often say, whoa, what are you doing? “
Hotmail was one of those cases – the idea of free web-based email was completely at odds with the way the Internet was built at the time. And Skype quickly changed its business offering to a freemium model just as Draper and his team were about to write the check.
“As for Tesla, who needed another auto company, especially when you looked at the DeLorean disaster?”
After all, everyone needs enough money to be successful, and Draper feels that sometimes people didn’t foresee how much they are going to need. “When it comes to finding funding, it’s better to build a long runway than go out halfway.”
On the positive side, by the time an entrepreneur hits the 25th pitch, they already have it under control in terms of their business, competition, and market. He prefers to see the 25th pitch rather than the first, it saves him time.
For our new @dshaccelerator in Austin, we are looking for extraordinary founders with extraordinary ideas. Apply to visit or live in the house and participate in programming. https://t.co/F8gJaBbBeU
– Tim Draper (@TimDraper) November 18, 2021
Enter the dragon
Draper’s talent for selecting winners extends to selecting cryptocurrencies as well. In 2014, Draper famously bought 29,656 bitcoins that were seized from the US marshals at a bid of $ 640 per bitcoin. Do the math: that’s nearly $ 2 billion in value today. But Draper thinks it can go much, much higher. He will tip $ 250,000 by late 2022 or early 2023 at the latest.
He believes he was overconfident in selling Marshall in the United States – but he didn’t expect to win all nine lots. Lots of people have only heard the auction part of the story, but it was actually just a way to offset the 40,000 bitcoin he lost in the Mt Gox fiasco.
“I’ve always been optimistic about Bitcoin – for me it stands for freedom, freedom across borders. I also love the element of trust – freedom and trust are a great combination, ”he says.
Draper Associates has around 30 unicorns under its belt, give or take a few million, including Skype, Hotmail, Twitter, and Tesla. When asked about this level of success, Draper says it’s a little different from other venture capitalists.
“I am a start-up investor and have entrepreneurship in my blood. When I meet people with the same drive, I click on the same ‘let’s do it’ approach. I have to see the drive in their eyes and know that it is in their heart. “
“Another difference lies in my attitude. Other investors wonder what can go wrong. I ask what if that works? What if it works and something really extraordinary happens to humanity and society – then it might be worth a try. “
Bitcoin is transforming the world
Draper is very encouraged by the recent news of world governments taking steps to adopt Bitcoin. He is thrilled that countries like Panama, Uruguay and Ukraine are looking like they are following the example of El Salvador where it is legal tender.
He has first hand experience of decision making in South America. He tells of an ongoing conversation with the former President of Argentina, Mauricio Macri. Draper had first spoken to him about Bitcoin when it was valued at $ 10,000 and then again when it had dropped to $ 4,000 two years later. At the same time, the Argentine peso had risen from $ 0.75 to $ 0.25. Draper made a bet on him – if the Argentine peso outperformed Bitcoin, he would double his investment in the country.
“Then I added that if bitcoin outperforms the peso, you should make bitcoin your local currency. Marci, however, was concerned about the impact of the IMF – similar to how El Salvador faces international sanctions.
“That is the wrong angle. When countries like El Salvador make these decisions, money will follow. I am going to El Salvador myself, as are many other investors. “
Draper believes El Salvador made a brilliant decision and will take advantage of the first mover advantage. Not only will citizens get used to the use of cryptocurrency, but the introduction of the blockchain will also help eradicate corruption across the country.
Draper is optimistic about Bitcoin. He likes the idea of running Bitcoin from start to finish in his investments.
“I would like to run a venture fund exclusively in Bitcoin. I would invest in Bitcoin, the company would pay its employees in Bitcoin, its suppliers would pay in Bitcoin, and the whole thing is a closed loop on the blockchain managed by smart contracts.
“Plus, when the company sells, all of the money flows through a natural waterfall into everyone’s Bitcoin wallets – everyone gets paid for what they’re supposed to be without the need for transfer agents, layers, accountants, bookkeepers and auditors.”
His belief in Bitcoin makes him shake his head at the recent COVID Paycheck Protection Program (PPP) loans in the US and sees them as a missed opportunity. These roughly $ 953 billion total PPP checks should keep businesses on credit and employees on their books.
“Why didn’t you pay for it in Bitcoin? There is another $ 3.4 trillion she will spend and that way it would have held its value. “
Here Draper makes clear his feelings towards the people who rule Washington who are “well beyond their prime” and “they don’t want change”.
While Draper is pessimistic about American leadership in government, he is still passionate about the technology sector and especially entrepreneurs in the field. He would elect someone like Miami Mayor Francis Suarez to be President of the United States.
“Someone like him could make sure America doesn’t fall behind,” he says.
Draper is passionate about everything in the digital asset space, even central bank digital currencies with their questionable results.
“I like every innovation that has happened around Bitcoin – the blockchain, the smart contracts, layer two solutions, NFTs, decentralization, BitcoinCash, Ripple, Algorand, Tezos and all the great innovations. But I like Bitcoin the most because it’s totally decentralized. “
“So when a government like China says no to Bitcoin, Japan shows up and says we’re taking it in. The last laugh goes to China, as the brain drain will go to Japan. “
At the heart of Draper’s vision of the future is light government, and he re-uses the example of if the US government tried to regulate the Internet because “it would have destroyed economic value and the minds would have just left the country”.
Draper’s children have followed him into the investment world, his daughter Jesse focuses on women-supported companies through her startup Halogen Ventures, and his son Adam, founder of Boost VC, who invests in startups that bring a science fiction future closer. Draper prides itself on both, but remains a generalist himself.
I just found out I’m the first ever female solo GP in Los Angeles and #Crunchbase just reminded me that we made 106 investments @HalogenVC! To celebrate something! 100% female founders! #femalefounders #investinwomen #halogenvc #losangelestech
– Jesse Draper (@JesseDraper) November 10, 2021
And although he is consciously American, he sees a future world in which there will be no borders. He can already see that owning a smartphone can open up worlds for the owner.
“I hope my grandchildren will one day ask me what a limit is and when I explain it they’ll say – that’s just stupid, Grandpa,” he says.
“If someone is a good programmer in Timbuktu, I want them on my team. We’re moving into a world without borders and all that nationalism and patriotism is just the roar of a dying lion. Being physically present is no longer relevant and the sooner people become aware of this fact, the better. If the government makes rules, people will just move to where the rules are easier or better. “
Draper believes that those boundaries will come down sooner than people think. In fact, he expects the borders to become porous in five years.
“We don’t need borders or customs to keep people and things in and out. People will be citizens of the world and can choose which government they want to belong to. “
And cryptocurrencies are only part of that development. Draper has been asked many times if he would sell his bitcoin for fiat, but he views fiat as the currency of the past and cryptocurrency as the currency of the future.
“Would I exchange my euro for a drachma or a French franc? Under no circumstance. Instead, I’m waiting for the day when I can use Bitcoin to buy my food, clothes, and accommodation. And if I can, why on earth should I hold dollars? “