Timothy Draper, born in 1958, is an American venture capitalist who has invested in multiple startups. He is also the founder of Draper Associates, Draper Fisher Jurvetson (later renamed Threshold), and Draper University of Heroes, a school for early-stage entrepreneurs in San Mateo, CA.
His original suggestion to use “viral marketing” in web-based e-mail to geometrically spread an Internet product to its market was instrumental to the successes of Hotmail and other web-based e-mail providers and has been adopted as a standard marketing technique by hundreds of businesses. He was ranked 52 on the list of the 100 most influential Harvard Alumni, and seven on the Forbes Midas List. Tim was named Always-On #1 top venture capital deal maker and he has funded many successful startups.
Tim has invested in prominent technology companies that include Coinbase, OpenNode, Ledger, Skype, Twitch, Tesla, and SpaceX through Draper Associates, and Tumblr, Giphy, Hotmail, Twitter, AngelList, and FourSquare through Threshold. He is a vocal bitcoin advocate and was an early investor in cryptocurrency.
In a heart-to-heart conversation with James Jung, Founder and CEO, beSUCCESS Media Group, Tim shares the knowledge and experience that he has gathered over the years and also few tips for building a successful startup.
Tim had previously launched “Six Californias,” a statewide initiative to create six new states and dissolve a failed one in California. Previously, Tim served on the California State Board of Education. In November of 2000, Tim launched a statewide cyber-initiative on school choice for the California General Election.
“I always talk about two things, first is trust and the other is freedom. If you build trust, and freedom in your society, you will have a very full workforce, a very wealthy society, and a creative environment. The economic systems will be running like clockwork, and you’ll just have a better life along with others who work in that country”–Tim Draper
What makes you believe in yourself so strongly?
Time makes one wise and growing old has its perks. With time confidence grows because you have seen a lot of scenarios play out in different ways. So, I have confidence in the things I’m thinking about as I have experienced something similar in the past. With age, I have developed a good foresight that helps me in predicting the future. It became possible because I meet with at least eight new entrepreneurs every day and they tell me what the future is going to look like, or at least their way of conceiving it.
By putting some of that together I get a pretty good sense of what the world is going to look like. A lot of what we do at Draper University to build the confidence of our students is that we tell them it’s okay to fail. You can fail and fail again but you gotta keep trying until you succeed. Once you are successful everything else will fall in place eventually.
Failure teaches more than any book can teach about better life lessons. As a person moves ahead in life, they realize that failure is not a boulder in their path to success, rather by failing one ends up being more successful because that person has more experience and wisdom. When I was growing up my mom always said, “Go explore.” Exploration was a big deal at that time and so I am of the view that going through life and exploring it builds your confidence because you try doing things and if they don’t work, then you know, okay, we don’t want to do that again but if they do, then you go, okay, I can follow that path a little farther.
People say that success is a mindset. What are the mindset principles that guide your life?
My dad used to say that in a business it doesn’t matter who is buying or who is selling. It is the personal connection that matters. I believe in his saying, both spirit and in letters, which means that if an entrepreneur can build personal connections, then that person is going to learn a lot of things. New opportunities will crop up that one would have never fathomed without building a connection and dig deep to know the true needs of the people.
Next is the mindset, which I consider as a prerequisite for dealing with people. Business is not always about numbers. Partially it is about the knowledge of the future that you hold, and most importantly it is about people and how an entrepreneur treats them to build a long-term relationship. This includes one’s customer, supplier, and employees.
Do you have any fears? What are they and why?
No, I don’t have any! I have a sticker on the back of my computer that says fear is the mind-killer. It’s a quote from Frank Herbert’s book, Dune. I firmly believe in this quote and my best shot at proving it is petrified people who watch the news regularly. These are the people who are driven by fear that exists in their head, scaring them, and that is the reason they keep coming back to watch the news as if it is an addiction.
I went and watched the news with the same mindset and after watching around 13 news stories realized that blatant fear-mongering is going on. I called it a day and pressed the snooze button on scary news. If you watch the news and build that into your thinking, you will be afraid of all sorts of things. You will be afraid of the virus, you will be afraid of walking outside, you will be afraid of getting in your car, getting on an airplane, afraid to communicate with people, you will be afraid of all those fears because the news is pushing fear on you as it helps them sell more ads.
Meanwhile, if you go out and explore you will realize that most of these fears are unfounded. It creates a lot more confidence. So, I would encourage you to forget the fears, go out there and live life.
Are you going to run for governor of California or President of the United States?
Ah! Well, not if my wife has anything to say about it. I don’t have plans. I think that when a person is in those jobs, they get trapped. The person gets trapped in not being able to make anything happen. As an advisor to the leaders, I always talk about two things, first is trust and the other is freedom. If you build trust, and freedom in your society, you will have a very full workforce, a very wealthy society, and a creative environment. The economic systems will be running like clockwork, and you’ll just have a better life along with others who work in that country.
Whether you run a company, a country, a state, and a city it is freedom and trust that matters. You’ve got to allow people the freedom to go try things, and you should have the trust that they will do good things.
Can you please describe more about trust and freedom?
I will use Korea as an example to elaborate on trust and freedom, as my dad fought in the Korean War. After the war, there was this Demilitarized Zone right between South Korea and North Korea. North Korea took on Marxism, socialism, and government control that prompted no freedom. The government told everybody about what they have to do. On the other hand, South Korea took to free market, open system, free speech, and capitalist democracy. Cut to current times the average South Korean makes 460 times more than what an average North Korean would make. So clearly, the experiment shows that freedom matters. Freedom is everything that it takes to create economic value and healthier people.
While talking about trust, I always look towards Singapore. Once upon a time, it was the least trusted country. There was thievery reigning in and they were one of the poorest countries in the world. I think they were the poorest in the world about sixty-seven years ago and then Lee Kuan Yew came in and he built a system based on trust.
Then 67 years later he built a country that is now one of the most trusted in the world and also one of the richest. The average Singaporean, I think, is either the second or third richest person in the world in their per capita earnings. So, I would say that if you can build freedom and trust into a system, you end up with a great world. That’s by the way why Bitcoin is so important to me. It builds trust, and freedom around the world.
What is the most important question that you ask a startup founder when you meet them for the first time?
Only one question that matters and I keep on asking an entrepreneur is Why are you doing this? I do it in an intimidating way that makes those entrepreneurs feel as if they are out of their minds to even come up with such an idea in front of me. Most entrepreneurs back right away, but then others prefer to say that they want to make money and then there are the clever ones who say that they want to make me some money.
However, a true entrepreneur while facing this question would come forward and burst their heart out. They would say ‘I want to do it because they did it all wrong at my company. I tried to tell people that the customers wanted this, but they just wouldn’t listen, and as a result, I had to create this business. It’s one of those things I had to do because the world wouldn’t have seen it if I hadn’t.’ So that’s the question and if you have the right intonation, you get the answer that you want.
What are some of the top reasons most startups fail?
Startups usually fail when people aren’t getting along. Sometimes there’s no market for the product, but that’s rare. Sometimes it is the product and they can’t make it work, but that’s rare too. It’s usually just the people. If they are getting along, humming along, and everybody’s excited about what they’re doing, they’re going to get it done.
I think Elon Musk is going to get people to Mars because people are excited about that prospect. So, if people are excited, and they’re getting along, because they have a common purpose, it’s going to work out. But if you have two people and both want to challenge each other the whole time, that startup is going to lose unless they’re challenging each other, for the good of the company.
However, if they’re challenging to unseat each other then you’re going to have problems. We’ve had problems when two founders were dating. We’ve had success when they’re married, but not when they’re dating, because it’s stressful to run a business. Usually, the relationship blows up, and then the business blows up. When entangled in such affairs they’re just not listening to the customer. You always have to delight the customers, do whatever it takes to make the customer happy and if you do that, then your business can be alright.
Besides cryptocurrency, what other sectors excite you?
I’m looking at these technologies that are changing industries. I look for lazy industries where the existing oligopoly is charging high prices and providing bad service to their customers. That’s number one, then I look for startups that are using new technologies to apply to those industries and I want those to be big industries. The reason I’m excited about Bitcoin, and the blockchain and smart contracts, as well as artificial intelligence and surveillance, is that they can transform the biggest industries in the world.
Once people can start offering services, government services across borders, then people start thinking that instead of being tribal, like I am Korean, instead, you’re saying, I am a member of this world. I grabbed my governance, from all these different locations, different services, and that will make governments improve, and governance will improve, and governments will have to compete for us, they’ll have to provide better service, they’ll be accountable to us.
The Draper ecosystem keeps growing and everybody’s very excited about it. What are some of the latest developments that you are excited about?
A lot of what I do with a Draper ecosystem is an experiment and when an experiment is a success, then I double down on the experiment. Draper University was a great way to attract amazing entrepreneurs from all over the world, and encourage those entrepreneurs to try new things and to grow and build businesses. Now we’re about 10 years into it and we’ve had 1200 students for hero training. They’ve started about 500 companies and about 15 of those companies are worth more than $100 million.
We’ve built an amazing company and so I would say Draper University is a big success, and we need to figure out how to continue to grow it. There’s one that’s sort of in the middle, which is the Draper startup houses and those are various locations around the world where people can go and be entrepreneurial, and have a relatively inexpensive place to stay, to work, and to get to know other entrepreneurs, wherever they may be. Now there are 15 of those and we’re continuing to grow and then the Draper associates, the Venture Fund, and the Draper venture network where, of course, John Nam from strong Venom’s is one of our partners, we’ve continued to bring success to our investors through investing in some startups that ended up working out pretty well.
Most of your children are following in your footsteps and it seems business runs in their blood. What are your opinions on it?
I hope so because three of my children are venture capitalists. Adam runs Boost VC which is an accelerator and that has been a big success. His seated coin base is one of the examples. Billy worked with me for four years. He brought me Robinhood. So, I guess he’s got a little bit of an eye for it too.
My daughter Jesse, is backing women. She has backed some amazing women entrepreneurs and a whole bunch of other companies in which she has been very successful. So, yeah, happily, they are on their way doing some great things. My younger daughter is still growing up and slowly learning to tread the ropes. She may end up being a venture capitalist, she may end up being an artist who knows.
I don’t say it’s genetic but it was nice to go to the dinner and have my dad talk about his companies. He had me go and visit various companies that he was investing in. I did the same thing with my kids and they saw how much fun I was having and how exciting it was, and sometimes how treacherous it was. I think they learned a lot, they enjoyed it and they jumped on board. Any person who has a career and if they like it that will pass on to their kids.
To the founders around the world do you have anything to share?
If you’re a founder, first, good job, and I know that you’re going to create a better society, no matter what happens to your business. If you succeed, that is fantastic. If you do not succeed, if your business fails, just remember that you moved the ball forward, you got people thinking in a new way, you tried something, and that is a very positive thing for the world.
There were 20 search engines before Google, most of us wouldn’t know the names of half of them but they pushed the ball forward. There were many social networking sites before Facebook. Before Apple had the Ipod, there were 50 companies that were doing something with a hard drive and music. Whatever you’re doing, you’re pushing the ball forward. If you catch it, right, fantastic but if you don’t just know in your heart that you move the ball forward and you should feel the success within for whoever succeeded in that endeavour.
So that would be my thinking for an entrepreneur. My advice is to do it because you’re going to live a very unique and interesting life and if you don’t do it, you will regret it. If it’s in your heart, you have to get it out and never keep it to yourself. Tell everybody that you know what you’re doing. Don’t worry about bad inventions or whatever. It’s better to just get it out there because everyone you talk to will improve the business.