Having Tim Draper be a part of SIC is a dream come true. It’s something you can’t imagine ever happening when you first start out building your Fintech blog as a side project. Tim Draper is the kind of individual who helped envision the beginning of the internet age with companies like Hotmail and Skype. He has been key to visionaries building companies like Tesla, Baidu, Twitch and so many more. And he is currently playing a major role in reshaping financial services with his vast investment in blockchain technology and cryptocurrencies.
And that’s just his day job. That doesn’t even speak to his non-profit efforts and involvement in trying to improve the political system. For that reason, you would imagine Tim to be the kind of individual that is totally inaccessible. But perhaps what has made him one of the most successful VCs of all time is the fact that he hasn’t lost sight of the fact that opportunity lies with his ability to be accessible to the next generation of entrepreneurs.
In fact, he and his whole family have been one of the most formidable VC teams in the US and for that matter across the globe for over 50 years. Be it building non-profits, game changing companies or helping to reimagine government policies, Tim Draper is a visionary of his time and SIC is honored to have him share his thoughts on VC and Fintech with us in this thoughtful discussion. Check out our discussion below.
CL: Tim, during your career you have been a part of founding Draper Associates, DFJ Venture Capital, and Draper University. Can you talk about your career progression and why you have continued to build new organizations to better support the startup community?
TD: My mission in life has been to support entrepreneurship and venture capital around the world. I have done as much as I could to drive this mission, through my VC business, its various funds and its network, through my school, its ecosystem and its ideals, and through policy, trying to develop laws that enable, train, attract, and easily fund entrepreneurs wherever they may be. Draper Associates is truly a global VC firm.
Draper Fisher Jurvetson has had tremendous success with Baidu and Skype. The Draper Venture Network boasts 15 relationships in 35 countries. And Draper University has taught about 1000 students from 72 different countries. They have started 350 companies around the world.
BizWorld, Innovate Your State, the School Voucher initiative, Six (and now 3) Californias, and my government advisory positions and speaking appearances around the world have all been efforts to build a platform for entrepreneurs to become as good as they can be and to freely delight their customers.
CL: Financial services has lagged most other industries on the innovation curve due to regulation and an industry-wide minimal risk tolerance. How do these factors impact the way you approach a Fintech investment from say a social media or e-commerce investment?
TD: Yes. Ever since we attempted to drive DFJ MeVC, a public VC fund, and we failed in our attempt to make Xpert Financial as a way to allow companies to be tradeable and stay private, I have shied away from heavily regulated financial investments. But I still knew that the regulations were stagnating our economy. Fortunately, when there is a new technology like crowdfunding or Bitcoin, the regulators (at least the US regulators) generally don’t interfere, preferring to see how technology evolves, and the markets respond.
In the case of Bitcoin, it was long awaited that someone would be able to move the heavily burdened financial markets so that society could progress. We are fortunate to have a government that is so accommodating to new technology, although I would also prefer that they try to better keep our regulations light touch.
CL: Within your portfolio of investments you have a broad set of Fintech startups across alternative lending, investing, blockchain, and more. So what areas of Fintech are you most intrigued by and why?
TD: I am most fascinated by Bitcoin and Blockchain and all the amazing markets that can now open up because of these new technologies. Companies can get funding easier for their missions, the unbanked can get banked, and the Blockchain will provide better records and more honest distributions and redistributions of capital. Governments will have to compete for us, and they can use Bitcoin and the blockchain to do it effectively.
CL: Tim, you have been an advocate and believer in blockchain technology for some time now and thus far have been correct in believing in its potential. Can you talk about why you are such a staunch supporter of blockchain technology?
TD: Having a perfect ledger is incredibly valuable. If you are keeping medical records and combining them with bloodtests, fitbit results, DNA, blood types, so that doctors can have confidence when they apply new AI techniques to evaluating patients.
If you are trying to keep track of who owns a piece of property in the third world, the blockchain can keep perfect title records. If a government is trying to keep records on pensions, social security, medical insurance, census data, or welfare, the blockchain is incorruptible, honest, and fair.
If you are trying to have cash that you can use all over the world rather than just in your own country, you can use Bitcoin. If your country is failing, rather than fail with it, you can pick up anywhere you like by pulling your bitcoin down. Bitcoin is a hedge against bad governance, and there is a lot of that out there.
CL: As an investor in Prosper, the second largest marketplace lender how do you see the marketplace lending story playing out? I continue to believe it brings transparency and efficiencies to consumer lending in a pretty revolutionary way, but there are many naysayers. What’s your perspective?
TD: There is really no reason that we have a bank as a trusted third party anymore. The blockchain can be that trusted third party. Prosper, and others like it, allows people to lend directly without having that trusted third party be a bank.
CL: Recently you launched, “Meet The Drapers,” a show where your father, you and your daughter judge startup founders on their ideas and then those companies get funded via equity crowdfunding on Republic. What was the inspiration for the show, and what excites you about equity crowdfunding as a tool for startups to raise capital?
TD: We liked the idea of launching a show that allowed the viewers at home to participate in the success of a young technology company. We also liked the idea of making a show together. It is really cool what has happened with the show. Companies are actually getting funded by the viewership!
CL: Having been in the VC business through the dot-com boom and now during the bitcoin craze, what are some of the similarities and differences you are seeing between these two periods?
TD: They are both big. Bitcoin is bigger since the industries it affects are bigger. The internet affected the communications industry, the information industry, the gaming industry, the taxi industry, and entertainment. Bitcoin affects larger industries: Banking, Real Estate, Insurance, Finance, Healthcare, and Government itself!!
The Minute Rundown with Tim Draper
CL: What is one tip you would give to someone considering building a VC fund of their own?
TD: Start in a place that doesn’t have any VC.
CL: Tim, you and your whole family for 3 generations have been at the forefront of the world of VC. Can you talk a bit about how you have been able to manage a great deal of success over such a long and storied career?
TD: I hit on some of these concepts in my book, How to be The Startup Hero, but the best I can think to tell you is that they watched how much fun I had through the trials and tribulations in working with entrepreneurs, so they decided to do it themselves.
CL: It’s pretty amazing that your daughter Jesse founded Halogen Ventures, and your son Adam founded Boost VC. What does it mean to you to have your children taking after the family business and building successful funds of their own?
TD: Both Jesse and Adam have taken new slants on the VC business with Halogen and BoostVC. Billy works with me to build and drive Draper Associates. My other daughter Eleanor is helping with a new startup called Bulletin. I am proud of all of them.
Tim Draper has been honing his craft for most all of his life and in doing so has been able to create a set of powerful tools to help drive the entrepreneurs of the future forward with gusto. Investment alone won’t get you far. Investment with vision, resources and support will.
That’s what Tim and the whole slew of Draper organizations is relentlessly working to do. What is immensely exciting to me is this idea that as game changing as the companies Tim has invested in to date, he has a pretty strong feeling that the age of blockchain is even bigger.
What is about to happen to the financial services arena is hard to even imagine. But you can bet that blockchain technology will play a meaningful role in its reshaping. Thanks Tim for the incredible views from the front lines of the game. And thank you for investing in truly Simple.Innovative.Change.