Tim Draper, an illustrious venture capitalist, has profoundly influenced the tech landscape through his investments in companies like Baidu, Hotmail, and Tesla. Founder of Draper Fisher Jurvetson (DFJ), Draper University, Draper Venture Network, and Draper Associates, Tim is a staunch advocate for Bitcoin and decentralization.

With a legacy that includes investments in groundbreaking companies and a visionary approach to future technologies, Tim Draper's insights are invaluable for anyone looking to understand the intersection of venture capital, digital currency, and technological innovation. In this interview, Tim shares pivotal moments from his career, his views on cryptocurrency, and his thoughts on the future of decentralization and technology.

Your investment portfolio spans numerous successful ventures like Baidu, Hotmail, and Tesla. Could you share a pivotal moment or decision-making process that significantly influenced the success of one of these investments?

The Hotmail founders, Sabeer Bhatia and Jack Smith came to us with a pitch to become website designers, and as we were showing them the door, they said they had a wild idea for free web-based email. We brought them back in and decided it was interesting enough to make a small investment.

At the first board meeting, Jack Smith proudly stated that the web-based email was up and running. I asked how they were going to market this amazing phenomenon, and they suggested TV, radio, billboards… expensive alternatives that we and the company didn’t have the budget for.

So I asked if they could just blast it out to all those people on the internet. They said that that would be spamming. Then I said, “You are giving this away for free, why not put a message at the bottom of each email that says, “P.S. I love you. Get your free email at Hotmail.” They thought I was crazy, but eventually, I convinced them to put the message at the bottom, just no ‘P.S. I love you.’” The product was the fastest-growing consumer product in history. It grew to 11 million users in 18 months. We eventually sold it to Microsoft, and you will have to read my book to hear about that negotiation.

Your early support for Bitcoin has been widely recognized. What initially drew you to cryptocurrency, and how do you see its role evolving in the broader financial landscape?

At first, I just thought it was fun. I had been looking for digital cash for years and assumed that it would come from some game company or another who decided to make it fungible between games, but when Bitcoin showed up, I thought there might be something there that they could all use. I bought what I thought would be 40,000 bitcoins for $250k from Peter Vincennes at CoinLab, but he had trouble getting them. First, the chips he ordered to mine them didn’t arrive for months. Then the coins he did get were locked up at Mt. Gox when that company “disappeared” the money. So I thought that was the end of Bitcoin, but the market had other ideas. They still loved Bitcoin. So I dug deeper and realized that in addition to buying pizzas, and illegal substances, Bitcoin was being used for some life-changing applications. It was used for remittance, for paying people overseas, and for allowing the unbanked to become a part of the world economy, and it was trusted without a bank or government as an intermediary. At that point, I knew it was going to be big.

As the founder of Draper University, you've championed entrepreneurship education. What qualities do you believe are essential for successful entrepreneurs today, and how does Draper University embody these principles?

Entrepreneurs have to be resilient and they have to believe that what they are doing is more important than anything else they could ever do, whether they become financially successful or not. We have our student founders memorize an oath that encourages them to make good, effective long-term choices. They also need to feel free to innovate without government or other intervention.

You've been a vocal advocate for decentralization and blockchain technology. How do you envision these technologies shaping industries like finance and healthcare in the coming decade?

I believe that Bitcoin will decentralize finance in all forms eventually. Bitcoin is decentralized, open, global, transparent, keeps perfect records, and is accepted everywhere by anyone, which the banking/government system cannot say. Eventually, great technologies eclipse existing antiquated oligopolies, but it takes time and constant pressure. Healthcare decentralization is simple. While people do want every healthcare provider to have access to all their health data, people would like that data to be in their control.

Your involvement in the proposed division of California into multiple states gained significant attention. What inspired this initiative, and what lessons did you learn from the experience?

I was appointed to the State Board of Education for California, and I realized how ridiculous the system was to have centralized decision-making for all education for all students throughout the state. People from Petaluma had to petition us to use their milk money to build a gym. The board was about to turn them down before I asked, “Have any of you been to Petaluma? There are more milk cows than people there. They have plenty of milk. Let them build a gym.” Also, the government-controlled California Teachers Association fights hard for teachers to the detriment of the children who we are all trying to educate. They fought hard to keep a paedophile in a district, and after the school principal spent $1 million in legal fees, and finally got rid of him, he just showed up in the district next door. They have a name for it: “The Dance of the Lemons.”

I left the Board and decided to put a school choice proposition on the ballot. I spent a lot of my own money to get it out there, but the entrenched government unions around the country forced their members to donate $100 million to defeat my measure. I took another tack with Six Californias, and later with 3 Californias. I figured that by giving people who didn’t want to leave beautiful California a choice, the multiple states would have to serve their constituents better, and they would naturally improve their education systems (and everything else) to attract the people, the businesses and the money to their new state.

It turned out that the entrenched government unions blocked me from these initiatives too. They undercounted the signatures that I submitted for Six Californias, and for 3 Californias, we doubled the number of signatures, so they couldn’t undercount and get away with it, so we were ready to go on the ballot, and our polling was showing a possible victory. But the day before the ballots were printed, they got the California Supreme Court to vote to pull it off the ballot! They said they thought it would be disruptive to California. It was dirty politics, and I think the 40 million people of California are suffering from that kind of government union influence to this day.

Looking at your investment philosophy, what criteria do you prioritize when considering potential startups or projects to fund? How has this evolved over your career?

We look for uniqueness. We look for people who are uniquely qualified to do what they are doing. We look for unique uses of new technology to apply to markets that are getting lazy and bureaucratic (like California government unions). We look for an x-factor, something where the startup can create an edge to wedge into an established market with a new look that turns the industry sideways.

With your extensive experience in venture capital, what advice would you give to young investors looking to enter the industry today?

There are a lot of new entrants into the venture capital business, so there is more competition, particularly at the pre-seed and at the growth stages. Everyone from investment bankers, who can raise money, but don’t really know how to deploy it, to novices, who can’t raise money, but might be good at deploying it are entering the business. It is not clear that venture capitalists without experience will be able to perform as well as those who have extensive track records, and so my advice to someone who is looking to go into venture capital is to make sure they do some real soul searching. Ask yourself, would I want to do this even if I don’t make any real money doing it? I always recommend that people do what their heart and gut tell them to do, even if it might not yield financial rewards. In VC, this is imperative. It will not be an easy career for people who are just starting out or jumping in. Still, it is a wonderful job with many ups and downs as well as a great way to learn about people and the world and the future around us.

In recent years, you've invested in companies utilizing AI, blockchain, and genomics. What potential do you see in these technologies to address global challenges in sectors like finance, healthcare, and government?

I think AI will enable governments to be far more efficient, fair, and effective. I have even started experimenting with something called Draper Nation, which I hope to develop into a new form of (virtual) government. AI is already outperforming the average doctor in diagnosing diseases, and I expect that with more data, that difference will only become wider. Eventually, I can imagine a time when AI runs the diagnostics, and develops the therapeutics in real-time for each individual. Genomics will play a great role in finding specific cures for diseases for each individual and will play into the computational biochemistry that is advancing at an extraordinary rate. Finance, of course, will operate more in Bitcoin than in banking, and government currencies, since with Bitcoin, people can operate all over the world, and the accounting, auditing, bookkeeping, and ownership transfers can all be done instantly on the blockchain without the need to pay professionals to keep track.

Conclusion

Tim Draper's visionary approach and unwavering belief in the potential of emerging technologies have positioned him as a key figure in the venture capital world. His insights into the transformative power of Bitcoin, decentralization, and AI provide a roadmap for the future of innovation. As industries continue to evolve, Tim's perspectives offer valuable guidance for entrepreneurs, investors, and technologists alike. We are grateful for the time Tim has taken to share his journey and vision with us, and we look forward to seeing how his ongoing contributions will shape the future.

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