Tim Draper: How I got into Venture Capital

Episode Transcript of: Tim Draper: How I got into Venture Capital

Alan
Welcome back. I’m here today with Tim Draper. Tim is the founder of Draper Fisher Jurvetson, a founding partner of Draper Fisher Jurvetson. He’s the headmaster at Draper University. He is also founder or creator of viral marketing. And he’s also a proponent of the six California’s Tim, welcome to today’s show.

Tim
Great. Thanks for having me,

Alan
Tim, you got quite a bit going on in your life. But I’d like to, to rewind a little bit and found out how you started out and how you built this place that you’re at today,

Tim
I sold apples as a kid and I and I sold oysters. And so I always had a little bit of an entrepreneurial streak in me. But then, when I got out of business school, I realized that entrepreneurs, there were lots of entrepreneurs out there, and they had lots of interesting ideas. And I wanted them all to be successful. And that was where I ended up being in the venture capital business. My way, of course, my father and my grandfather were also both venture capitalists. So it was really the last thing I wanted to do. But and so I wanted to be an entrepreneur. But I realized that there were just too many. I had too many ideas. There were too many interesting ideas out there. And I really wanted to support those entrepreneurs as I went forward. And so so I got started, and I got started with a Small Business Investment Company loan, I borrow, I was able to borrow $6 million. And they and I was able to put that into a bunch of small businesses. And after three years, it looked like I had pretty much lost all the money. And, but then, after four years, the it went from me being on the dirt list of the SBA to being they have my poster on their wall, my face posted on their wall as venture capitalist of the year, because number of companies then went public. So it’s interesting how you get there. There a lot of fits and starts along the way. And that was how I got started,

Alan
you built Draper, Fisher Jurvetson, into a very large empire, worldwide network. In fact, several pools are rated as number one in the world for doing the most deals and such. When did you know though, that you were on your way to the appealing the success of the venture industry? Was there particularly well, I’m

Tim
still getting there? I’m not sure I’m on my way. Yeah. Venture capital is very much you’re you’re a hero for a while, and then you’re a goat for a while, and then you’re a hero for a while and you’re a goat for a while. We’ve had, we’ve had times when we were really on the top of the game when when Skype and Baidu came out. And that was really because we were willing to venture out beyond just the Silicon Valley or even beyond America to go look for companies. And we were really among the first if not the first Silicon Valley venture capitalists to do that. And by being first we were able to find really, really interesting companies in other parts of the world. And I think that made a big difference. There have been, there have been times here in the US for the last 10 years, it’s been a desert. For liquidity we build we’ve funded a lot of companies that have built great value, that they have not become public or liquid or whatever. And, and, and now it seems as though things are picking up again. So every every eight to 14 years or something, there is a there’s a new boom in the tech world. And I think we got one coming. And I think that all the hard work we did in the meantime is going to really pay off.

Alan
Tim they often refer to you as the riskmaster

Tim
Now that’s funny, because that’s a term I use for the entrepreneur. The risk master was a song I wrote for entrepreneurs, I had a great opportunity is superstar rock star who doesn’t want to be named, who wrote the song for me. And the deal was I write the lyrics and he writes the song. And so he, I wrote these lyrics and I thought, well, if I’m going to write a song, that’s going to be a great song. It should really be about entrepreneurs and all the great things As they do and all the struggles they go through, and then what they come out with at the other end. And so, the risk master term is really because I’m always singing the song. But I’m singing it and singing it to entrepreneurs.

Alan
So I’m visiting here today with Tim Draper. Tim is the founding partner of one of the founding partners of Draper, Fisher Jurvetson. Involved in Draper University and founder of viral marketing. Tim, we need to take a quick break, we’ll be right back after these messages.

Alan
Welcome back. I’m here today with Tim Draper. Tim, before the break, we’re talking about your history getting into the venture capital, I want to turn the page and a new passion that you’re working on is the is the master at Draper University. So first of all, in concept, what is Draper University,

Tim
I’ve had this long career in venture capital, and we’ve been able to fund a lot of great companies, and I’ve gotten to understand what it is to be an entrepreneur. And, and I realized that that’s a kind of training that isn’t really not taught in schools. And after 2008, the economy crashing, I felt like well, we need heroes, we need more heroes. And so I created something called Draper University of heroes. It’s a it’s a school like no other school, and it’s not for everyone. It’s really for those people with a real spark who really want to change something or, or they see something in the future that that either needs to be disrupted or needs to change or whatever. And, and they have to have it in their heart to be able to do that they have to be able to overcome all the high risks, the embarrassment, the all that goes on in the in the emotions of an entrepreneur as well as the what an entrepreneur needs to know. And, and I thought, well, that’s something I can actually do, I can, I can actually create a school where they live there, it has to be immersive for eight weeks. And, and we can teach in a way that no other school can teach. We, we, where other schools teach history, we teach future, where other schools, basically most of the learnings by either reading or listening. Ours is more by doing. We have survival training, for instance. And they make, they build things, they build various things. And at the end, they do presentations to a panel of venture capitalists on their business. It’s a very interesting, unique school. The students are, they say it’s transformative. They say we’ve we’ve got a process, we put them through a process. And by the end, they are really transformed. And rather than having professors, we have a few, we mostly have speakers, we have about 50 speakers, and they all do some extraordinary things for the students. Now, what’s interesting is our online school is seems to be equally successful. So Draper University online, can be for those students who can’t take eight weeks, and live at a school and live and breathe entrepreneurship at the school. But they they want to learn all the same concepts. And they want to do the things that we do and they want to be transformed and entrepreneurs. And this is this is working out incredibly well. We were very happy with our results. It’s getting harder and harder to get in. Because we only take about 40 or 50 students in our boarding school but for those who who doesn’t work for we do have the online school for a lot of the students apply or they invited here the students apply. We do invite some we hunt them down. But that’s a rare that’s very rare, most of them apply. Our application has a very different kinds of applications. Why were you put on this earth? It’s how, draw me a picture, write me a song, draw, make the movie, whatever. It’s it’s very different from an application you might I get from Stanford or whatever turns out about 20% of our students come from Stanford, and about 60% come from international.

Alan
Yeah. So for the aspiring entrepreneur that the message is if you’re going to come be creative and be prepared,

Tim
you also have to have it bursting out of your heart and your soul you have to really be saying that I have a change I really want to make in the world I have a desire to do something extraordinary in the world and and I think that that is more what we the the fanning we do have the flames Is that is that desire to create something extraordinary.

Alan
And visiting here today with Tim Draper we’ve been talking about Draper University and a Tim we need to take a quick break and after we get back I want to talk about the six California’s okay.

Alan
Welcome back and visit here today with Tim Draper. Tim was founding partner Draper, Fisher Jurvetson. And we’re talking about Draper University before the break. But Tim, I want to switch over to a current topic that you’ve been making a lot of headlines in the news for and about California. So what exactly is the is the vision here?

Tim
Well, I grew up in California, and I love it here. And it’s beautiful weather and my friends are here, my family’s here. And I was the beneficiary of the best education system in the country. California was number one, when I went through my schooling. So I brought naturally brought my children to this, I ended up taking them to the exact same school I went to. And I was shocked. Not only was the school kind of barren, but the the teachers were all the same teachers I had, that had there hadn’t been any refresh. So I got involved in in education. And I was at I eventually became a member of the State Board of Education in California. And then I realized that we have a real problem in that we are that the people who are deciding these things for our education, are living in a bit in an ivory tower, and very separated from the schools and the children that are actually being educated. And that disconnect is so strong that our education system has gone from first to 46 than the last 40 years. So we have a real serious problem in education. But it turns out, we have a serious problem in all government for the same reason. It’s become more centralized, and we become complacent as people, as citizens of a democracy. We’ve allowed this to happen, where our government is somehow separated from us. And here in California, we have this this horrible situation where now we have the worst run state in the country, and they’re pushing jobs away. And so not only are we losing on education, we’re losing jobs. We’re Occidental Petroleum just sent 1000 jobs to Texas and, and Tesla has was started here in California, it’s a great factory, everything’s going great. And they decided to move their battery plant to one of five states, none of which is California. And so on down in LA they’ve lost that the Hollywood is losing out to Louisiana and North Carolina and other states that are giving incentives to go make their movies and TVs there. So we’re losing jobs. And and we’re losing them because we have this centralized California, California needs to be created. We need to create six new states it does a lot for us. One is our our representative government becomes more a part of us. And we can take a real role in starting these new states and getting them getting them going and getting people excited about how Those states could be run, how much better they could be run. And so many examples of that where I mean, we could have electronic voting, we could have electronic signatures, we could have so many things that we can do by moving a state into the next next century. But each of these regions in California has very different interests. And so if you’re in Hollywood, you’re interested in our, let’s get those movies back into Hollywood. If you’re in the Silicon Valley, it’s like, let’s have a government that really understands technology, let’s move that ahead. If you’re in the Central Valley, let’s have a government that really understands how, how water rights work, or how water should move, or even better, let’s start attracting some some manufacturing jobs here. And that economy could really take off. So it’s, it’s a new way of thinking, for some people, there’s this real resistance to any kind of a change. But but we really need to take back our democracy, we really need to feel close to our state governments and in California is just too big. We’ve had a lot of good people managing California. But it’s it’s at this point unmanageable, and it’s proven out, we’re the worst managed state in the union. And the other big states are also down there. The other big states are badly run to

Alan
so implementation of this. It doesn’t happen at the polls, that citizens of California vote the

Tim
Yeah, what happens is, first, we need to get 5% of the voters to sign a petition. And that’s about one, it’s about a million signatures, and where did they find that petition. And they find that petition out by their grocery store, or whatever we have, we have a bunch of people out there, many volunteers, and some are paid. But they’re out there asking for signatures and bringing them in, and we need to get a million by May. After that, we will be put on the ballot either for November of 2014 or November of 2016. And, and then, Californians can vote. I mean, once i i make sure this gets onto the ballot, I want it I want discussions in every Californian home, and every California neighborhood to decide what kinds of what kind of a state they want. I want them starting to think about their state. And in in making it so those states compete for us. We want those states to be great states. And if you if you’re in a state, that’s not a great state, the great thing about six California is is you can move to a place 40 minutes away and and you can be with a different state.

Alan
If somebody wants to get a petition and start getting people to sign up, where would they where would they find that out? Who do they contact?

Tim
Well, they can contact our campaign. It’s info at six California havebeen sorry, it’s it’s at six California’s dot info. X si X California’s dot info www.si X California’s dot info. And then that’s where our website is. And that’s where the information is being distributed. Still, to get to a petition, you have to look around. Yeah, you can call you can contact us and we’ll make sure that you get you get a petition, but we really didn’t do need those signed. And so the California is have a chance to vote on something that really could change things. And then once it’s voted in California will the various counties will be able to self organize into states. And then the US government will be able to decide when they allow the six states and that could be that could be at any time really. It probably will be a political issue. And one party or the other will feel that that will benefit them and then it’ll be voted.

Alan
Amazing here today with Tim Draper. We’ve been talking about the six California’s we need to take a quick break, Tim and after we get back I want to talk about the vision for the future.

Alan
Helping you. I’m visiting here today with Tim Draper. He’s the founding partner, and CO founding partner of Draper, Fisher Jurvetson. And we’ve been talking about the venture capital world, Draper University, six California’s. But Tim, I want to jump into this last segment and talking about disruptive technology for the future. How do you stay ahead of the game,

Tim
so the future is always somewhat uncertain. And I think what’s happened in our world, particularly here in the Silicon Valley is that change is happening faster and faster and faster, and we need to be ready for it. In fact, sometimes it’s better to, to be be ahead of it. I think that there, a lot of changes happen in a lot of different industries. And, for instance, the music industry has been completely changed by the beginning of Napster and Kazaa, on various other now kind of moved into iTunes and Spotify. Many other industries have been changed by the Internet. The the telecommunications business is completely different. I think that there are other industries that have not yet really been changed by the Internet, that will be and so I think moving forward, there will be major changes in medicine, there will be major changes in banking, there’ll be major changes in the investment banking and venture capital world, I think those those businesses are being changed as we speak, some of the year old profession, the accounting profession will probably be changed, and new technologies will come and change those. And we’re always looking for industries that are getting a little bit set in their ways, where there’s a startup and a new technology that are coming together, that might make a big change. And for all of those money related industries, I think Bitcoin and and other maybe some other currencies like Bitcoin, will, will be the the will spur the changes in a lot of those industries. So I’m very excited about what’s going on with Bitcoin. I’m also excited about some changes that might happen in manufacturing because of 3d printing, or, or some changes that are that are happening in surveillance, surveillance, because of micro satellites and drones. I think we’re going to have some major changes in, in, in education because of MOOCs big and because of Draper University online. And I think that government is going to take on a new thought process. I think we’re going from where bad governments are being overthrown by Twitter and Facebook and good governments are being encouraged and and, and populations are moving toward countries with good governments as we become more mobile, that the government’s have to go into a sales mode rather than a than a buyers mode. And they have to attract the money and the entrepreneurs and the businesses of the world. They have to attract venture capital. And so they become competitive. So my belief is that governments will need to compete for us. And rather than us being slaves to a government, it needs to go the other way. And I think six California’s is an example of how, how we can encourage that get ahead of that in California. So I think that we’re in a in a really interesting, transformative time. We’re so lucky to be alive during this time, because technology is changing everything. Oh, boy, that crowdsourcing is making all of our lives so wonderful. I mean, I, I can push a button and two minutes later, a cab shows up and takes me somewhere I push another button and my dinner arrives. There are some extraordinary things happening that are making her life so much better, so much easier. And I’m just as a venture capitalist, I’m looking for industries that are going to be transformed by some of these new technologies.

Alan
I’ve been visiting here today with Tim Draper. Tim is a founding member of Draper Fisher Jurvetson we’ve been talking about Draper University viral marketing proponent six California’s and Tim It’s been a wonderful have having you on the show today good so pleasure

Tim
to be on the show thank you

 

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About Tim Draper

Tim Draper is founding partner of leading venture capital firms Draper Associates and DFJ.

Tim’s original suggestion to use viral marketing in web-based email to geometrically spread an Internet product to its market was instrumental to the successes of Hotmail, YahooMail, and Gmail and has been adopted as a standard marketing technique by thousands of businesses.

Venture successes include Skype, Overture, Baidu, Tesla, Theranos, Parametric Technology, Hotmail, Digidesign, Twitch.tv, and hundreds of others.

As an advocate for entrepreneurs and free markets, Tim is regularly featured as a keynote speaker in entrepreneurial conferences throughout the world, has been recognized as a leader in his field through numerous awards and honors, and has frequent TV, radio, and headline appearances.

He was ranked 52 on the list of the 100 most influential Harvard Alumni, and seven on the Forbes Midas List. He was named Always-On #1 top venture capital deal maker. He was awarded the Commonwealth Club’s Distinguished Citizen Award for achievements in green and sustainable energy.

To further encourage entrepreneurship, Tim started BizWorld.org, a non-profit for children to learn entrepreneurship,Draper University of Heroes, a school for entrepreneurs 18-28, and he leads SixCalifornias, an initiative to improve the governance of California. Bio courtesy of dfj.com