My biggest mistakes were failures to invest, including the seed rounds at Google and Facebook.

[01:20]

"Well, I started Draper University of Heroes for entrepreneurs and we've had 3,500 students through there and they've started about 900 companies and five are unicorns."

[06:30]

"My advice would probably be also maybe interesting for people who have children, who want those children to be financially literate. Give them an allowance, not a very big one, get them to earn money, and get them to invest that money in the stock market really early."

[03:46]

"PS, I love you, but it spread to 11 million users in 18 months, and so I realize that if you can do something to Delight your customers and somehow get them to spread the word, then your customers can be your Salesforce."

Full transcript

[Music]. My name is Richard C Wilson. I'm the founder of the family office club and billionaires. Comom, and I am honored to have with me here today Tim Draper, who's a founder of Draper Associates, dfj and Draper Venture Network. He also has his own show, meet the Drapers. Tim helped fund Tesla, SpaceX, box, Carta and over 15 other unicorns, importantly at the seed stage.

Nowadays, anybody can invest in a secondary and they could have invested yesterday in SpaceX and claim they funded. It doesn't mean as much as the seed stage, obviously. Uh, he's invested in over 50 crypto companies, including coinbase, and, for those people my age or older, his strategies were instrumental in helping Hotmail and Skype go viral. Worth magazine has called Tim one of the top 100 most powerful people in finance.

He's a huge supporter of entrepreneurs globally and we're honored now to have him here for a live, exclusive interview for billionaires. Comom is part of our 100 billionaire interview Series. So thank you, Tim, for being here and I've got a few questions I want to go through. But first of all, is anything I missed that you wanna, anything you want to add to your bio?

Um, great, thank you, Richard. Well, I started Draper University of Heroes for entrepreneurs and we've had 3,500 students through there and they've started about 900 companies and five are unicorns. So far that come from. The people have come from 102 different countries. To come uh, harder to get into than Harvard or Stanford. But Harvard and Stanford say, uh, 85% of their graduates get jobs when they get out.

And what we say is: our average graduate uh, create seven jobs, and, and our uh, and our school is only five weeks long and theirs are four years, so we only take you for five weeks and you create seven jobs. They take you for four years and they, 85% of you, will get jobs. Wow, well, I'm sure that staner is very proud to have you uh as an Alum. I saw that in your bio as well.

So, but, that's great, that's great. Congratulations on that. Um, so I've got three quick questions I want to go through here just to respect your time here today. Uh, the first one is: what was the major turning point or the point of increased momentum or maybe a strategic choke point. You acquired that once you, you did that thing or that thing happened, everything else kind of surged forward for you.

Well, I'd say there were two um, because I started by borrowing from the government through the sbic program and that was the money I put to work to start with, and I was on their watch list and their dirt list and um, and about about 5 years later, um, the IPO window opened up and I had five IPOs, and one was parametric technology, which is still now PTC, the largest software company in New England, and um, and it paid for everything. I was able to pay back the government. I was able to, you know, build my business. So that was inflection point number one, um.

Inflection point number two was really um, when we, we funded Hotmail and I, um came up with that idea, the message at the bottom of the screen saying PS, I love you, get your free email, hot mail, and they, they got rid of PS, I love you, but it spread to 11 million users in 18 months, and so I realize that if you can do something to Delight your customers and somehow get them to spread the word, then, um, your customers can be your Salesforce, and I think that has helped me along the way. Um, and Hotmail was a big inflection point in my wealth too, uh, and I was able to uh make quite a bit of money on that. And then the maybe the third is, um, when I decided to go um build out a network of venture capitalists and and uh, and so I went internationally and I was the first Silicon Valley venture capitalist to go to China and uh, and the first one to invest in something uh, in Eastern Europe and uh, so we, we were able to fund BYU and Skype, and I think that's where, um, suddenly, I had uh extraordinary wealth.

So, um, those were, uh, those were probably the inflection points. Great, awesome, appreciate you sharing that. Um, what would you say is the most, the most valuable strategy that is worth far more than a million dollars that you wish somebody had provided you with early on? Obviously, the hot mail PS, one is one that you already covered, but is there another strategy that comes to mind that you just wish you would have heard on an interview just like this?

I I'm a Believer in human endeavor, um, and I think that strategy of um of always thinking of how to Delight your customer and making your customer into a Salesforce, um is probably the most powerful thing, uh in business and uh for these family offices, um. I think, um the moment you start thinking of capital preservation, you have already lost, and I think um you know Capital preservation makes no sense. The way you make money is you invest it in human endeavor and you invest it with people who are dedicated to what they do, and this is all they want to do with themselves and the more complicated investment strategies you hear about, the things that make you go. Huh wait, what, how, how, how, where does that go?

How does that money go? Um are the ones that will lose the most money. My advice would probably be um also maybe interesting for people who have children, who want those children to be financially literate. Um, give them an allowance, not a very big one, um, get them to earn money and, uh, get them to invest that money in the stock market really early, so that they're, um, they, at first they won't really know what's going on and they'll just so, oh, it's going up, it's going down, they.

But eventually it'll be like, hey, have you looked at the PE Ratio here? Have you noticed that the cash flow of this business has dropped way off? Have you seen their receivables? Have D have gone up EX in an extraordinary way. Why are they building up all that inventory? You know, those questions start hitting and then you start getting better and better at understanding business.

Um, also, it's good to invest in companies that collect early and pay late. Amazon was brilliant in saying: um, we're going to um you, you go ahead and pay for the book, we'll go find it for you and we'll get it to you. And so, uh, they got their cash first, then they bought the book. Uh, and Elon was also brilliant in doing something similar, where it's like: you pay $80,000 for the car and then you get, you pay the last 20,000 when you get it, um, and some of those cars were two and three years coming, uh.

So, so, businesses with cash flows, um, that come early. But entrepreneurs who are starting out to give something away, think give first, um, rather than take first. It's always a temptation to try to take first than give first, uh, and that ends up being really powerful. So I would say those would be my sort of primary strategies, uh, as a, as an advisor, both as a to an investor and to somebody who's running a business.

Sure, I I love that you are going against Capital preservation, since the family office World beats that drum non-stop all the time, at every event. Right, it makes no sense at all. I mean, you preserve your cab. It's like I don't know if you not notice this, but anything you try to hide, you lose, right, right, anything you try to hold on to, you lose.

The things you, things that help you, you win, are are things where you sort of go: okay, this is risky, but I'm gonna try it and here's what I'm gonna do. Um, also, um, I guess, for family offices: invest in a future. You want, uh, you see, something you like. Invest in that future because, even if it doesn't work out, you feel like, okay, I did something cool, right, right, right, okay, got it.

And then, if we just rewind two minutes there, when you say give, instead of thinking about getting, are you saying: you know, um, add value to a potential customer, build a relationship and then monetize that relationship later. Like Gary vaynerchuk is like a huge proponent of saying stuff like that, is that what you're getting or are you talking about? Yeah, I found that by um giving away more scholarships at Draper University, we got better Talent, we got more great entrepreneurs through there, we had more opportunities to invest. Um, I found that, uh, when I uh work with limited partners, investors, I found that, um, doing things for them uh first would often bring them back.

Uh, whenever I was raising a fund, right, uh, and and I I know that hot mail, um, you know, just gave it away and, uh, it was the fastest crowing consumer product in the history of the world and eventually they became incredibly valuable as a customer acquisition tool. Right, so, yeah, yeah, got it. Okay. Um, I've studied Robert chelini a lot.

He brings up reciprocation and we talk about that quite a bit at our investor Club, so makes sense. Um. Third question here: what's the number one most costly mistake that either you have made or you see so many investors make? And business owners could could easily avoid this mistake, um, if they just took it to heart and H it from you.

It was a failure to act. Um. I, my business is different from a lot of businesses, but? Um, my biggest mistakes were were failures to invest um, and that includes into the seed round at Google and Yahoo and Facebook and Linkedin and Ne? Um, Netflix and um, and all of them were very interesting and on the margin for me, and a lot of the times I just got talked out of it um by Partners or whoever, and some of the times it was just purely I didn't get get it uh, and, whereas I would not say that the times I invested in companies that didn't work out were, um, were really inflection points of any kind, or or uh, issues that really, um, seriously affected me, uh.

So you know, the other downside is always, if you get into some sort of legal struggle, uh, that usually ruins your life for as long as it lasts, and the lawyers are making money during that time that it's ruining your life, uh, and so they're saying, yeah, I need billable hours, and they want, they want to spread that as long as they possibly can, and what you want is for it to be over, and so it's always better to incentivize your lawyer, change the model, incentivize your lawyer to settle, to figure it out, to win quickly, to end it quickly, to lose quickly, whatever, yeah, um, just get it done, because otherwise you just sit there living in fear. Uh, it's a horrible, horrible feeling, um, and fear, as Frank Herbert of dun says, is the mind killer. Um, and all the decisions I've made based on fear have been, uh, huge mistakes. And all the decisions that I've made based on, um risk or possible opportunity, or what if it works?

Um, I haven't regretted any of those. They they didn't all work out, but I haven't regretted right, right and and look, when we backed Tesla, there were like there was one guy, his name was Martin abart, nobody else was there. Elon came later and uh, and we were going after a company that was starting a car company and there hadn't been a successful car company started for 50 years and they were Capital intensive. It was a huge, huge risk.

When we invested in Skype, those were two guys who were, um, in effect, Outlaws from the US because of the work they did for file sharing in at uh, Kaza, right for hot mail, um, that was the first product anybody had ever said: we're just going to give it away for free and we didn't really have a reason to go. And all of those great companies pivoted too. They weren't all. Skype started out as file sharing, I mean um, Wi-Fi sharing, um, not um.

And uh, Hotmail came to us with a, a whole different idea for uh, showing people uh different, helping people with their websites, uh, and they changed the model right there, on the spot. And then viral marketing. When I came up with that idea, um, that that pivoted them once again. So, uh, yeah, I think um, it's that.

I think it's um, it's: avoid fear. Don't make decisions based on fear. Uh, go ahead, use your fear to figure out. You know what could go wrong, but then always invest for what? If it works, okay, awesome, that's great. So I know you've been interviewed 500 times, maybe a thousand plus times.

I wonder you know what's the the smartest question I should be asking you: what do you wish? People asked you, and they never do that. You'd love a chance to share more. Um, is there any anything that comes to mind that you want to end with? I don't know, but my son um, on our show meet the Drapers.

My son asked one of the entrepreneurs: uh, what is your spirit animal? And it put, put the entrepreneur completely on their heels and it was like, oh my God, this is hilarious. Um, so if you were to ask me what is my spirit animal, um, and and then I said to my son, well, mine is either the Rhino or the hummingbird, um, and he said, oh, you can have one on land and one in the air and one on one in the sea. And, uh, and so I, I thought about the sea and I, um, I kind of had to go with Dolphin because, um, I have been, I'm a big swimmer, ocean swimmer, and I got surrounded by Dolphins once, um, they were having a dolphin Stampede.

It was, uh, something like 300,000 dolphins all going through this one area at once, wow, and and so that's a spirit animal for me, and the um and the rhino has been a big part of my life. I remember I spent, I don't know, I was 20 years old or something, I was traveling around Europe and in the Berlin Zoo there was a rhino and the Rhino was allow, was able to reach his head over the fence, yeah, and I rubbed the rhino's horn for about 20 minutes, thinking this is so wild, and the Rhino and I got along famously, and so I thought, okay, and Rhino kind of, is um is really important for an or a venture capitalist or an entrepreneur, because what you're really doing is you're just charging in there and you can't see what's going to happen next. Um, and you just charge forward and you know you're not a bull, you're not a bear, but you're a rhino and and so I kind of that's, that's a strong spirit animal.

And then, um, the hummingbird, um is my, is my up in the air animal and um, I, I just seem to bond with them when they're around. They, they just seem to come and they look at me and they're just right and um, and I always think my mom died and I always think of when I see a hummingbird, I think she's, she's down here checking me out, um, my wife. So I think, yeah, what's your spirit animal? That?

Can that? That'll wake up a lot of interesting stories. Yeah, yeah, for sure. Well, I, my wife, I always thinks the same thing about her father. When she sees like a red cardinal bird or bird, some general, she equates it with her dad. You know, passing away and, uh, I get, that's the question.

I'll have to throw that curveball question at one of the other billionaires we interview in the series and just see if I just stun them into silence or if they come up with an answer or not. I, I guess I'd have to choose octopus for myself, and I think that, uh, Rhino and octopus would make for a a good combination for a fireside chat at one of our, our family office club events one day. Uh, on stage, did you see that documentary about octop, octopi or about that one octopus is that that one? Oh my God, yeah was so good.

It's amazing. Hawai and I was looking for, I couldn't find one in the Rocks, but my daughter and I were looking for one. Yeah, that was amazing. They are very, they're very, they're, they're really smart and a little bit slippery, yeah, but they but eight legs. You got a lot of things going on. You must be juggling quite a bit.

Yeah, not, not as much as you. I hope that maybe I'll be you and I grow up and I can juggle half as many things as you do. But, um, I appreciate you being here on the interview. I know your time is Super valuable, so we can uh bring this to an end. But, um, can I add one more thing?

Sure, um, you know, there there's this uh long history argument of uh Freedom versus government control, and it's been going on forever. And I'd like to pck for freedom because, um, I noticed, I, I funded all these companies while China had freedom and the Chinese people were so excited and so Dynamic and their economy grew at 9% and there was no unemployment and everybody was working and everybody was happy and everybody was fantastic. And then, uh, president shei came in and he decided to be a dictator and he put everybody into his controls. And, uh, and now everybody's watching over their shoulder.

They're afraid to try anything. They're not doing anything, um, interesting they're. They're struggling, um, now, financially. They are um, uh, they're, they're worrying about what the rules are. Every time they try something new, they they worry about what will the government think? Uh, um, in fact, in the US is starting to happen too, uh, and um, and, and the economy's gone Flatline, so, um, and there's more unemployment and there are more problems and there are more.

And you, you think that the government is doing things. Oh, they're helping out the poor, they're helping, it turns out, the freedom helps the poor the most, right, and it's very hard for people to kind of grock that. But, um, as I go around the world and I get a chance to meet with people from wherever, um, I found that the, the leaders who are conf, self-confident enough to set their people free, are the greatest leaders in the world. They're the ones who actually grow economies, get people off the streets.

Uh, everybody's working, everybody's got a job, uh, it's, and, and they have a reason to live and they're they're having fun and they're happy, and all of that. And the ones that uh, try to control everybody, um, I recently was in Cuba, um, they are afraid to do anything, they can't do anything, and so nothing gets done and nothing happens, and there's no sense of a customer and there's no, and people are not happy, right, uh, so, um, anyway, vote Nikki Haley. She's a winner and she believes in Freedom. And these other two I don't.

I don't think so sure, sure, well, uh, if there's a another billionaire we interview and they love your kind of American Dream, you know, focus and excitement of entrepreneurism, and they want to invest money with you, or somebody wants to try to apply for Draper University, or somebody wants to try to get on Meet the Drapers or read your book, where, where do they go online to to find all of that? Where's the best place I should be sending them? Oh, well, they can, um, they can go. Uh, send me email.

I, I, I get through all my emails, I'm timer. VC, okay, great, and uh. And then, if they just want to kind of watch, um, I, I keep everything up on Twitter. So, uh, Tim Draper on Twitter, okay, and if you want to watch Meet the Drapers and some of the other things that, uh, we've been up to, um, Draper tv.com or draper.com, um, it's a, um, it's our Network, okay, great, awesome.

Well, I appreciate your time here today. You're very generous with your time and your lengthy answers, and multiple answers for one question in some cases, so I really appreciate that. It's going to make the website um that much more valuable at ADB billionaires.. Just appreciate your time, so just let me know whenever you could use anything from me and I'm looking forward to keeping in touch.

Thank you, Tim, great. Thank you, Richard. Take care.