Tim Draper is one of four generations of venture capitalists — his grandfather was the first VC in Silicon Valley in 1957. Tim is the founder of Draper Associates, a VC fund for family offices; and Draper Decentralized, a platform for investors to network, access vetted deals and co-invest. He was an early investor in some of the most recognizable startups, including Hotmail, Skype and Tesla. Draper spoke with Crain Currency about his approach to investing and cultivating the next generation of entrepreneurs.
What’s the main driver behind your investment decisions?
I invest into a future I want to see; that helps me decide more than anything. I back the missionaries, not the mercenaries; the entrepreneurs who are so driven, it’s their reason to live.
You travel to startup events all over the world, like TechBBQ in Copenhagen, where we’re conducting this interview. Why do you make yourself so accessible?
I learn from talking with people, and the best entrepreneurs go to these events. I meet with many and invest in few, but I like to follow up with people I’ve met at conferences.
Traveling helps me learn about other ecosystems. I was the first Silicon Valley VC to invest in China, and I was the first Silicon Valley VC to pull out of China. I look at who’s creating more freedom and who’s creating less freedom. The ones creating less freedom, I pull out of; the ones creating more freedom, that’s where my energies go. I’m excited about El Salvador, Uruguay and Chile.
The Draper name is well-known, but the landscape for capital has become more competitive. How do you attract founders you want to invest in?
We have two customers: investors and entrepreneurs. We need to encourage entrepreneurs to come to us, and we’ve done that partly through Draper University, where we teach entrepreneurship. It’s been an amazing success. We’ve had 3,000 students from 102 different countries. Five unicorns started from scratch at Draper University.
Why is Draper Associates focused exclusively on family offices?
We’re a perfect fit for family offices for a few reasons. Most institutional investors don't want to invest in a single decision-maker venture fund; they want to invest in an institution. Family offices want to invest in a family office, so they’ve been a good fit.
In addition, family offices usually have some area of expertise that we don’t have. Whether they make tires or shirts, we can go to them and have a reference call with somebody who really understands that business.
A lot of family offices want to learn venture capital, so we put together VCX, a three-day training program in Silicon Valley. We bring in the best VCs in the world to do presentations and go through case studies, interview new entrepreneurs and provide other workshops.
We also set up Draper Decentralized, a platform for club deals and co-investing.
What was your most recent investment?
Unstoppable Domains, the first decentralized platform that will allow people to control their wallets and their data. It will also enable free speech around the world. I am a believer in the decentralization of everything.
What are the biggest mistakes you’ve seen family offices make?
Family offices are most successful when they communicate among themselves effectively. The biggest mistakes come from mistrust among family members, and communication solves that. With respect to investing in venture capital funds and direct investments, family offices often underestimate experience and reputation and go for what is trendy, rather than backing missionaries who are transforming industries.