“I Back The Missionaries, Not The Mercenaries” Tim Draper On His Investment Strategy

Tim Draper is a modern-day legend of Silicon Valley. He’s a fourth-generation venture capitalist whose grandfather is credited with being one of America’s first VC’s. And, after decades on Sand Hill Road, Draper opened his own VC firm Draper Associates, down the road in San Mateo. A big fan of decentralizing everything, he recently set up Draper Decentralized, a platform for investors to network and access vetted deals. An early investor in some of the most recognizable startups, including Hotmail, Skype and Tesla, Draper stands out for his frequent appearances at startup events around the world.

I met Draper for an interview at Tech BBQ in Copenhagen last month, where he filmed an episode of Meet the Drapers, a self-produced, international version of Shark Tank. Entrepreneurs pitch Draper, his father and his sister, as well as a guest judge, in a competition for a million-dollar investment. Danish aerospace company Airflight, which produces electric-powered flying cranes with a 440 lb payload, won the round in Copenhagen and will go on to the final in another episode.

Amy Guttman: How did you come up with the idea for Meet the Drapers?

Tim Draper: We did it as a lark, just for fun. It’s my Dad and my sister and a guest judge. I always wanted to do crowdfunding and I wanted to do a show that allowed the viewer to invest. We’re currently rethinking the crowdfunding to make sure it works. But, we had one company called Boxabl that, with crowdfunding, has raised $200M. We started in big markets like India and Brazil and the show is hitting its stride.

Guttman: Why do you attend so many tech summits like this one?

Draper: I learn from talking with people. I meet with many and invest in few, but I do like to follow up with the people I have met at conferences, so I guess they get a slight advantage.

Guttman: How do you make investment decisions?

Draper: I invest in a future I want to see. I am a I believer in the decentralization of everything that can be decentralized. Bitcoin and Blockchain offer the opportunity to decentralize.

Beyond that, I back the missionaries not the mercenaries. I back the entrepreneurs who are so driven, it’s their reason to live. This is all they’re going to do with their lived and they’ve shown me a future I want. The mercenaries are just in it for the money and when things get tough, they’re the first ones to leave the ship. We want people that are real captains – willing to go down with the ship, but they’re going to fight all the way through that tempest.

Gutttman: What drives your decisions about which ecosystems to explore, geographically?

Draper: We have a non-profit called the Draper Innovation Index that goes out and gathers research and data and then we list countries by how good they are for innovators. We also list states in the same order. California has dropped significantly, and the U.S. is still clinging, barely, to the top spot; it’s really close between the U.S., Singapore and Switzerland.

I look at that list and say, not who’s the best, although that’s where I usually invest, but who’s changing the most? Who’s creating more freedom and who’s creating less freedom. The ones creating less freedom, I like to pull out of and the ones who are creating more freedom, that’s where the energy’s going to go.

Guttman: Where do you see that freedom going?

Draper: Interestingly, a lot of South American countries are getting more freedom while a lot of South American countries are locking down. I’m excited about El Salvador, Uruguay, and Chile has always been great because a President takes office for 5 years and then can’t be re-elected until they’ve sat out a term, so they can campaign while in office. I look at those places and put my toe in the water.

Guttman: Which emerging markets excite you?

Draper: In Africa, I really want to invest in the ones where they can skip a step. The Central African Republic has now made Bitcoin a national currency. So, I might go there because they’re going to start innovating.

I was jealous talking with people from El Salvador. I was thinking, you guys are already way ahead of us, because they’ve got smart contracts (self-executing contract written in code stored on blockchain) already happening. They can do airdrops (unsolicited mass distribution of cryptocurrency coins used to encourage adoption). I’ll invest in El Salvador as soon as I can.

Guttman: The work you do at Draper University is, perhaps, your most important investment. How’s that going?

Draper: It has been an amazing success. We have 3,000 students coming from 102 different countries. We’ve had 5 unicorns started from scratch at Draper University. People come out of there saying, my life’s changed. It’s extraordinary.