Draper University Educates Entrepreneurs

Part 1 of our interview with Tim Draper, venture capitalist, who discusses his family history in private equity and his work to educate future business leaders. | April 2019

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Welcome to Part 1 of our two-part interview with Tim Draper. Please click here for Part 2.

New Horizons: Well hi, everyone. Today, we’re here and honored to be talking with the legendary and outspoken Tim Draper, who is one of the world’s leading venture capitalists. Thanks for joining us today, Tim.

Tim Draper: Great, my pleasure.

New Horizons: I’m sure that most people don’t know that your grandfather was the very first VC on the West Coast. So, being a VC is literally in your bloodstream.

Tim Draper: Absolutely. Yeah, my grandfather was the first Silicon Valley venture capitalist. He pioneered the LPGP relationship that we all hold dear. And he was only a venture capitalist for I think three or four years, because he was doing all sorts of other things. He ran the economic part of the Marshall Plan after WWII and helped with the reconstruction of Germany and Japan. He met with Chairman Mao and worked with him on the One Child Policy, because he ran something called Population Action International. It’s still around… or Population Crisis Committee. Anyway, the thing that he started is still around. And he also funded the San Francisco Bay Bridge when he was with Dill and Reed. So, he had quite an amazing career.

And my dad was a pioneer in venture capital and made it his career until he went to work as the Chairman of the Export-Import Bank. And then he ran, he was the administrator, the highest-ranking American in the UN — the administrator of the UN DP, where he traveled to 110 countries and promoted free markets and women in the workforce and the environment as he went around. Then he came back and created the first venture fund for India. Then he started something called the DRK Foundation, which uses venture capital models to fund non-profits. So, he’s had quite a career.

And my sons and one of my daughters are all venture capitalists now. So, we have four generations of venture capital in the family. They have done extraordinarily well. Billy brought me a company called Robinhood, which is now ‘decacorn’ — or unicorn times 10. He worked with me here for four years, and now he’s doing his own thing called Pioneer Ventures. Adam runs Boost, which is an accelerator, and he goes after Sci-Fi. He started with Bitcoin and brought all the Bitcoin people into one area down here. Then he went to VR and did a whole bunch of things around VR. Now, he’s doing exoskeletons and flying cars and a whole bunch of other interesting things. He’s had a couple of tremendous hits. He seeded Coinbase, and he seeded the architect one that now was just sold for $800 million. He’s got a touch. And then my daughter is only backing women, and she has been tremendously successful. I guess her big winner now is Sugarfina, but she’s had great success with a number of other companies that she’s backed. So, yeah, we’ve got it in our blood. And then I’ve been in the business for 33 years, and we have 34 unicorns.

New Horizons: Wow, that’s really impressive. What would you says is the accomplishment that you’re most proud of as a venture capitalist?

Tim Draper: Interestingly, it’s really creating viral marketing. I was working with the people at Hotmail when they said, “Ok, we’ve launched this thing.” I said, “How are you going to get the word out?” They were going to give away free web-based email, which was a major breakthrough — a free product, just getting it out there and not knowing what the business model was going to be or anything, just because it was so inexpensive and it was a great communications tool and everybody was very interested in potentially getting an email account but they hadn’t yet. I came up with the idea… I said, “Look, if you’re going to give away free email,” first I said, “can’t you just blast it out to all the people on the internet?” And they said, “No, no, that would be spamming.” That was a new word for me. I didn’t know what that was. And I said “Ok, I guess that’s bad.” And then I said, “Well, can’t you just put a little message at the bottom of everybody’s screen?” My idea was to say “PS. I love you. Get your free email at Hotmail.” And to this day, I think we would have had a much more peaceful and loving world if they had kept the “PS. I love you.” They didn’t, but they at least put that message and it persisted for every email. Since it persisted and it was clickable, it spread like crazy. It went to 11 million users in 18 months – the fastest growing consumer product of all time to that date. Now, of course, there have been others. Skype moved faster, actually.

It went to one guy in India, because our founder was Sabeer Bhatia, and he was an Indian, and he sent an email to his friend in India, and within three weeks we had 100,000 registered Hotmail users in India. And at that time, we didn’t even have 100,000 — there weren’t even a 100,000 computers in India. So, this was a major change in the nature of the world. And I had tried to work on international things before, and it was so difficult. And suddenly, we had email that was global that was free and the whole world was able to get it. I’d say that was probably the biggest thing, the thing I’m probably the most proud of.

Although I was the first Silicon Valley venture capitalist into China, and I think that may have had a very huge impact on China because we backed Baidu, among others… but Baidu is an information machine, just as Google is. It allowed a billion people to be a part of the information world, and so I think that had a big impact too. You know, there are others I’m proud of but those are two that really come right to mind where I say, “Wow, that had a big impact on many, many people.”

New Horizons: As a marketer, I have to say thank you for that, because that becomes another tool for us to use.

Tim Draper: Well, as a marketer, it’s in my book, How to Be the Startup Hero, by Tim Draper, look it up on Amazon. In my book, I talk about viral marketing. But I also talk about what that has led to — it’s led to growth hacking and social media and all these other things. But what it’s really done, as a marketer, it gets people to think, “How do I get my customer to become my sales force?” That was the beginning — that was a major breakthrough for us. The reason I came up with this was a combination of thinking like a chess player but it was also because at business school, I read the Tupperware case, where the women could only buy Tupperware if they threw a party to get the Tupperware so they could throw the party and tell all their friends about it. And so, in that case, Tupperware forced their customers to become their sales force. That was the beginning of that kind of thinking. And this was the first electronic version of that. We call it viral marketing to kind of spice it up a little.

New Horizons: I think it’s a perfect description.

Tim Draper: Yeah, I thought maybe organic marketing, but then viral marketing had such a bite to it that I thought it would spread faster this way.

New Horizons: Pun intended.

Tim Draper: Right. Absolutely.

New Horizons: Well, you’ve also spent a lot of your life’s work helping people realize their dreams, their entrepreneurial dreams. Part of that was founding Draper University. Has that met your expectations or exceeded them?

Tim Draper: When we started Draper University, for me, I kind of had this in the back of my mind, I always wanted to start a school. I didn’t really know how. I didn’t know what I was going to teach. I had had a good education, although not perfect because it didn’t sort of point me toward understanding anything really about how to start a business. I went to Andover Prep School — top high school in the country, not accredited — that becomes relevant later. Stanford and Harvard Business School, but even at Harvard Business School, there was at that time nothing that sort of guided you towards starting a business. A lot of it had to with getting into middle management and working your way up. And so I felt like there was a big hole in the education there.

And also as an entrepreneur, you have to really be willing to standalone and take punches until the world comes your way. They start by beating on you, but eventually they say, “Oh, yeah, that was my idea all along.” And so I thought, well you know, if I’m going to start a school, what kind of school would it be? Of course it would be a school for entrepreneurs because that’s all I really know. And so I created a school — Draper University of Heroes — I bought an old hotel that had been boarded up for eight years, fixed it up, and then I sent out our pilot program. I sent out information to a bunch of people and we got something like 30 or 40 students, and they came for five weeks.

The biggest surprise to me was that we kind of made a school that worked. We made it team-based, so everybody was on a team. We had them go through survival training and go through emotional challenges. We made them create various products very quickly through a hackathon model. We got them to do a business plan and then do a two-minute presentation, and we brought together a panel of venture capitalists to judge them.

And it ended up our survival training includes Navy Seals and Special Forces and Army Rangers, and then the speakers we got to come through were quite extraordinary. I know Elon, so we brought everyone down to the Tesla factory, and we actually got to be there the day they launched the Tesla, the ‘S’ car. The governor was there, it was a big huge thing, and Elon talked to my group. Anyway, those students then went off with sort of renewed vigor — it’s like we ripped them apart and then put them back together, and they came out as heroes.

Many of our students now have done extraordinary things. We’ve now had 1,000 students through our program, they’ve come from 76 different countries, they’ve started 350 companies, and now they are scouts for Draper Associates. They all know people who are starting businesses, and they go, “Hey, this would be a good one for Draper Associates.”

New Horizons: That’s your affiliate marketing.

Tim Draper: So, I’ve somehow made my customers into my salesforce.

New Horizons: Exactly. Funny how that comes back, right?

Tim Draper: Yeah, and I had no idea how successful this school would become. Our students, we now have, a couple of our — three of our students went through the program when we were about four years ahead of every other school in teaching anything about Bitcoin. Well, they went off and started a cryptocurrency, and it’s called Quantum — it’s a top 20 currency and got to be worth about $7 billion dollar. They’re big sponsors of Draper University’s programs now and scholarships and things.

Another woman who was in our pilot class created a device that goes up, it uses a fiber line, a very thin fiber line that goes up the fallopian tubes and can determine if you have cancer, and she got FDA approval for it and sold it for $275 million. I was an early investor because she came to the school and that’s where she got her first money through that. So, that has actually paid for a couple of years of the school for me, because I was sort of putting money into the school. An investment like that turned out to be quite valuable for us.

So, the school has worked out incredibly well. And now, all sorts of countries’ leaders have come to me and said, “How do I get a Draper University in my country?” And it’s not just the Draper University, it’s the Hero City, it’s the incubator, the boost accelerator that Adam, my son, runs, connection with venture capitalists and the Draper Venture Network, which is a connection of 30 venture capitalists around the world in 60 different countries, and they’re all interconnected.

We believe that we can actually now — it took a long time to get the model just right and to get the school really working that we could close to break even so that we knew what kind of student we were looking for, so that we knew how many scholarships we could provide versus how many people would have to pay. We knew who the best people were to run the school. We had to work through a lot of those issues. And now, we’ve got a real winner, and we think that we might put another school in another country or two.

New Horizons: Congratulations. As a former entrepreneur, a reformed entrepreneur myself, I could have really used that education. Going through the school of hard knocks.

Tim Draper: I would have loved it. I would have loved this school. Because it’s all project-oriented, team building, a lot of leadership skills we teach. It’s really amazing. And all the creativity that comes from it is great.

New Horizons: It sounds really incredible and I’m going to look into it a little bit more. I wanted to switch tacks though a little bit because you recently published a book How to be the Startup Hero. Now, was that an outgrowth of Draper University?

Tim Draper: Yes. It was exactly — good for you for figuring that out. I had started to repeat myself at Draper University, I started to tell the same stories and people would ask the same questions, and I started to think, “Wait a second, why don’t I just write this down?” So, I put it into the format that our school runs on, which is – it’s built around this pledge that I make them memorize and they have to say every morning. It starts with “I will promote freedom at all costs, and I’ll do everything in my power to drive, build, and pursue pride, progress, and change.” And then it says “I will fail and fail again until I succeed and explore the world with gusto and enthusiasm.” I’d say, “GUSTO and enthusiasm!”

And so I decided that that would be a great way to organize my book. Here’s a line of the pledge, here are some stories about why that line is important, and then we have something called ‘quexercises’ — questions and exercises — that they can kind of go through. And then I read a poem for each chapter and have some quotes from famous people, and that’s how I built the thing — that’s the first two-thirds of the book.

The last third of the book is ok, you want to start a business, and now you’re a hero, you want to start a business, here are some very practical tips on how to run or how to start a business, how to think about the business, how to drive your business model, how to think about getting money early rather than later, how to think about viral marketing, and different kinds of things.

And it was very fun to write. You know, I travel around a lot, and I found myself on a lot of airplanes, and I have an iPhone, and I basically wrote the entire book on the iPhone, and then I edited it on my computer. And so I’d go on a trip, and I’d just be on the iPhone, and I’d go “Ok, I’ve got a story I can tell.” I’d go do-do-do-do. And then it’s done. And then I’d fit that story into the book and it kind of came out all right. People are liking the book.

New Horizons: Well, I started reading…

Tim Draper: And now it’s been translated into Chinese, and it looks like we’ve got — our goal was something like 20 languages by the end of the year. That should be easy because we have people who have come from 76 different countries from various places that are students. Maybe they’ll want to do it. We’ll give it to them.

New Horizons: We’ll be sure to include the link to Amazon and I guess the Chinese distributors and the other ones in the transcript of the podcast.

Tim Draper: Oh yeah, that’s right. There’s a lot of Chinese listeners here.

New Horizons: There are.

Tim Draper: Well, we have a new Chinese version and it’s in a bunch of bookstores and airports and wherever else, and it’s just coming out now.

New Horizons: We’ll make sure that we have an image of the book next to your picture so people can know what it looks like so they can go right in and get it. I notice that you only have a couple of copies down front.

Tim Draper: Right! Well, that’s supposed to be retail space and we don’t have anybody operating the store, and I said, “Well, let’s just put my book everywhere.”

New Horizons: I think it looks great.

Tim Draper: It’s really kind of fun. It’s a great marketing tool.

New Horizons: And that ends Part 1 of our two-part interview with Tim Draper. Be sure to listen to Part 2, where we talk about how to become the most valuable employee in your company, crypto currency, and lots more.

Thanks for listening to this episode of New Horizons. Please be sure to click on the link below to read a full transcript of this interview. For more information on Huawei’s products and solutions, please visit e.huawei.com. Be sure to tune in again soon for more great guest interviews and stories. And as always, thanks for listening.

Please click here to continue with Part 2 of our interview with Tim Draper, where he discusses AI, Bitcoin, and the technologies of tomorrow.

Biography:

Tim Draper is a top global venture capitalist, having founded Draper Associates, DFJ and the Draper Venture Network, a global network of venture capital funds. The firms’ investments include Coinbase, Robinhood, TwitchTV, Skype, Tesla, Baidu, Focus Media, YeePay, Hotmail, SolarCity, Athenahealth, Box, SpaceX, Cruise Automation, Carta, Planet, PTC, Ledger and many others.

He is a leading spokesperson for Bitcoin, Blockchain, ICOs and cryptocurrencies, having won the Bitcoin US Marshall’s auction in 2014, and led investments in the companies that would issue two of the largest ICO’s: Tezos and Bancor.

He created viral marketing, a marketing method for exponentially spreading an electronic service from customer to customer, instrumental to the successes of Hotmail and Skype and other applications, particularly effective for mail and communications applications. Arguably, social media, crowdsourcing and growth hacking are all outgrowths of Tim’s invention of viral marketing.

He is regularly featured on all major networks as a proponent for entrepreneurship, innovative governance, free markets and Bitcoin, and has received various awards and honors including the World Entrepreneurship Forum’s “Entrepreneur of the World,” and is listed as one of the top 100 most powerful people in finance by Worth Magazine, the top 20 most influential people in Crypto by CryptoWeekly, #1 most networked VC by AlwaysOn, #7 on the Forbes Midas List, and #48 most influential Harvard Alum.

In promoting entrepreneurship, he created Draper University of Heroes, a residential and online school based in San Mateo, Ca to help extraordinary people accomplish their life missions. The school launched entrepreneurs from 76 countries who built 350 companies including NVision (sold for $275 million) and crypto leaders QTUM, Spacecash, DataWallet and Credo. He authored a popular entrepreneur’s text book called, “How to be The Startup Hero” and created a crowdsourced TV series with Sony Network called “Meet The Drapers,” where viewers can invest in participants. ABC Family created another show, “StartupU,” around the activity and students of Draper University. He has more than 100,000 Twitter followers.

He started Innovate Your State, a non-profit dedicated to crowdsource innovation in government, and BizWorld, a non-profit that teaches young children how business and entrepreneurship work.

He served on the California State Board of Education, and led a movement for Local Choice in schools culminating in becoming proponent for a statewide initiative for School Vouchers. He also led an initiative to create competitive governance with Six Californias, followed by Three Californias, which was approved for the ballot, but was rejected by the California Supreme Court before the vote. He received the “Toqueville” Award for freedom from the Independent Institute.

Tim Draper received a Bachelor of Science from Stanford University with a major in electrical engineering and a Master of Business Administration from the Harvard Business School. He has two honorary doctorates from The International University and Trinity College of Dublin. He gave the commencement speech at USC’s Marshall School of Business in 2017.