The dot market just fell under our feet and everything dropped 95%. All these investors came and I felt like I was on a firing line. My worst decisions were all made out of fear and my best decisions were made where I go, 'God, what if this works?'
Tim Draper, he is one of the most legendary investors. He has incredible ability to spot the future before it happens.
I always try to do the hardest thing I'm going to do that day first. Get that done. Get it out of the way. And then the rest of the day is a little easier.
How do you decide if something is a crazy idea that's going to fail or a crazy idea that will change the world?
So, a lot of it is you build your judgment by learning about what's out there and I've made lots of mistakes and most of my mistakes were errors of omission not errors of judgment.
You're afraid of people's hating you, judging you, or what will society say? There's all these things that are coming your way. How do you still take action?
Most people aren't really thinking about the future you're trying to create. If those voices are bigger in your head than the opportunity, then you should be.
Excited to have you here on the show, Tim.
We're happy to be on your show. And I have a show too. It's called Meet the Drapers and it's great fun. I interview four entrepreneurs each time and it now reaches about 300 million people and about 20 million see it every episode and now about 2.5 million are on YouTube watching. So very exciting.
And it's real entrepreneurs and the winner of a whole big competition gets a million-dollar investment. So, I like seeing entrepreneurs and spreading the good word about entrepreneurship and venture capital around the world all the time. And I do it through the school and the show and being a venture capitalist myself.
I know. And I want to take you back in time if that's okay, Tim, because you've been an entrepreneur from a very young age. Like you were selling apples as a kid or something? How did...
Hey I know a lot about you Tim so talk me back in time.
Yeah. I think I was about eight years old and I was discovering money and we had an apple tree and so I picked all the apples from the apple tree or I picked a bunch and then I brought them. We had a very long driveway. It was about a quarter of a mile long. And so I went out to the road and sold those apples. And every once in a while some friends would come by and whatever. And so I did it for about 3 weeks. And one day my neighbor's mother came over and my neighbors were hanging out with me and the neighbor's mother came over and said so how much have you made and I'm thinking over the three weeks $8. And I said fantastic. And she picks up the $8 and she hands one to one of my friends, one to another friend, one to another one, one to me, two to two other people and walks away with $3. And I thought, that was my first exposure to socialism, and I don't like it at all. Capitalism is way better. Socialism creates lazy socialists and capitalism builds great businesses and builds progress and everything else. So yeah, that was my eight years old I was the biggest capitalist there is and I didn't understand how sort of like how she could have done that just because she was an adult.
Oh boy. Learned very well. I mean, that sparks some fuel right there.
Yeah. I mean, the other great fun story of entrepreneurship for me was...
I sold oysters. I was about 20 years old and I sold oysters and I'd go up to Marin County and buy them for a dollar a dozen from this old fisherman. And all week I would be calling different people, anybody who wanted to, you know, I dialed for dollars all week. And then Fridays I'd go and pick up the oysters. And I'd sell them for $6 a dozen. And I'd always buy a few extra dozen so that I could sell more, just hoping that I'd be able to sell more. I never was able to. So the garage just got smellier and smellier. And then I sold to this one guy and he put one in a microwave and it was delicious. And we said, 'Oh my god, this is the greatest.' Put the oyster in a microwave and he wanted an oyster bar and he kept ordering more and more and more. And I was thinking, 'God, I got a real customer here.' And then I went up and I was selling, you know, door to door. I sold to this woman and I said, 'Yeah, they're great. If you put them in the microwave, they're fantastic.' So, I demonstrate. I put it in her microwave and I hit the thing. We had oyster all over the microwave. It was just a disaster. She was very nice. She bought two dozen oysters, but I don't think she put them into the microwave after that. And I don't know who she must have had to clean it up because I didn't. It was so bad. So anyway, you know, every time you do some sort of a business, there's always fits and starts you go through.
There's going to be a lesson that comes with it for sure.
Yeah, there's always a lesson. Always try. It's always good to try things because you hit bumps in the road and if you know how to deal with the bumps in the road, you can power through.
Hey, we're having some crypto bumps in the road. Crypto bumps in the road and you just know that long term this is the currency of the future. This is the store of value of the future.
And we'll definitely talk about it. And by the way, those are not on YouTube. You're missing out because he is with a crypto... Bitcoin and Bitcoin, Bitcoin, Bitcoin. Because what happens is all the other cryptocurrencies sort of contract and then Bitcoin rises up each time we have one of these boom busts. Bitcoin has a bigger and bigger market share of all the cryptocurrency.
So, we'll talk about all of this. But take me then just one more question because I think that's also a little rare in terms of your childhood before we move on. I think you didn't grow up like your high school wasn't at home, right? You were...
Right. I went to prep school. I went to Andover, Massachusetts.
So, so talk me a little bit about what was that like because that could be traumatizing, but it could also be...
Well, for me it was a great adventure. I had two older sisters, quite a bit older. They're three and four years older. And so I spent a lot of my time with the neighbors because they had three brothers. And so I was used to exploring and adventure. And my mom always encouraged me to go explore. And I think it was partly to get me out of the house. Because she was used to girls who kind of did it all the way it's supposed to and I was trying things and breaking things and you know it was I think I was a real shock to her system.
So it was easier to ship it. Yeah.
In fifth grade I had a pension for math. So in fifth grade I was in algebra. But my school didn't have anything past algebra. So, I had algebra for fifth grade and then sixth grade and seventh grade. I really know algebra. And so shipping me off to Andover, well, actually, it was kind of my decision. We had, but they took me on the tours of these campuses and it was kind of like I think it's time for you to go kind of thing. And we knew that the math there would be much more exciting and interesting for me and that the adventure would be great and my parents had both grown up on the east coast and the culture on the west coast we were kind of the wild children you know we were it was wild out here. I'm old, I'm 67. So when I was growing up here, that was more than 50 years ago. All of this was, you know, Silicon Valley, it was all orchards and kind of wild and there were no fences between houses and it was just a, you know, you'd always cut through the neighbor's backyard and you did all that. And you had to watch out for gangs and the whole thing.
So, for me, Andover was an adventure. I went 3,000 miles away to high school when I was 13. And I think it was great. It made me kind of definitely appreciate my mother because I did all my laundry and my...
You had to do it all on your own. So...
Had to do it on my own. Had to go buy the toothpaste and all that stuff. So, then Andover really piles on the work. So, I was able to decide what I would really want to focus on because I knew I wasn't going to be good at everything, right? Because the work was, well, the work combined with the fact I'm living in a dorm and everybody's, you know, goofing off and socializing until about midnight. So, it's like I've got from midnight till 6 in the morning to do all my homework.
And so I had to really cram. It was great.
It taught you to work hard. And before venture capital, you also worked a little bit in, if I'm not mistaken, HP and investment banks and stuff like that. But you did decide at some point to step away from, you know, the good or at least stable salary and create your own venture firm, which was really rare in those days, right? Like that was like not even a known word. I think like Tim, take me through those moments.
When I was growing up, well my grandfather was the first venture capitalist in the Silicon Valley. My dad was a pioneer of venture capital. And you know I don't know whether my grandfather did very well as a venture capitalist but he was the first one. He did finance the Bay Bridge which is a really big deal. And I think Raytheon, he had something to do with getting Raytheon started. But my dad was a pioneer of venture capital and I always explained to people in my class they said oh my dad's a doctor or a fireman or a banker. Everybody knew what those were. And I said my dad's a venture capitalist. And everybody looked at me with a blank stare and I say he invests in small companies and he hopes they get bigger. That was it. So, by the, you know, then as I grew up, I kind of had a better feel for it.
But, and you know, I went to work for an investment bank and my job was half investment banking, half venture capital. That was after business school and I realized I kind of knew more about venture capital than the venture capitalists the investment bankers did. And they were happy to get rid of me. It was a bear market. I was not a good investment banker. I didn't like standing in between a deal. It never felt good. I wanted to be on the team. I didn't want to be a referee. And so it was a good mutual parting. And my dad had started an SBIC that had no cash in it but had some private companies and they were the SBA was valuing at $2 million. And he said, 'Well, why don't you go ahead and just do something with this?' I said, 'Okay.' And I went and I applied to borrow. I borrowed $6 million from the SBA.
I want to go there for a second, Tim. I want to go there for a second because again, even though your dad is like a venture capitalist, so taking a 6 million loan is really really scary at a young age. So take me there for a second because I think our listeners, a big thing is holding you back is fear of money and taking loan and taking risk. So, can you go there for a second?
Yeah. So, the good thing was I was putting at risk the $2 million, but I was not putting my life at risk. It wasn't a personal guarantee, which I would never recommend anybody sign. It was a guarantee against that $2 million. The SBA used to be very efficient. There were only four people that worked at the SBIC program and I went through the whole thing with a guy and I applied. It was a very well-organized thing because other people all did it by hand. I was able to do it on a computer and so it was like very impressive for them and in the application I showed the cash flows because as an investment banker I learned how cash flows work and I showed how it was going to work and the guy was very impressed but then he said wait there's something here, you know that he's got a checklist and he goes through the checklist everything's fine then he goes wait you need 10 years of investing experience. And I said, 'Oh, I've been investing since I was 10 years old.' And he goes, 'Check.' And boom. And they lent me the, I mean, there were a lot of interesting things that happened there. They lent me the first 2 million and I started putting it to work. And for some reason, Wells Fargo, which made me feel like Wells Fargo may not be a good place to keep my money anymore. They sent me the $2 million twice. And I went, 'This is a mistake. You got to take this back.' And they were lucky they found an honest guy because they sent me the first two million and then they sent me another $2 million.
So funny. And I was thinking, wait, why do we have four million in the account? We're only supposed to have 2 million.
Spoke to them. They were, you know, oh, and hardly even appreciative.
Just as $2 million like, let's go.
Oh, never mind. Whatever.
And by the way, for those who don't know, the SBIC, I think it's important, is Small Business Investment Company. And it's basically like they, you know, give investment to, you know, to fund small businesses, right?
Yeah. They lend to venture capital investors to put money to work. And it used to be just four people there. And now, I mean, and they had about 600 SBICs. Now they have about 600 SBICs, but there are about 1,200 people there. And so and it's a mess and you can only borrow one to one and you have to hire a lawyer to fill out all the forms and it's a nightmare. But I did it all harder now. Incredible.
Yeah, it's a nightmare. It's one of those government things that just went off the rails and they should shut it down or restart it the way it was before.
So let me take you there though for venture capital though, Tim. Like being a good entrepreneur or a knack to entrepreneurship does not necessarily mean being a good venture capitalist. In fact, I think sometimes they can actually clash a little bit because you can be starting to see things from the solution point of view versus the, you know, why is the team really able to build this kind of thing? But you've been able to invest in some of the biggest companies in the world. Why do you think you've been able to do that? Like what do you think is how do you decide if something is a crazy idea that's going to fail or a crazy idea that will change the world?
Well, first I work very hard to access as many entrepreneurs as I can. So that's where the school generates a bunch of entrepreneurs, brings them in from all over the world. The show is Meet the Drapers is reaching...
Yeah. Reaches 300 million people. And so anybody who's running a business, they say, 'Hey, why don't you talk to this guy?' And then my venture business, I've had sort of the same email address forever. And that email address is a powerful force. It's about...
Yeah. I think probably today I may have gotten 20 or 30 business plans in over email.
And then we go proactively and we look through any article we read or anything, we go and we hunt them down. So, a lot of it is you build your judgment by learning about what's out there and you just try to make sure you're making the best investments. And I've made lots of mistakes, right? And most of my mistakes were errors of omission, not errors of judgment.
Tell me more. What does that mean? Because I know you're pretty public about it. Like Google or Netflix, like you're pretty public. Yeah.
Right. Yeah. I didn't fund Netflix because I thought that was nuts. I thought, 'Wait, why are you, we're about to be streaming. Why are you doing DVDs through the US mail? We can stream in about a year and a half.' And he said, 'Yeah, they're not ready for that yet.' And I didn't really understand what he meant, but then I realized he's grabbing all the customers and then he's going to stream to them. And Netflix, smart, big one to lose. And then some, you know, I can blame partners for or whatever. But I do feel like it's, the venture biz. What's great is we saw all those deals. We got outbid on Facebook. We had six search engines before we saw Google. We saw them all. So, and a lot of that is because I get out, I speak, I give people my email address, I go...
That's how I started. You're the most approachable person I met when I started and I think that that's a big thing.
