Tim Draper on Finding Entrepreneurs, Missed IPOs & AI Winners

Fun to be here, Nicole. This is great. I'm looking forward to it. You go ahead and fire and we'll have some fun today.

Well, when I started the show, it was I would drag in any entrepreneur I could and try to get them to be on the show with me and the only person who would watch it was my mother. And then as time went on we instituted crowdfunding so that the viewer could invest in the companies and then it started to get very popular and then we started to go international and we did all these kind of amazing things and now it reaches 300 million people and about 10 to 20 million watch each show. So, it's gotten to be a really big deal. And what's happened is it not only helps us see a lot of interesting entrepreneurs because I'm a venture capitalist. I like the idea that these things I do bring me deal flow. But it also allows the people who get on the show to supercharge their business and that's just really fun for startups. So, we've had a lot of fun with the show. This most recent season is all US. And that's really the first time we've really gone to the US. We tended to do it to attract entrepreneurs from other parts of the world. And one of the US stops was Hawaii. And part of what we do is we do a little cultural thing. So the cultural thing was walking up this waterfall or walking up two-way waterfall. And I got to the waterfall and I thought, 'God, I'm at a waterfall. I should just get down into the bottom of the waterfall.' So I walked up, jumped in, and I looked down and there were a bunch of entrepreneurs way down at the bottom. And I said, 'Hey, anybody want to pitch me?' and they all like one guy just sprints straight up the waterfall and jumps in with me and starts pitching me in the waterfall. But we've had so much fun and we have guest judges there that are so great. We have these guest judges like and we adopt them as Drapers. So we now have Joe Montana Draper, you know, four-time Super Bowl champion. We have Sri Sri Ravi Shankar Draper, the biggest guru in India. We've had Rosie Rios Draper. She's been on the show four times. She's former treasurer of the US. She signed all your dollar bills.

Well, the entrepreneurs we look for are the entrepreneurs that have very big ambitions where they're transforming an industry. They're doing something really extraordinary because we seed seed entrepreneurs. We put the first money in. So like first money in Tesla, first money in SpaceX, but we were also first money in a whole bunch of companies that did not work. And the reasoning there is that we take these extraordinary risks on entrepreneurs who are trying something really big. And you know, everything now it's everything from reversing aging to colonizing the moon to making Bitcoin pervasive to all these amazing things these people are doing and they're things that I call them heroes because they take long shots at extraordinary outcomes. And those outcomes can be so big that they're bigger even than the entrepreneur imagines they become because it's a big world. And so the entrepreneurs today, they are more savvy. They have seen more. There's a system now in place around the world for an entrepreneur to get funding. And that is relatively new. And then the entrepreneurs over the last year or two are seeing that they can start a company with AI without hiring a whole bunch of people. And so they can start companies with very little money.

Oh, yeah.

Oh. Well, Netflix, he came to me and I said, 'Wait, why are you sending DVDs through the US mail? We're going to be streaming in 18 months.' And he said, 'The world's not ready for that yet.' And I didn't understand what he meant, but what he meant was he's going to get all the customers and then he's going to stream to them. And I was just an idiot. And then I made another mistake not investing in LinkedIn, not realizing how incredibly extraordinary that LinkedIn network would become. And then I can blame myself for a bunch of them and I can also blame partners for some of them. But you know I sat with Sergey and Larry on an airplane and I came to my partners and I said hey you know these guys at Google is pretty cool and my partner said Draper you've gotten us into six search engines you know why do we need another one?

That was a good one. Okay. And I got outbid for Facebook. We have had a lot of you know people say well you know you've had this success. How about your failures? My failures were all failures to act.

Yeah, when I was getting started in the venture business, you know, my dad was a venture capitalist and so were all of his friends or a lot of his friends and that made up the entire venture industry. There like six people and I went around and some of them said it's all about the people, my dad included. Some said it's all about the market and some said it was all about the technology. So Don Valentine talked about the market and Tom Perkins talked about the technology and I realized that they're all right and so we need to really evaluate all of those things and more and actually we're even using AI now to help us evaluate companies. So the world is changing in a super fast way. Our AI can evaluate their voice and see what their personality is through their voice. The AI can evaluate their facial expressions and determine their emotions and whether they're lying. And a lot of it is just right now we're just using AI to verify our own feelings on companies. And we're also using it for sourcing and we're using it for post-investment help and pre-pitch help. We're using it in amazing different ways. It's really changing the whole nature of the venture capital business and we're really...

Yeah. Another one I missed was OpenAI with Sam because I was talking to Sam about the other thing he was working on, the universal basic income that I think maybe should be universal earned income. But he never really he told me a little bit about this nonprofit thing he was doing, but I didn't really dig in and I should have. So and I think in general AI I think that is a battle for xAI, Grok and OpenAI and all Claude, Anthropic that boat has sailed but what's really kind of interesting is that when we were in 1999 the biggest deal companies in the internet were AOL and Yahoo and a couple others. And it was only after the bust, after the bubble burst that some of these other companies, Google, Apple, Amazon, all took advantage of what was there. So, we're looking around the periphery to see if there are companies that are doing AI that might end up being those companies, the ones that find the really beautiful applications for where AI will be used in the future.

Well, we've seen a couple of companies that are robot brain companies. So, the idea is a robot goes around and the robot doesn't have to be humanoid. I kind of like the ones that don't look like people that just do really interesting things, but they learn now. So where they used to be kind of I pick this up, I move it over here, I drop it. I pick it up. Move it over here, I drop it. And they could be kind of trained to do that over and over and over. But what they weren't trained to do was let me feel what it feels like to pick up a piece of chicken or orange or something that's not rigid. But over time they move from being sort of an expert system to an LLM where they learn that if I pick this pitcher of water up and I pour it this way, it'll spill. But if I pour it a little bit, then it won't spill. And I think those kinds of learnings get better and better and better and so I do think that there will be a really good application of AI will be in robotics. So we're very active there.

The only thing that I will say is that every 20 years, seven out of the 10 biggest companies in the world turn over. And only three stay the same. I think Microsoft's made it through a couple of decades as still being one of the top companies in the world. But I think that turnover will happen faster. Now we're seeing so much change at the venture capital level that there will be extraordinary change as you move to the public markets and in who the great leader companies are. And it happens for a variety of reasons, but what usually happens is when a company sort of gets huge and flattens out, a lot of the great people spin out and do new startups. So we've had, now one thing I do think might be happening is I don't know if you're in any big pharma companies, but big pharma is all built on chemotherapies. They put a chemical in your body, it would have some effect, and then there would be an effect of the effect and you'd have to get another chemical in there to fix that, another chemical. And it was like whack-a-mole. And some of the companies we're seeing now are bio cures. And so going from chemotherapy to bio cures I think there will be a huge turnover in healthcare in the public companies in healthcare. I think you'll see a very dynamic market there. I think you'll see in AI I think that's going to go back forth back forth. In space I think there's a lot of innovative activity in space. You know of course SpaceX has huge leadership there. But people are mining asteroids. They're colonizing the moon. Space is going to be a really interesting thing. I think we're going to think it's completely normal to take a weekend and go to the moon.

Yeah. Oh, your tie. Oh, yeah. Looking good, Tim.

So, yeah, all the regulatory things are little speed bumps along the road. Bitcoin is a new model for a society to have a global economy that is much more frictionless and open, transparent, keeps perfect records on the blockchain. And so I'm a, you know, I'm a believer that long term this is going to be a really important part of our world. And keeping perfect records means that you don't have to have all the checks and balances that you do with banks and governments. Because all of the records are kept automatically on the blockchain. So taxes are paid, people are paid, everything can be built into a smart contract. And so I look at it and I just constantly we accept Bitcoin for rent. We accept Bitcoin anywhere I operate, I accept Bitcoin. And so my Bitcoin continues to increase. Now, at first I used to try to say to people, hey, this is going to change the whole world economy. Why don't we why don't you go get some? It is a good idea. And now I'm saying to people, look, if you're a fiduciary, if you're the treasurer of a business and you don't own Bitcoin, you're being irresponsible. If you're a central bank of a government and you don't own Bitcoin, you're being irresponsible. Because a fiat currency can inflate and people can lose faith and if they lose faith in the fiat currency they will run to Bitcoin and you could be stuck holding a bunch of dollars that become worthless. There could be a run on the banks. That was very close. We were very close after the Silicon Valley Bank went under. I think and if you manage a family and you don't own Bitcoin, my recommendation for a family is that you should probably own about six months worth of Bitcoin. Keep your family alive for six months with Bitcoin because you don't want to be one of these people clawing at the bank bars to try to get your fiat out and get it into Bitcoin when it hits because boy when Silicon Valley Bank went under that hit between Thursday at 2:00 and Thursday at 4:00 and then it was shut down gone. And so you want to make sure that you're well taken care of. And I think if you're a board of any kind of a business, you're responsible for at least two weeks and sometimes four weeks of payroll. And if you're responsible for that, you better have that in other vehicles other than fiat currency. So you should hold at least two to four weeks worth of currency to pay people off if your bank goes under. And then as a government, if your currency inflates and people lose faith in it which happens all the time, you know Cyprus and France and whatever there are so many of these and in Argentina every 10 years and Nigeria has been that way forever. Then you should make sure that you are somehow able to keep your government intact and holding Bitcoin will be a big part of that. So yeah, this is going to be very important to all of us for years to come.

If you look at all the charts it cycles because every four years it has these halvings. And so when there's a halving there's in effect a reduction in supply of Bitcoin and so the price naturally goes up before the halvings and during the halvings and after the halvings and then it falls as the miners are able to accumulate more and the miners are usually the downward pressure on the price of Bitcoin. But one thing that I've thought about is that part of the rise in Bitcoin is the rise in the value of Bitcoin and part of it is the falling in the value of a dollar. A dollar today, you know, a year from now that's 90 cents and two years from now it might be 75 and it just keeps dropping. So, it's pretty easy for Bitcoin to go up against the dollar. So, it really your question is harder to answer than it seems on the surface because you're measuring it in dollars and dollars are decreasing in value. You don't want to hold dollars forever because they just drop in value over time. And Bitcoin rises in value over time with these four year cycles. So but you know there may be a day when if there is a run on the banks and people don't have confidence in the dollar then bitcoin against the dollar becomes infinite. It's like my dad gave me a million dollar bill when I was 10 years old and I went, 'Wow, a million dollars. What can I do with it?' And he said, 'Nothing.' And I said, 'What do you mean nothing?' And he said, 'That's a million Confederate dollars.' The Confederates lost the war. People lost confidence in the Confederate dollar. They all wanted Union dollars and the Confederate dollar inflated into no longer existing.

Well, young folks starting and young entrepreneur may be two different things, but young folks starting I would recommend just get a job. And it doesn't matter if you're paid or not. Just get a job. Do it. Build it. Have pride in it and you'll learn so much. I know Ron Johnson was a huge success with the Apple stores and everything he's done. Almost everything we all have ups and downs. But he started with a job coming out of Harvard Business School, scraping gum off the floors at Target, retailers. And just having that job, you start seeing things. Your mind opens up to all the things that are going on in a business. And when you get that, then all of a sudden things start to click for you. And so I think it's important just to like get a job and throw yourself into it. That would be like for a 20 year old get there. Get out there and do it. If you're a young entrepreneur, and you have some burning idea, I mean, the best advice anybody gave to any entrepreneur was Elon when I brought my Draper University founders over to Tesla when they had their big launch of the S and Elon spoke to them and some entrepreneurs said, 'Hey, what would you recommend to a young entrepreneur?' to Elon. And Elon is exhausted. He's, you know, he's been building this thing. He's put this whole thing together. They're launching the S. The governor is there. It's just this huge thing that he's architected. You could tell he's been up all night for three nights and he just looks at this woman and says, 'Don't do it.' And for an entrepreneur, you hear don't do it and you think maybe I shouldn't do it. That means that you don't really have the burning desire in you and you probably shouldn't. But if you're a true entrepreneur, it won't matter what anybody says. You will, you have to do it. It's something you have to do. You've got to make this happen. It's a world that doesn't understand and you need to explain it to them.