Founder of Draper Associates, Draper Associates
Invest Smart: Tim Draper's Quick Guide
Tim Draper
ABOUT SPEAKER
Tim Draper is the founding partner of Draper Associates and DFJ. Investments include Skype, Hotmail, Tesla, Baidu, Indiegogo and AngelList among many others.
He is the creator of viral marketing, a marketing method for spreading a software application from customer to customer, instrumental to the successes of Hotmail and Skype among hundreds of others including Gmail and Yahoo!mail.
Tim has been recognized as a leading supporter of entrepreneurship with numerous awards and honors. He was listed as #46 of the most outstanding Harvard alumni, #7 on the Forbes Midas...
About Tim Draper
Tim Draper, founder of Draper Associates, has been active in media appearances and events, discussing his investment philosophy and his views on Bitcoin, SpaceX, and entrepreneurship. In interviews, Draper described himself as an early investor in SpaceX, stating that the company is "going to take us to Mars." He has reiterated his prediction that Bitcoin will reach $250,000, arguing that it is "better, faster, cheaper than the dollar" and will "eclipse fiat currencies." Draper has advised families to hold six months' worth of Bitcoin, businesses to hold two to four weeks of payroll in Bitcoin, and governments to hold Bitcoin as a hedge against hyperinflation. He has also stated that "if you're a fiduciary... and you don't own Bitcoin, you're being irresponsible." Draper has also commented on the broader investment landscape, stating that "every 20 years, seven out of the 10 biggest companies in the world turn over." He has discussed his criteria for identifying entrepreneurs, saying he looks for founders who are "challenging the status quo" and have a "burning desire" that makes them proceed regardless of criticism. Draper has also promoted Draper University, describing it as a "human accelerator" that turns "ordinary people into heroic entrepreneurs." He has criticized what he called "socialist countries," stating they have "weak leaders" and "flatline" economies, while arguing that "free countries and the capitalist countries grow at extraordinary rates."
Transcript (81 segments)
✨ AI-enhanced transcript with speaker attribution
T
Tim Draper0:07
Now you know some of my secrets. We really do have a good time at Draper University, and it's so much fun to see what these students do after they've been through it, because what we've done is we've stripped away their high school hang-ups. We've made it so they can feel great about doing whatever it is that they need to go do. There's so many things. Fear drives so many of us in so many ways. Watching the news is scary, but if you can strip away your fear, it's amazing what you're capable of. And I think that's what we do with those students. I think they're going to live more dangerous lives, but they're going to end up doing really some extraordinary things.
So what I thought I'd do today is talk a little bit about investing. But before I do, I want to cover something that I believe is sort of near and dear to my heart. I've been flying — I was in Seoul, and then I flew from Seoul, Korea to Kazakhstan through Uzbekistan and lost my luggage. So now I'm a little ripe, by the way. But I started to think — and I'm going around the world — so I started to think about the term 'international.' And it made me start thinking that that's an old term.
This is the first time I've been to Turkey where I had to kind of go through all these lines to get a visa. It wasn't great. It was one of those things where you knew there really was no reason for it other than these leaders trying to stay in power and kind of moan at each other. And I thought of the term 'international' — it's a little like interdivisional sports or whatever. Each of these countries has their leader and their fiefdom and their way of operating. But we are all global.
I've decided that 'international' is now — even though I'm saying it about fifty times today — not going to be a part of my vocabulary, because 'global' is so much more what we are today. All the geographic borders have fallen. All of us now can easily move from country to country. Those governments, those people in power are telling us all what to do, but we can leave. Or in the case of Tunisia, we can gather a social media campaign and overthrow them. This is a really amazing, interesting time, and it's so exciting for me.
I'm starting to put some real effort into seeing what is the global governance — what does that look like? We know what international governance looks like. It's all these little land-based wars and spats and bilateral agreements and that sort of thing. But what does the global world look like from a governance standpoint? And that is going to be a really interesting issue.
Here's what else is happening. We have the blockchain and Bitcoin and all of these new technology governance. We have all these new technologies, and there's going to be sort of a layer of governance above all the other governments. We might end up having our healthcare and our social security and anything that's insurance-based be handled in the virtual world, in the cyber world, and the land-based government gets less and less important — except maybe city governments, things that are local to you. Those might end up being interesting.
I had a great talk with the prime minister of Kazakhstan. He's trying to create a hub in Kazakhstan, and we started brainstorming about how he could get more people into Kazakhstan and make it more of a hub. He's trying to make it more free. I said, well, the Estonians have this e-governance — I was very familiar with the team that put that together — why don't you do that? He said that sounds like a good idea; we've been working on something like that for a while.
Then I said, Estonia has only got like twenty thousand e-residents so far. In fact, I'm number three. It was great — I was supposed to be number one, the prime minister said I was going to be number one, but it turns out he gave that to some reporter. Anyway, I'm number three. So I told these guys, twenty thousand — it's not making a big impact on the world yet, but it was a brilliant idea.
Then I said, well, what if you just instead of having a guy sitting back there going, 'Give me your visa,' what about having somebody who says, 'Welcome to Kazakhstan! You are now a virtual resident of Kazakhstan.' All you have to do is fly to Kazakhstan and you are a Kazakh. Welcome! And then he has a big expo, brings in three million people, suddenly he's got three million virtual residents of Kazakhstan, and then more and more of these services can be provided by that virtual residency. I thought that was a pretty interesting idea.
Then it turns out I learned that the word 'Kazakh' means 'free.' So I said, oh, you've got to do this — you've got to say 'I am Kazakh.' So that anybody who gets one of these cards, the one thing they have to say is 'I am Kazakh. I am free.' And it gets you thinking, wow, that is really exciting. He's going to create a free land, but generally, he's going to create a virtual governance, and that I think could end up being something that just changes everything.
Then all these countries start creating virtual governances, and they compete for us. And they start looking the way entrepreneurs look at their customers — they're going to look at their citizens, and they're going to be virtual. We're going to be able to pick and choose. They want people like you. They want the investors of the world, they want entrepreneurs, they want businesses of the world. How do they get them? They have to delight us. They have to excite us. They have to say, 'Yeah, this is the place for you,' because otherwise we can just walk to another border and go somewhere else.
So with that, now I want to talk about how I like to invest, because you're all investors in your thinking. 'God, really, am I going to back this guy who's got to start a crazy idea? Why am I thinking about it? I've got a good real estate business going — why do I want to mess with this?' Well, you do, because it is the future of progress. And it helps the world in a huge way to take your money and put it behind these entrepreneurs who are then going to make something of it. And be prepared to lose that money. Just get into the habit of losing and failing. And at our school, Draper University, one of our pledge items is: 'I will fail and fail again until I succeed.' As investors, I want you to look at it that way.
Now I'll tell you a few things that I think about when I'm investing. First of all, we are global, so I'm always looking for something that's really big and transcends geographic borders. And then I'm thinking, is this an industry where you're getting bad service at a high cost? So maybe you guys can come up with a few — what industries are out there right now that you feel are getting bad service at a high cost?
Healthcare — oh my god, worst service, highest cost, it's crazy. Education — there's that weird artificial union premium that somehow we're paying for a good education. Government? Oh, you've heard me speak before. So what I usually say is I first pick on my own industry: finance. Finance is this industry where we pay a crazy high price for our banks, for our investment banks, for our venture capitalists. We pay crazy prices and we get bad service.
What do you do about that? Well, whenever I look at an industry, if it's got those characteristics — really high costs and really bad service — I say, what technology can be used to transform that industry? What can we do to go after healthcare, education, government, finance? What technology is out there that can sort of change the nature of those industries and give an entrepreneur a chance to build a wedge into a market that then can grow and eventually transform that industry so everybody gets good service at a low cost.
So right now, that technology — I think, I mean there are lots of great technologies out there. There's 3D printing, there's CRISPR, there's all the marketplaces, the Uber-ization of everything, there's IoT, there are all sorts of really interesting technologies to bet on out there. But the one that's going to go after all these regulated industries is the blockchain and Bitcoin. It's unbelievable. Having a perfect ledger basically eliminates the need for all that bureaucracy, because you can use a blockchain platform to do all the things that government does.
It keeps a perfect record of everybody who comes through the country. It keeps track of your healthcare and your healthcare insurance. It keeps track of your pensions or your age or whatever. It does all those things, and it's a permanent record that is incorruptible, fair, and honest. And I know that all the bureaucrats in the world are incorruptible, fair, and honest — but we know that the blockchain is. And so I look and I say, this is a huge opportunity. This is a globally transformative technology that is going to open up all sorts of new possibilities for entrepreneurship, and it's going to make our world awesome.
In the meantime, we're going to still have international out there, but I'm seeing this beautiful global light at the end of the tunnel, and I think we're going to see some really amazing things. So I look at those industries, I look for that big margin, and I look for those technologies that are going right for something that could be really extraordinary. Then I think, okay, is this business interesting? Is it unique? Is it something that I could go and do? If I can go and do it, forget it. Is it something that has an interesting new twist? Is there an idea in there?
Then I think, okay, well, my specialty is business modeling. So I don't actually even care what they're thinking about for a business model, but then I go and I challenge those entrepreneurs with a business model and get them really thinking about the business model as much as they might have even thought about the technology, because that could be the make or break for the business. You keep the business alive long enough, it becomes successful. And then the other thing — we see thousands of business plans every year, so we don't get to meet everybody. So I make the cut based on how big's the market, is it an industry that needs transforming, and is it interesting technology.
Then I say, okay, this passes all those tests, and I meet the entrepreneur. The one thing I'm looking for when I meet the entrepreneur is incredible gusto and enthusiasm. They have to just love what they're doing. It doesn't have to be like cheerleading — 'Go team!' — but it does have to be genuine. I always ask this one question, and it's a good question for all of you to ask when you're looking at an entrepreneur: why are you doing this?
The great entrepreneurs are separated from the would-be entrepreneurs very quickly. The would-be entrepreneurs say, 'Well, because my friend thought it was a good idea and I would have it,' or the bold ones say, 'I want to make money,' or they say, 'I want to make you money.' Those are sort of clever ones. But the one that I back is the one that says, 'Because it has to be this way.' Because I told my boss over and over, 'This is the way — all the customers want this, this is so important,' and my boss just wouldn't listen because he's got that gravy train going. And it's an innovator's dilemma or whatever. But I've got to do it, and if I'm not going to do it with you, I'm going to do it with somebody else. There are plenty of fish in the sea.
When I see that, I think, okay, this guy or girl — by the way, women are rocking it now. Yeah, it's amazing. And most of the ones I see are these ones that go through Draper University. They come to Draper University kind of, 'Oh hi, I'm here,' and they leave Draper University going, 'Yeah!' Because they go through this survival training and they come out just like super strong. And there's this wave — my daughter is only backing women — where you're going from what used to be like five percent of entrepreneurs being women to now like thirty percent. And that to me looks like a major trend.
The women who do start businesses are going to be quite extraordinary because they're taking that big step. So where was I? Women — they always confuse me.
When you see an entrepreneur like that, go ahead and take the plunge with them. And think in terms of, hey, I want to try this, this is going to be pretty interesting. And here's the way I would invest in venture capital: I would take the money that you have that you can basically throw away and your life won't change, and then divide that into twenty pieces, and then divide each of those in half, and then put that much money into this entrepreneur that you fall in love with.
Then what'll happen is you'll find another one and another one and do three right away, like tomorrow. You'll see a bunch of them, invest in three of them right away, because then nobody can blame you for just blowing it with that one entrepreneur you backed. Because you can go, 'Oh no, it's a portfolio — I've got three of these.' It's the same recommendation I give to new analysts and associates in venture firms: just get three done, because then they can't look at you and just think of that one loser you brought to them.
Expect to win every time, but expect to lose sixty percent of the time. And the reason I say sixty — first of all, that's about my record — but the other thing is, if you expect to win more than half the time, you're going to be disappointed and you're going to stop investing. But if you expect to lose more than half the time, you're going to go in there and go, 'Okay, you know, I might lose it, pretty likely I'm going to lose it, but I'm behind you and I believe in you and I hope that you make this thing a successful business.'
Starting a business is so hard. It is brutal. Survival training at Draper University doesn't even test them to what they're going to have to go through when they actually do run a business. And you've got to be — when you're an investor, you've got to kind of be a big supporter, a cheerleader, but also a psychologist or a psychiatrist. They have real emotional problems.
Think about this — Elon Musk. He says, 'We're going to Mars,' and everybody goes, 'Oh, that guy's crazy.' But then there's like three or four percent of the people that go, 'Huh, how would we get to Mars?' And some of them are the best engineers in the world, and they go, 'I want to work for that guy.' So he's alone though — he's out there alone for a long time before people start recognizing, hey, maybe we'll get to Mars. But it's tough, because that's why you get rid of the high school hang-ups now, because you've got to be willing to stand there alone and just be there. 'Here I am, I believe in this, and I'm just going to keep believing this.' And a lot of times entrepreneurs are kind of deciding, do I take the safe route or the risky route? Always encourage them to take the risky route. Always. That's the one they really want, that's the one in the back of their mind, and that's the one that'll make you a fortune.
So then you've decided to bet on these entrepreneurs, but before you bet on these entrepreneurs, there are a few things to watch out for. Watch out for the relationship between the founders. First of all, if they both want to be the CEO, they'll talk over each other in the meeting. If they're dating, all they really care about is dating — they're not really as interested in what they're pitching you. They're just having the excitement, and that relationship is going to blow up, and so is the business. So I don't recommend that.
But if they're married, it works. But you've got to tell them that one of you is CEO, and whoever that is has to be able and willing to take all the risk that they have to take to make this thing successful. Because what usually happens is one spouse is the one who says, 'Yeah, you know, we've got to make sure that we can pay for everybody's education and we're going to do this and that.' Well, you need one of them to just go, 'Yeah, but I'm the CEO and we're going to try this and this may totally blow up and we're going to have to go get jobs.'
Incidentally, at Draper University we have this exercise: okay, you have twenty-four hours — go get a job offer on paper from somebody you've never met before. They go out and about ninety percent of them come back with a job offer on paper. It's pretty amazing. But what we're really telling them is, hey, you can always go get a job. You can't always change the world, but you can always get a job.
A couple of other things to look for — make sure the person fits the job, and make sure that the passion just isn't somebody who has a really good way of selling you. Don't get sort of thrown into the sales pitch. And a good way to do that is to meet them twice, because the first day they may be pitching this and the next day they may be pitching something else. And then the other watch-out gotcha, in my mind, is — I'm a serial entrepreneur — I scream running away from entrepreneurs that are serial entrepreneurs, because I think, oh wait, serial entrepreneur — you're just here for a quick hit and then you're gone. I'm counting on you to run this business for your life.
You're telling me you've done this six times and you sold some of them, you lost all the money. I'm thinking, well great, I'm glad you're able to try and try again. And I think it's okay to have entrepreneurs who have failed and failed and they keep trying and going. But if they call themselves a serial entrepreneur, it's something to watch out for, because then it's like they just go from one to the next to the next. The ones that are great are the ones that say, 'Yeah, I did this and I failed, and then I tried again with this little different pitch and I failed, and this time I'm going to do it right, but I'm still going after that same thing.'
Although there's one exception: if an entrepreneur has made a fortune and done an outstanding job, then the second time around you don't want that person in the same industry — they carry too much baggage. You want them doing something entirely different, but you know you've got a total winner, so it's still worth backing them as long as it's something very different. So that's the exception to the rule. There are always exceptions, and always bet on the exceptions. You're looking for the outlier, you're looking for the crazy guy, the crazy girl — the one who's kind of a little, maybe, is she off or is she brilliant? It's got to be a little bit of that.
The other thing I think about is, if they come from the financial world, sometimes it's all about the numbers, and that doesn't do it. The best are usually the ones that come from the engineering world or the marketing world — usually, not a total rule — because the marketing people sort of see this connection between the customer and the engineering, and the engineers come up with these really incredible things that could apply to interesting markets.
You're here for a couple of days, you might as well back a few entrepreneurs, have some fun out there, and then ride this wild ride that I've been able to enjoy through my whole life. With that, I don't know how much more time we have. I probably run over.
Oh hey, we got another half hour. Let's do a Q&A. All right, thank you, this is awesome. So, small group — anybody? Yep?
Oh, okay, what happened to my luggage — that's a great question. This is great. I went, everything was fine and I was in Seoul, and then I flew from Seoul to Uzbekistan. I got into the wrong line, and they said, 'Visa,' and I said, 'Wait, I'm just going through.' 'No, oh yeah, transfer, transfer.' They said, 'Oh okay, you got to go back this way.' Well, of course, if the person at the desk is going, 'This is...' And then I went back, and I was going straight to the transfer place, and then some guy stops me — very official — 'Excuse me, passport.' And I'm like, 'Wait a second, I'm going over there, you stopped me in the middle.' And I said, 'Okay, well, he looks official,' and I gave him the passport.
And then he disappears for about twenty minutes with my passport, and I'm thinking, 'Oh great, there's Uzbekistan — welcome to Uzbekistan.' And then he comes back and he goes, 'Here's your boarding pass, your bag's on the plane, everything's great.' And I thought, 'Oh thank you, I thought you just wanted to take care of me.' And so then I got on the plane and I went to Kazakhstan, and fortunately I was working with some great people at Kazakhstan who were able to buy me a fresh pair of underwear and a few other things.
But then it didn't show up the next day, didn't show up the next day, didn't show up the next day. And then they said, 'We found it — it's in the lost and found here in Uzbekistan.' I don't know what that means — it means like, 'Hey, we've taken everything out of it that we need,' and nobody fits into this stuff. So now it's supposed to be on its way to Turkey. So there you have it. And why — I mean, let's just eliminate these borders and go global. Why are we doing this? Why do we put up with all these leaders? It just makes no sense.
Oh yeah, and government — oh God, yeah. The customs, oh yeah, that's just all wasted money, the whole thing, totally wasted money. And it used to be that one country would get super rich and they'd build these beautiful buildings and everything would be great, and then they'd want to protect it and keep people out. Well now I travel a lot, and I keep going to these countries where everybody thinks, 'Oh God, you're going to Kazakhstan or Uzbekistan or whatever, oh boy, you're going to be going in the bathroom in holes.' No — you go and these buildings are spectacular and the place looks spotless and the people are all completely informed and they're just like people from everywhere else in the world. And you start thinking, wait, what are we protecting anyway?
What was your question? Stories? Can you talk about a memorable failure of the sixty percent? Great, okay. Here are my biggest failures. Biggest failures, okay, you ready? I passed on Google and Facebook and Yahoo. So my biggest failures are failures to act. It's not like what everybody's thinking is failures — all these little failures, you lose money, who cares. You lose money. One time I missed out on what, ten thousand times my money on Google. My partners all said, 'Wait, we can't do Google — we have six other search engines.'
I was with Larry and Sergey on the plane, and I met these guys and I thought, 'Wow, these guys are impressive.' It's impressive. And I said, but there are a lot of other search engines — we had already backed six of them, and somehow the discussion went the wrong way there. And Facebook — I got outbid. And what else? Oh, Facebook — my god, it just killed me, because my daughter — it's all she could talk about, and she was on Facebook all the time. And I thought, you know, there's something here. But they were very clever, and they played us against another venture firm — back and forth, back and forth, back and forth.
The guy kept coming back and apologizing and saying, 'I'm so sorry, it's going to have to be forty million this time.' I said, 'Okay.' Then he'd come back a week later, 'I'm so sorry, it's going to have to be eighty million.' This is Sean Parker — he is brilliant, that guy's amazing, best negotiator I've ever seen. He started me at twenty million, where I was thinking, 'Oh, this is awesome.' And then we got up to a hundred and fifteen million, and I went, 'Oh, I can't do this.' And a hundred and fifty million — what is it, three hundred billion now? Oops. So those are the biggest failures. And in doing things, I never really feel those are great failures. It's like, okay, so yeah, I invested in this entrepreneur, I lost my money — so what? You know, I still live perfectly fine.
I don't think I talked enough about blockchain and Bitcoin. You gave an impression that it was something to invest in, and I can't for the life of me understand it still. I'm going to help you with understanding blockchain. First let's work on Bitcoin, okay, because that's sort of the simple one. Bitcoin. Okay, first think about our deep ancestors who went — at first they didn't know, they said, 'Here, I give you a donkey if I can stay in your village,' or whatever, or 'Hey, you've got fire, I got something.' So they started trading.
Then they needed something, so they came up with like shells or pretty rocks or something. So they're sitting there with shells, and they go, 'Okay, I got thirty-eight shells and I need meat, so here are your shells for the meat.' And then the shells became this thing that we were all trading — but virtually, the shells are kind of worthless, right? Then we went, well, we're going to get more sophisticated, we're going to go for precious metals. Let's make gold and silver really, really valuable — really the thing you don't have to carry as much of. A small bag of gold can get you a palace.
And then in gold, it's just like rocks, right? And then people sort of said, 'Canada, you know, we're kind of a little low on gold, but we still need to make all these deals. We don't have enough liquidity in this market.' I don't think they had the word 'liquidity,' but let's go for the promise of gold. Okay, I'll promise you gold or I'll promise you silver. And then it was like, 'Here, you get a silver certificate,' and it'll be printed up really nicely, 'here's a silver certificate.' And then it was like, 'God, we were sort of running out of gold and silver, and we don't have as much silver to back up all those papers that we're sending out to people. Okay, let's just promise that we can deliver something of value.'
So let's do something called a Federal Reserve Note, which is backed by the full faith and confidence of the federal government. Let's just print these things, and then we'll have more liquidity. And things worked pretty well that way for a while, and then people kind of went, wow, you can go even farther — you can create credit. 'Here's an IOU, here I owe you this money, just give it to me now, because now it really means something to me and tomorrow won't matter.' And then people started to electronically move money around. And each time one of these things happened, the world got wealthier.
Everybody wins. If you and I make a deal, we're both better off because we made this deal — at least in both of our minds, that's a good deal, because we would have done it another way. So we're both better off. You want more deals. Okay, so suddenly there's this new technology that allows you — it's not this little piece of paper, it's not a shell, it's a bunch of electrons running around up there in the sky — but it creates a ton more liquidity. And let me give you a reason. I'll tell you a quick story.
I actually invested in a bunch of Bitcoin at six dollars a Bitcoin, and I had it, and I did it through another guy who stored it at Mount Gox. And then I was thinking, hey, this Bitcoin's really exciting — people are going to be able to trade this and it's going to be really fun, and it's going to be a new form of currency, it's going to be interesting. Maybe it'll just be for games for a while, but who knows — maybe people will be able to buy houses with it someday or something.
Well, then that guy from Mount Gox just goes and steals all the Bitcoin, or it disappears. And I thought, oh well, that's the end of that — not just my money, but I just thought Bitcoin is gone, it's, you know... But the next day Bitcoin traded down about ten percent. I thought this would be zero — why is it still at ten percent? And then I realized, somebody out there really needs this. And then I thought about who might really need it. Yeah, sure, there were the drug dealers and the gun runners and all that, right? But there were also the unbanked.
Now I'm going to go through the unbanked with you right now. Let's say you have seven dollars and eighty-two cents and you want to set up a bank account. Somebody looks at you and they say, 'Well, there's just no way I'm going to set up a bank account for seven dollars and eighty-two cents.' You say, 'Why?' Because it costs them two hundred dollars just to regulate — just to deal with all the regulations for your account. Why would I ever do that? So then the unbanked — and the regulations keep piling on. The government always has new ideas for what the banks have to do, right? And they keep piling on, so that two hundred dollars becomes three hundred, four hundred. And at some point there's this group of people who are going, 'Well, I can't be in that economy at all.'
So all of a sudden there's Bitcoin, and they're going, 'Hey, we've got an economy, we've got a way to trade, we've got our shells, we've got the thing that we can do. And here, I'll give you some Bitcoin for this.' And actually, there is a way to trade the Bitcoin for these other fiat currencies. And suddenly you've got a real economy. Now, we're — what are there, three billion unbanked in the world? Something like that. You got almost half the world can now participate in a new global economy. And it's global — oh my god, it's fantastic.
Let's say, just for sake of argument, that one country that you live in suddenly becomes taken over by a dictator, and that dictator — you're thinking, 'I've got to get out of here.' And you've got thirty million whatever monopoly money that that country uses. A lot of people in Hong Kong did this — it was like, 'I have to leave all my money behind and I've got to move somewhere else.' And so they all moved somewhere else.
Well, now you can do that, and you can just go, 'Oh, I'll just pull down my Bitcoin,' and you still have your money. You might have lost your monopoly money from the dictatorship, but you still have money that is now globally recognized. And it is so powerful, unbelievably powerful. Think of that — it's just like freeing Kazakh. I'm free! Just — if I can — okay, yeah, we'll get...
So we manage an angel investment network out of Dubai, and we get loads of blockchain startups who may or may not need blockchain to run the business. How can we first, as the people managing the network, understand that, and how can we explain it to people? I'm glad you asked that. I should have said this earlier. There are these ICOs. Oh, by the way, you know, we talk about governments being in competition with each other for us. You see weird things happening with these governments, because they're nervous. They're going, 'Oh, I think I get it — my power is now going to fall because these people are global.'
And so all of a sudden you see China going, 'No, no ICOs.' And then weirdly, the free part of Korea, South Korea, said, 'No, no ICOs.' But then you see Japan going, 'Bitcoin is now a recognized currency of the Japan country.' And then you think, okay, fast forward ten years — which of those countries is going to be the winner? It's definitely Japan. And it's all the other countries — it's Estonia, Singapore — it's all the countries that are going, 'Yeah, I'm taking that.' Because what China and Korea have just done is said — let's say it was 1985 — they've just said we're not allowing the internet. They've just said we're going to stay in the dark ages, and this new thing is happening anyway.
How do you invest in these ICOs, blockchain, whatever? Okay, ICOs aren't something new. They are not a for-profit enterprise, they are not a nonprofit enterprise, they're not an NGO. There's something new — they're a token of excitement. That's the way I would look at it — a token of excitement. And the ICOs I have backed are when I sense a movement, I sense a societal transformation, something that is changing some part of society. And they're coins — you're not investing, you're buying coins.
With those coins, very rarely are those coins somehow connected to the profits of the business, and usually they're not. So you're not betting on the profits of the business. If you're buying the coin, you're buying a coin, and if that coin spreads the way Bitcoin did, it will get more and more valuable. Now, I'll give you a tip on valuing Bitcoin. What I thought about when I thought about what's the upside on Bitcoin — what's all fiat currency worth? It's like a hundred trillion dollars, right? Now, all the virtual currencies are worth about a hundred billion dollars. So there's a thousand times in there somehow.
Another way to look at those is, if it's a new coin and I create it, and it's Draper Coin, and then it's only me, then the coin's worth zero. But if you're willing to buy it or trade in it, then at least we've got some value. And then if he joins us, then the three of us now are kind of trading in it. And then as each node is added, it grows with Metcalfe's law — so the value of a coin grows with the square of the nodes in the network. So you can extrapolating from there, we've got a long way to go, and we also have big opportunity in these coins.
Now, if somebody's coming to you and they couldn't raise money from venture capitalists and so they're saying, 'Hey, I'm doing an ICO' — that's a warning sign. But if somebody comes to you and says, 'Society needs this, we need a coin that does this — it's got to be faster, like Tezos, it's got to be more integrated, like Bancor, or it's got to do smart contracts like Ethereum' — if you see a new way that people are using these tokens, then spend some time and think about it, and those are the places to go. So those are ICOs. Blockchain is just this awesome technology that's this perfect ledger and a perfect store of data. It's amazing, and so you can apply that to a whole bunch of different uses. And there are many, many industries that need a blockchain for their data. So if it's, 'We're using blockchain to change blank,' listen very hard.
You guys have been very patient back there, six minutes and forty-three seconds. Yes, stand up so I can hear you. Inflate away their debt — because the US has done what, one trillion dollars of debt — and suddenly you have this Bitcoin. You could just inflate it away. So what's your opinion about that?
It's great. I think what happens there is the markets decide, and maybe the debt starts to lower in value. But here's what I'm thinking — the crypto world is much more efficient, much more effective, quicker, cheaper, faster to move money. It's going to slowly but surely eliminate — not totally eliminate, but take over where fiat currency exists today. So I believe that five years from now, you're going to go in and try to buy a cup of coffee with fiat currency, and they're going to laugh at you. 'What, you don't own any Bitcoin? Why are you using that weird paper stuff?'
And so I actually think that these — and that's five years, because things move so fast now in technology, it's not like twenty years. I think it's like five years where we're embarrassed to be using fiat currency, because it's not cool anymore. But in that case, it'll just be a market thing, and all these things sort of happen and evolve and they take different forms. Anytime there's a new technology of any kind, it transforms an industry, and the industry adapts and eventually maybe it does go out of business. You know, we don't make buggy whips anymore because we have these horseless carriages that move us around — cars. And so the buggy whip manufacturers slowly went out of business, except for maybe the specialty items. So Fiat becomes that buggy whip — it kind of goes and doesn't quite disappear, but it becomes more of a specialty item.
Positive, because many people on this planet don't have access to high-quality education. How do you disrupt education? Education, it turns out — well, of course there are the MOOCs, and they have done great things in education. But when people start a MOOC, usually they fall off about ninety-three percent of the time. So only seven percent of the people who start a MOOC course finish a MOOC course. So something's missing there. And I think it's the person cheering you on. I think it's that. And that person cheering you on could be virtual, so I think that would be fine, but there has to be that person.
You know, I would have liked — I got pretty heavy and I wanted to lose some weight, but it was not until my wife said, 'Hey, we've got to try this,' and she looks at me, 'We've got to try this,' that I actually did the diet and kind of lost all the weight. By the way, sugar is poison. Just ink. And anything you see on TV is not food. And there's your new diet.
So I look at disrupting education in a couple of ways. One is politically — education is a mess, at least in the United States, and especially in California. The teachers' union controls it and dominates it and makes the laws for it. And it's the perfect thing for an entrepreneur to go in there and go, 'If I've got a wedge, I can take these guys. I can grab a piece of this market.' And people do. There are a lot of families that have decided to homeschool, and there are voucher programs, and there are some good things that are starting to happen there, because it just is so bad.
What I tried to do politically to fix that — I tried to create the voucher program in California. Teachers' Union spent a hundred million dollars to beat me. They slashed my tires. They did — every day, it was horrible. And then I thought, well, the best way to improve education is to lead by example. And that's why I started Draper University of Heroes. Suddenly there's a new kind of school. It doesn't have full-time faculty sitting there that bores you to death for an entire year. It doesn't have most of the money going into some deep dark research that never sees the light of day. And it doesn't have big, huge buildings and fancy offices for all the professors. I mean, sorry about that.
Instead, we have a rule: nobody speaks for more than an hour at Draper University. Except Gina. And Gina's special, because she rips their hearts out for an entire day — from eight in the morning until about three in the morning. She just goes. She's one of these emotional, spiritual teachers that is just extraordinary. So nobody speaks for more than an hour, so the students are kind of going, 'Oh, this is interesting.' Here's somebody who's doing PR with their life. Here's somebody who started a business in 3D printing. Here's a Bitcoin company. Here's something.
Hey, we got a tour of the Tesla factory. It's bringing education to what's really going on in the world. We're not teaching ancient Turkish or Greek — we're teaching coding and anything that's kind of the new thing. And if coding is no longer relevant, we're going to teach the next thing, and we're going to do it immediately, so we have that jump. And now it's really fun, because I'm watching as not only all these college presidents coming to visit me and saying, 'What are you doing here?' Because you know, we've been in business six years, and the biggest ICO in all of China — or the second biggest — was done by Draper University students. Because they learned about Bitcoin. Nobody was teaching Bitcoin four years ago, but we were.
So we're looking at education, we're sort of saying, look, it's too expensive, it's wasting people's time, it's not relevant, and it's not getting people to be more effective in the world. So let's do something that does all those three things better. Lead by example — that's the only thing I can think of. And use those technologies any way you can, bring them in.
Yeah? I always like to give the last one to a woman. Okay, you — and then some woman — okay, you're up next. Okay, can a large big company be a startup? Yes! Oh yes, large big companies can be startups. And here's what has to happen, and I know how to do this now, because I kind of had the problem myself. It's called an innovator's dilemma. I ran DFJ, and it got to be a big thing — it was like a machine, it kept being able to go and go, everything was kind of working.
And then all of a sudden I realized that venture capital is changing. There's crowdfunding and there's AngelList and there's Bitcoin and there's electronic shares and there's all this new stuff. Venture capital is going to change. I've got to do something. And then I went to my partners and I said, we've got to do something. And they were kind of going, 'Wait, we've got a machine here, we're not going to go do all those crazy things, we can't do that. We don't want to give up this machine, it's really working.' And so what I did was I said, okay, well, then I kind of have to manage my own thing. And fortunately I had enough money to kind of get it all going.
But I raised other money, telling the investors, 'Look, I'm going after something completely new. This is not the Draper Fisher Jurvetson thing that I created before. This is like I'm going after something new. I see a major change in venture capital. I don't know where it's coming from, I just sense it, and we've got to do something about it.' And I'm going to raise money that way. So fortunately, there were plenty of people that I was able to raise money from.
So then I put it to work, and I started to realize all these things I was able to do and how freeing it is to be outside the big machine. So as a big corporation, yeah — I'm outside, but I'm also still managing partners of DFJ. I just don't manage that money anymore. So, complicated, but we've kept it, and I've got this innovator's dilemma beat. Got to beat the innovator's dilemma. It's got to be like a skunkworks project. It's got to be outside of the organization. It can't be tainted by the organization in any way. It's got to be free of the organization. In fact, it may even be worth it to name a separate corporation that's fully owned that goes off in this weird new direction.
Yeah, Google did it. Alphabet. They did that. Yes, final question. I should first of all mention that I'm a lay person to all these investment issues until tomorrow. Tomorrow you're going to make three investments, and then you're going to be forward. But then while listening — and I just sold it — can it be that everything is about money, speed, progress? So all has to be somehow value-based. So how do you deal at your university, for example, with that part of life?
Great question. Values are absolutely critical, and we actually have a pledge: I will promote freedom at all costs. I will do everything in my power to build and pursue progress and change. My brand, my network, my reputation are paramount. I will set positive examples for others to emulate. I will instill good habits in myself. I will take care of myself. I will fail and fail again until I succeed. I will explore the unknown with gusto and enthusiasm. I will treat people well. I will do my best to make reparations for my transgressions.
So yes, but think about it this way: if you are doing something good, it is much more likely that it will spread. People don't want to be associated — they run away, they feel tainted if they're doing something that's not really good for society. And I'll do my little rant on nonprofits and for-profits: nonprofits and for-profits are both the same thing — they're just two vehicles to accomplish something. And I believe that for-profits have historically been so much better for society. Making money turns out to be a really good thing, because if you can make money, then you can spread the good word around the world.
Think about this: there are these nonprofits, they take millions and millions of dollars, they do good things, they go and they drill a well in the Congo so some family can drink clean water, and it costs about a million dollars. If you took that million dollars and spread Google a little farther, everybody in Congo can now look at Google and say, 'That's how I drill a well,' and they can go do it. I mean, I think about all the incredible things that — we backed Hotmail. Hotmail was a, 'Hey, we're going to give free email away.' That's what they told us. Free email, it's free. I said, 'And then how are you going to make money?' They said, 'We don't know.' But we still backed them, because free email meant a lot of things to people that suddenly spread all over the world.
We backed them thinking, this is going to be great if it works. I don't know if we'll ever make money, but it's going to be great. And then of course there were hundreds of ways to make money off of email. And so we look at it that way. But it turns out that if you're pretty much going for backing an entrepreneur for something that they're trying to get done, when you meet these entrepreneurs, they're doing something really great — they're doing something good for society. So whenever you listen to the news and they go, 'All these evil corporations' — whatever — corporations are people who are doing really good things. They're making it so you can be clothed and fed and housed and all those things. Corporations are like the lifeblood of our entire world.
And whenever I see these — the news people or Hollywood or whatever — they're always picking on the big guy who did this big thing. Every time I think, oh my god, they are getting it so wrong. When I think of Bill Gates, I just say thank you. When I think of Steve Jobs, I say thank you. Think of Larry Ellison — thank you. Donald Trump — yeah, what, ten billion dollars worth of thank you. You bet, you bet. So, you know — and think of what the press has done to him. Go ahead, any of you — go run for president, see what happens to you. Anyway, thanks, it's been a blast.