At age 56, Tim Draper is one of the grand middle-aged men of Silicon Valley finance—he founded venture capital firm Draper Fisher Jurvetson in 1985. His most successful early investments have included Hotmail, Skype and Baidu. Over the past year, he has been a prominent buyer of Bitcoin.
What were your best investments?
Hotmail, in 1995, was a defining company for us. It was sold to Microsoft in 1997. Another great one was when my daughter's friend, Elizabeth Holmes, said she was dropping out of Stanford at 19 to transform medicine. I gave her the first half-million dollars, and she started Theranos in 2003. The company is now worth $9 billion.
What were your worst?
There were a lot of worst.
Do your winners have common traits?
The good experiences always surround an entrepreneur with big ambition and some quality—high imagination or whatever. Like Elon Musk with SpaceX—he says we're going to Mars. He gets people motivated.
What about your losers?
It usually has to do with the entrepreneur not thinking big enough or not having unique enough technology. Or the entrepreneur could just run out of cash. The best advice is: Always be raising money until your company starts earning money.
If you were an average guy with a $100,000 windfall, what would you do with it?
I'd buy Bitcoin. There are only a certain number of them, and there's a whole ecosystem being built around it. The Boost accelerator [backed by Draper] has generated something like 100 companies, so probably hundreds more around the world are planning their businesses on Bitcoin.
How should average investors approach Silicon Valley?
The great thing is that they can now do a lot. They can go to AngelList or FundersClub and participate in start-ups. My advice is to diversify heavily, because our business is one where you really need a lot of shots on goal. Or they can invest in funds like ours, which have consistently shown they're good at it. I do believe that venture capitalism is in for another major run, by the way.
Based on what?
Because of the markets we participated in. The Internet has made big changes. Bitcoin is changing finance. Massive open online courses are changing education. Government is being changed. Identity is being changed. These are trillion-dollar markets.
Do you follow any standard rules for VCs, like eight out of 10 of your companies may fail?
Oh, when I invest, I expect all of them to make it. But what actually happens is 50% to 60% of them don't make it. There are usually another 10% that make so much money, that overcomes it.
What about exit points?
Every time I've gotten out, I think I would've been better off if I never sold anything.
So why did you sell?
Lots of things. When there's a relative peak. When the entrepreneur is ready to sell. When we think the market is overvaluing a company—although that's usually the time I should not be selling.
When investors read that Uber has a $40-billion valuation, what are they to make of that?
If it's me, I think, Oh, I should sell. But now, with 20/20 hindsight, I want a lot of those. It would be, "Just hold on, baby. There's more there."
What's your favourite investing movie?
Sabrina (1954). It's one of the few times Hollywood honoured the industrialist, instead of making him the antagonist. Bill Gates, Larry Ellison, Elon Musk—these people are heroes.
What's your favourite metric?
Market size. How big could the company become if it took the whole market?
What's your favourite investing book?
The Startup Game (2011) by William Draper III, my father