Episode Transcript
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Speaker 1 (00:00):
You know, capital
preservation makes no sense.
The way you make money is youinvest it in human endeavor and
you invest it with people whoare dedicated to what they do,
and this is all they want to dowith themselves and the more
complicated investmentstrategies you hear about, the
things that make you go.
Huh wait, what, how, where doesthat go?
(00:23):
How does that money go?
Are the ones that will lose youthe most money.
Speaker 2 (00:28):
Welcome to the
Accredited Investor Podcast,
which you will learn from theworld's leading experts, thought
leaders, industry titans andthe who's who in business.
This podcast provides diverse,high level and timely
information for accreditedinvestors and those looking to
scale their business to the nextlevel.
I'm the host, jonathan Tuttle,founder at Midwest Park Capital,
(00:49):
a boutique mobile home parkreal estate fund revenue fund.
A leading digital consultingand fractional CMO agency
business.
Cash out, a boutique M&A firmfocused on service-based
businesses, and a part of thefounding team at Wally Pop, a
mood-enhancing kava beverage.
This episode is sponsored byPrestige, the world's most
(01:09):
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All links are in the show notesbelow.
Enjoy the show.
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Thanks for listening.
Speaker 3 (01:26):
My name is Richard C
Wilson.
I'm the founder of the FamilyOffice Club and Billionairescom,
and I am honored to have withme here today Tim Draper, who's
a founder of Draper Associates,DFJ and Draper Venture Network.
He also has his own show, Meetthe Drapers.
Tim helped fund Tesla, SpaceX,Box, Carta and over 15 other
(01:47):
unicorns, importantly at theseed stage.
Nowadays, anybody can invest ina secondary, and they could
have invested yesterday inSpaceX and claim they funded.
It Doesn't mean as much as theseed stage, obviously.
He's invested in over 50 cryptocompanies, including Coinbase,
and, for those people my age orolder, his strategies were
instrumental in helping Hotmailand Skype go viral.
(02:08):
Worth Magazine has called Timone of the top 100 most powerful
people in finance.
He's a huge supporter ofentrepreneurs globally and we're
honored now to have him herefor a live exclusive interview
for billionairescom as part ofour 100 billionaire interview
series.
So thank you, Tim, for beinghere, and I've got a few
questions I want to go through.
But first of all, is thereanything that you want to add to
(02:30):
your bio?
Speaker 1 (02:31):
Great.
Thank you, richard.
Well, I started DraperUniversity of Heroes for
entrepreneurs and we've had3,500 students through there and
they've started about 900companies and five are unicorns.
So far that come from.
The people have come from 102different countries to come
(02:51):
harder to get into than harvardor stanford.
But harvard and stanford say 85of their graduates get jobs
when they get, and what we sayis our average graduate creates
seven jobs and our school isonly five weeks long and theirs
(03:16):
are four years, so we only takeyou for five weeks and you
create seven jobs.
They take you for four yearsand 85% of you will get jobs.
Speaker 3 (03:27):
Wow.
Well, I'm sure that thatstancher is very proud to have
you as an alum.
I saw that in your bio as well,so but that's great, that's
great.
Congratulations on that.
So I've got three quickquestions I want to go through
here, just to respect your timehere today.
The first one is what was themajor turning point or the point
of increased momentum or maybea strategic choke point?
(03:50):
You acquired that once you didthat thing or that thing
happened, everything else kindof surged forward for you.
Speaker 1 (03:57):
Well, I'd say there
were two, because I started by
borrowing from the governmentthrough the SBIC program and
that was the money I put to workto start with and I was on
their watch list and their dirtlist and about five years later
(04:18):
the IPO window opened up and Ihad five IPOs and one was
Parametric Technology, which isstill now PTC, the largest
software company in New England,and it paid for everything.
I was able to pay back thegovernment.
I was able to, you know, buildmy business.
(04:38):
So that was inflection pointnumber one.
Point number one.
Inflection point number two wasreally when we funded Hotmail
and I came up with that idea themessage at the bottom of the
screen saying PS I love you, getyour free email at Hotmail.
And they got rid of PS I loveyou.
(04:59):
But it spread to 11 millionusers in 18 months.
And so I realized that if youcan do something to delight your
customers and somehow get themto spread the word, then your
customers can be your salesforce, and I think that has
helped me along the way.
(05:21):
And Hotmail was a big inflectionpoint in my wealth too and I
was able to make quite a bit ofmoney on that.
And then maybe the third iswhen I decided to go build out a
network of venture capitalistsand so I went internationally
(05:45):
and I was the first siliconvalley venture capitalist to go
to china and uh, in the firstone to invest in something, uh,
in eastern europe and uh, so we,we were able to fund baidu and
skype, and I think that's whereum and Skype, and I think that's
(06:10):
where suddenly I hadextraordinary wealth.
So those were probably theinflection points.
Speaker 3 (06:13):
Great, awesome,
appreciate you sharing that.
What would you say is the mostvaluable strategy that is worth
far more than a million dollarsthat you wish somebody had
provided you with early on?
Obviously, the Hotmail PS oneis one that you already covered,
but is there another strategythat comes to mind that you just
wish you would have heard on aninterview just like this?
Speaker 1 (06:35):
I'm a believer in
human endeavor and I think that
strategy of always thinking ofhow to delight your customer and
making your customer into asales force is probably the most
powerful thing in business andfor these family offices.
(06:59):
I think the moment you startthinking of capital preservation
, you have already lost and Ithink you know capital
preservation makes no sense.
The way you make money is youinvest it in human endeavor and
(07:23):
you invest it with people whoare dedicated to what they do
and this is all they want to dowith themselves.
And the more complicatedinvestment strategies you hear
about, the things that make yougo huh, wait, what, how, where
does that go?
How does that money go Are theones that will lose you the most
money.
My advice would probably bealso maybe interesting for
(07:48):
people who have children, whowant those children to be
financially literate.
Give them an allowance, not avery big one.
Get them to earn money and getthem to invest that money in the
stock market really early, sothat they're um, they're they.
(08:13):
At first they won't really knowwhat's going on.
They'll just so oh, it's goingup, it's going down, but
eventually it'll be like hey,have you looked at the pe ratio
here?
Have you noticed that the cashflow of this business has
dropped way off?
Have you seen their receivableshave gone up in an
extraordinary way?
Why are they building up allthat inventory?
(08:34):
You know those questions starthitting and then you start
getting better and better atunderstanding business.
Also, it's good to invest incompanies that collect early and
pay late.
Amazon was brilliant in sayingwe're going to you go ahead and
(08:56):
pay for the book, we'll go findit for you and we'll get it to
you, and so they got their cashfirst, then they bought the book
, and so they got their cashfirst, then they bought the book
.
And Elon was also brilliant indoing something similar, where
it's like you pay $80,000 forthe car and then you get.
You pay the last 20,000 whenyou get it, and some of those
(09:24):
cars were two and three yearscoming.
So businesses with cash flowsthat come early.
But entrepreneurs who arestarting out to give something
away, think give first ratherthan take first.
It's always a temptation to tryto take first, think you have
(09:46):
first, and that ends up beingreally powerful.
So I would say those would bemy sort of primary strategies as
an advisor, both to an investorand to somebody who's running a
business.
Speaker 3 (10:04):
Sure, I love that you
are going against capital
preservation, since the familyoffice world beats that drum
nonstop, all the time, at everyevent, right it makes no sense
at all.
Speaker 1 (10:15):
I mean, you preserve
your capital.
It's like I don't know if younotice this, but anything you
try to hide I don't know if younotice this, but anything you
try to hide, you lose.
Right, anything you try to holdon to, you lose.
Things that help you win arethings where you sort of go okay
, this is risky, but I'm goingto try it and here's what I'm
(10:39):
going to do.
Also, I guess for familyoffices, invest in a future you
want.
You see something you like.
Speaker 3 (10:49):
Invest in that future
Because, even if it doesn't
work out, you feel like, okay, Idid something cool, right,
right, right, okay, got it.
And then, if we just rewind twominutes there, when you say
give instead of thinking aboutgetting, are you saying you know
, add value to a potentialcustomer, build a relationship
and then monetize thatrelationship later.
Like Gary Vaynerchuk is like ahuge proponent of saying stuff
(11:10):
like that, is that what you'regetting at?
Or are you talking about yeah?
Speaker 1 (11:12):
I found that by
giving away more scholarships at
Draper University, we gotbetter talent, we got more great
entrepreneurs through there.
We had more opportunities toinvest.
I found that when I work withlimited partners investors I
(11:33):
found that doing things for themwould often bring them back.
Whenever I was raising a fundand I know that Hotmail just
gave it away and it was thefastest growing consumer product
(11:58):
in the history of the world andeventually they became
incredibly valuable as acustomer acquisition tool.
Right, so yeah, yeah.
Speaker 3 (12:07):
Got it Okay.
I've studied Robert Cialdini alot and he brings up
reciprocation and we talk aboutthat quite a bit at our investor
club, so it makes sense.
Third question here what's thenumber one most costly mistake
that either you have made or yousee so many investors make?
And business owners could couldeasily avoid this mistake if
they just took it to heart andheard it from you it was a
(12:30):
failure to act.
Speaker 1 (12:32):
Um, I my business is
different from a lot of
businesses, but my biggestmistakes were failures to invest
, and that includes into theseed round at Google and Yahoo
(12:56):
and Facebook and LinkedIn andNetflix, and all of them were
very interesting and on themargin for me, and a lot of the
times, I just got talked out ofit by partners or whoever, and
some of the times it was justpurely I didn't get it, and
whereas I would not say that thetimes I invested in companies
(13:20):
that didn't work out invested incompanies that didn't work out
were really inflection points ofany kind or issues that really
seriously affected me.
So you know, the other downsideis always, if you get into some
(13:43):
sort of a legal struggle thatusually ruins your life for as
long as it lasts, and thelawyers are making money during
that time that it's ruining yourlife, and so they're saying,
yeah, I need billable hours andthey want to spread that as long
as they possibly can, and whatyou want is for it to be over,
(14:04):
and so it's always better toincentivize your lawyer, change
the model, incentivize yourlawyer to settle, to figure it
out, to win quickly, to end itquickly, to lose quickly,
whatever.
Just get it done, becauseotherwise you just sit there
(14:25):
living in fear.
It's a horrible, horriblefeeling.
And fear, as frank, herbert anddoom says, is the mind killer.
And all the decisions I've madebased on fear have been, uh,
huge mistakes.
And all the decisions I've madebased on fear have been huge
mistakes.
And all the decisions that I'vemade based on risk or possible
(14:50):
opportunity or what if it works.
I haven't regretted any ofthose.
They didn't all work out, but Ihaven't regretted it Right?
And look, when we backed Tesla,there was one guy his name was
Martin Eberhard.
Nobody else was there.
Elon came later and we weregoing after a company that was
(15:15):
starting a car company and therehadn't been a successful car
company started for 50 years andthey were capital intensive.
It was a huge, huge risk.
When we invested in skype,those were two guys who were um,
in effect outlaws from the usbecause of the work they did for
file sharing at uh kaza rightfor hotmail um, that was the
(15:42):
first product anybody had eversaid we're just going to give it
away for free and we didn'treally have a reason to go.
And all of those greatcompanies pivoted to.
They weren't all.
Skype started out as filesharing um, not fashion, um, and
uh, hotmail came to us with awhole different idea for uh
(16:06):
showing people, uh, different,helping people with their
websites, uh, and they changedthe model right there on the
spot.
And then viral marketing when Icame up with that idea, um,
that that pivoted them onceagain.
So, uh, that pivoted them onceagain.
So, yeah, I think it's that.
(16:28):
I think it's it's avoid fear.
Don't make decisions based onfear.
Go ahead, use your fear tofigure out.
You know what could go wrong,but then always invest for what
if it works.
Speaker 3 (16:45):
Okay, Awesome, that's
great.
So I know you've beeninterviewed 500 times, maybe a
thousand plus times.
I wonder you know what's thesmartest question I should be
asking you what do you wishpeople ask you and they never do
that.
You'd love a chance to sharemore.
Is there anything that comes tomind that you want to end with?
Speaker 1 (17:03):
I don't know, but my
son on our show Meet the Drapers
, my son asked one of theentrepreneurs, what is your
spirit animal?
And it put the entrepreneurcompletely on their heels and it
was like, oh my God, this ishilarious.
So if you were to ask me whatis my spirit animal?
And then I said to my son, well, mine is either the rhino or
(17:30):
the hummingbird.
And he said, oh, you can haveone on land and one in the air
and one on one in the sea.
And and so I thought about thesea and I I kind of had to go
with dolphin because I have been, I'm a big swimmer, ocean
(17:51):
swimmer and I got surrounded bydolphins.
Once they were having a dolphinstampede.
It was something like 300,000dolphins all going through this
one area at once.
Wow.
And so that's a spirit animalfor me.
And the rhino has been a bigpart of my life.
(18:13):
I remember I spent I don't know.
I was 20 years old or something.
I was traveling around Europeand in the Berlin zoo there was
a rhino and the rhino was ableto reach his head over the fence
and I rubbed the rhino's hornfor about 20 minutes, thinking
(18:35):
this is so wild.
And the rhino and I got alongfamously and so I thought, okay,
and rhino kind of is reallyimportant for a venture
capitalist or an entrepreneur,because what you're really doing
is you're just charging inthere and you can't see what's
going to happen next, um, andyou just charge forward and you
(18:58):
know you're not a bull, you'renot a bear, but you're a rhino
and and so I kind of that's,that's a strong spirit animal.
And then, um, the hummingbird,um, is my, is my up in the air
animal and, um, I, I just seemto bond with them when they're
around, they, they just seem tocome and they look at me and
(19:21):
they're just and, um, and Ialways think my mom died and I
always think of when I see ahummingbird, I think she's,
she's down here checking me out,um so I think, yeah, what's
your spirit animal that can that?
that'll wake up a lot ofinteresting stories.
Speaker 3 (19:38):
Yeah, yeah for sure.
Well, I, my wife, always thinksthe same thing about her father
.
When she sees like a redCardinal bird, or birds in
general, she equates it with herdad.
You know, passing away, and uh,I get, that's the question.
I'll have to throw thatcurveball question at one of the
other billionaires we interviewin the series and just see if I
just stun them into silence orif they come up with an answer
or not.
(19:58):
I guess I'd have to chooseoctopus for myself, and I think
that a rhino and octopus wouldmake for a good combination for
a fireside chat at one of ourfamily office club events one
day on stage.
Speaker 1 (20:09):
Did you see that
documentary about octopi or
about that one octopus?
Speaker 3 (20:16):
Is that that one?
Oh my god.
Yeah, so good.
It's amazing hawaii and I waslooking for.
I couldn't find one in therocks, but my daughter and I
were looking for one.
Yeah, that was amazing.
Speaker 1 (20:25):
They are very,
they're, very, they're, they're
really smart and a little bitslippery.
Yeah, but eight legs, you got alot of things going on.
You must be juggling quite abit yeah, not as much as you.
Speaker 3 (20:40):
I hope that maybe
I'll be you and I grow up and I
can juggle half as many thingsas you do.
But, um, I appreciate you beinghere on the interview.
I know your time is supervaluable so we can, uh, bring
this to an end.
But but can I add one?
Speaker 1 (20:53):
more thing.
Sure, you know, there there'sthis long history argument of
freedom versus governmentcontrol, and it's been going on
forever.
And I like to pitch for freedombecause I noticed I funded all
(21:16):
these companies while China hadfreedom and the Chinese people
were so excited and so dynamicand their economy grew at 9% and
there was no unemployment andeverybody was working and
everybody was happy andeverybody was fantastic.
And then President Xi came inand he decided to be a dictator
(21:39):
and he put everybody into hiscontrols and now everybody's
watching over their shoulder.
They're afraid to try anything.
They're not doing anythinginteresting.
They're struggling nowfinancially.
They're worrying about what therules are.
(22:05):
Every time they try somethingnew, they worry about what will
the government think?
In fact, in the US it'sstarting to happen too.
In fact, in the US it'sstarting to happen too, and the
economy has gone flatline andthere's more unemployment and
there are more problems andthere are more.
(22:25):
And you think that thegovernment is doing things.
Oh, they're helping out thepoor.
They're helping.
It turns out, the freedom helpsthe poor the most, and it's
very hard for people to kind ofgrok that.
But as I go around the worldand I get a chance to meet with
people from wherever, I foundthat the leaders who are
(22:48):
self-confident enough to settheir people free are the
greatest leaders in the world.
They're the ones who actuallygrow economies, get people off
the streets.
Everybody's working,everybody's got a job and they
have a reason to live andthey're having fun and they're
(23:08):
happy, and all of that that.
And the ones that uh, try tocontrol everybody, um, I
recently was in cuba.
Um, they are afraid to doanything, they can't do anything
, and so nothing gets done andnothing happens, and there's no
sense of a customer and there'sno, and people are not happy,
(23:31):
right, uh?
So, um, anyway, vote NikkiHaley.
She's a winner and she believesin freedom, and these other two
, I don't think so.
Speaker 3 (23:43):
Sure, well, if
there's another billionaire we
interview and they love yourkind of American dream, you know
focus and excitement ofentrepreneurism and they want to
invest money with you.
Or somebody wants to try toapply for Draper University, or
somebody wants to try to get on,meet the Drapers or read your
book.
Where do they go online to findall of that?
(24:04):
Where's the best place I shouldbe sending them?
Speaker 1 (24:07):
Oh well, they can.
They can go send me an email.
I get through all my emails.
I'm Tim at Draper VC, okay,great.
And then if they just want tokind of watch, I keep everything
up on Twitter.
So at Tim Draper on Twitter,okay.
(24:29):
And if you want to watch Meetthe Drapers and some of the
other things that we've been upto, drapertvcom or drapertv they
both work.
It's our network.
Speaker 3 (24:45):
Okay, great, awesome.
Well, I appreciate your timehere today.
You're very generous with yourtime and your lengthy answers
and multiple answers for onequestion in some cases.
I really appreciate that it'sgoing to make the website that
much more valuable atbillionairescom and just
appreciate your time.
So just let me know wheneveryou could use anything from me
and I'm looking forward tokeeping in touch.
Thank you, tim, great.
(25:05):
Thank you, richard.
Take care.
Speaker 2 (25:15):
Hey, it's Jonathan.
Make sure to download andlisten weekly, as I bring the
top entrepreneurs sharing theirbest insights and timely
information.
Finally, I get people asking meto help them one-on-one.
Yes, I can, but it's verylimited.
Go to RevenueAscendcom forfractional CMO and business
consulting.
For real estate investing, goto MidwestParkCapitalcom, and
(25:36):
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to BusinessCashOutcom.
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