“I think if you’re going to build a brand in investing, you need to create a new form of investing. I think you have to change the paradigm.” — Tim Draper
Even the most successful investors in the world, like DFJ founder and world-renowned venture capitalist Tim Draper, miss out on big opportunities. Tim and his partners have passed on Google, Yahoo!, Facebook, Uber, and Airbnb for one reason or another. With successful investments in Robinhood, Cruise Automation, Twitch TV, Coinbase, and dozens of others, Tim has found success looking at the upside of a deal instead of only considering if it will succeed or fail.
“Reasons we might invest are when we say this is so potentially big that if it works, this could be huge. That’s my biggest question. How big is it? If it doesn’t work it’s just not going to work, but if it works, how big?”
In this episode of the Spearhead Podcast, entrepreneur and angel investor Cory Levy speaks with Tim about his career as a venture capitalist, tips for new investors, blockchain technology, and more.
Taking Your First Step as an Investor
Profitable exits are not easy to come by, especially early in your career as an investor. Asked what Tim would tell his younger self if he could go back in time, he would say, “Make sure that you diversify because it’s very uncertain as to whether any one of them will work, so make sure that you’ve made investments in 10 or 20 different companies, or just invest in a fund and follow that fund.”
For prospective investors working a “day job,” Tim recommends spending an extra 10% of their time there. “What you do with that extra 10% is really all the things you want to do,” says Tim. Tim also believes in the importance of building relationships and networking. “The other piece of advice I’d give is to get to know everybody. Find out what they all do. It’s always a little hard to do when you’re just coming out of college — you’re just getting started, but ask everybody to lunch and then ask what they do and get to know them all,” says Tim.
Asked about saying no to founders, Tim states that he has to say no to 95% of founders, and it’s no longer hard to say no when it’s clear that there isn’t a strong fit. Tim gave several reasons he says no, including:
- Market size
- Team dynamic
- Not unique enough
- The team needs strength in one area or another
Tim doesn’t rest on his success when looking towards the future. When asked by Cory for the biggest challenge he faces right now, Tim says, “It’s, what’s next?” He frequently asks himself questions like:
- How do I take this wonderful machine that I’ve built and build it further?
- How do I make a bigger impact on the world or how do I get entrepreneurs to make a bigger impact on the world?
- How do I make it so that my investors are delighted with the service I provide?
“Keep taking that step, keep pushing. It gets easier and easier to just rest on your laurels but that’s really not in my future. I’m kind of in the mode of, ‘Okay, now I’ve done all that stuff, what’s next?’”
Listen to the full conversation between Cory Levy and Tim Draper right here on the Spearhead Podcast.
In the interview, Tim Draper and Cory Levy talk about:
- Missing out on opportunities and how to adjust
- Creating new investment models
- Setting yourself apart from other investors
- Blockchain technology
- Generating deal flow
- And more!
- Cory Levy begins his conversation with Tim Draper by asking about his very first investment (1:09)
- What Tim would tell his younger self about investing (2:36)
- Cory asks how Tim helped his son, who recently started a venture capital fund, get started (4:21)
- Tim answers the question, “How important do you think it is to build the brand as an investor and how do you go about doing that?” (6:42)
- The challenges of setting up a fund that operates using only bitcoin (8:49)
- “You have to have a long-term perspective…if you really want to do something extraordinary, you really have to have that (10:50)
- How to know if you’re doing a good job as an investor between exits (11:05)
- Tim’s experience working with LP’s (limited partners) (12:05)
- Deal flow and how to say no (13:46)
- The investment that Tim thinks could return 1000x (15:20)
- Companies Tim has missed out on and how his investment approach has changed since (15:45)
- Investing in later rounds after missing an opportunity during a Series A round (16:46)
- Who Tim has learned the most from in his career (17:19)
- For the final question, Cory asks, “What are your biggest challenges right now?” (17:52)