How Tim Draper, the father of Silicon Valley venture capital, bets on Bitcoin and the next era

Author: Weilin, PANews

The popularity of the trendy toy brand Pop Mart has once again made its first angel investor Mai Gang the focus of market discussion. In the summer of 2012, Mai Gang invested in the company five days after meeting Pop Mart founder Wang Ning. As the first angel investor of Pop Mart, Mai Gang witnessed its journey from a simple residential house in Beijing to its listing in Hong Kong.

In fact, Mai Gang's "vision" is partly due to his "enlightener" during his early years studying in the United States - Tim Draper, a well-known venture capitalist in Silicon Valley. Mai Gang joined the Chinese venture capital industry in 1998 and participated in the establishment of Shanghai Pudong Science and Technology Innovation. After that, he studied in the United States and won the first place in the entrepreneurship competition while studying at UCLA. As a result, he became acquainted with Tim Draper, the godfather of Silicon Valley venture capital, and entered the Silicon Valley venture capital industry. In 2005, he co-founded VenturesLab with Tim Draper.

Tim Draper is known as the "father of venture capital". The projects he invested in have promoted some of the most innovative developments in the market today, including Skype, Baidu, Hotmail, Tesla, etc. At the same time, Tim Draper is also an early believer in Bitcoin.

Family inheritance and Silicon Valley genes: the continuation of the third generation of investors

Draper was born into a family with venture capital and political background, and is the third generation of this family. His father is the founder of Draper & Johnson Investment Company and served as chairman and president of the Export-Import Bank of the United States. In 1994, Draper's father returned to the investment circle from public office and co-founded Draper International with others. This is the first American VC fund focused on investing in Indian companies.

Tim Draper's grandfather, William Henry Draper Jr., founded the venture capital firm Draper, Gaither and Anderson in 1958, and established the basic rules of VC today, including management fees and project sharing after the investment company exits. Draper's grandfather also served as the first NATO ambassador of the United States.

In such a family with both financial and political backgrounds, Draper showed a unique perspective very early. He studied at Phillips Academy Andover and then entered Stanford University, where he received a bachelor's degree in electrical engineering in 1980. In 1984, he received an MBA from Harvard Business School.

In 1985, Tim Draper founded Draper Fisher Jurvetson (DFJ), and later expanded to multiple entrepreneurship and entrepreneurship education platforms such as Draper Venture Network and Draper University.

Tim Draper's most well-known investment projects include Baidu, Hotmail, Skype, Tesla, SpaceX, AngelList, Twitter, Coinbase, Robinhood, Twitch, etc.

When foreign capital generally withdrew from China in the early 2000s, Draper chose to stay and eventually successfully bet on Baidu through DFJ. He is also one of the earliest Silicon Valley figures to enter the Chinese venture capital industry. In 2005, he and Mai Gang and others jointly launched "VenturesLab", becoming an important participant in China's entrepreneurial ecology. VenturesLab also became an angel investor of OKX in the field of encryption.

In 2018, Draper University, a well-known university founded by Tim Draper, established a base in Beijing Zhongguancun to train blockchain talents through a Chinese training camp called dCamp, attracting many crypto OGs to participate.

Draper also participated in the investment of some early encryption projects, such as Ethereum, Coinbase, Ledger, Bancor, Arkham, Ark, Merzo, Propy, etc.

Connecting with Bitcoin: From the "disappearance" of 40,000 Bitcoins to a firm believer

Today, Tim Draper's investment footprint is everywhere in the encryption field. However, compared with 2014 to 2020, Tim Draper's investment in the crypto field in recent years has not been as frequent as before. He mainly promotes Bitcoin in public.

Tim Draper's interest in Bitcoin began in 2011, when Bitcoin was just two years old. He met CoinLab founder Peter Vincennes through investor Joel Yarmon. Coinlab later became an innovative company and miner focusing on Bitcoin, and was also a partner of Mt.Gox, the largest exchange at the time, in the United States. The concept sounded a bit far-fetched at the time, but he was very interested and made a small investment in the company. Draper then asked if he could help him buy $250,000 worth of Bitcoin. At that time, the price of Bitcoin was about $6 per coin. Peter bought some for him and stored them in Mt.Gox. Peter also said that he would use part of the money to buy ASIC high-speed mining chips from mining machine manufacturer Butterfly Labs to mine more Bitcoin at a lower cost.

Two things happened next, causing the approximately 40,000 bitcoins that were supposed to be received to "disappear". First, the mining chips were delayed in delivery. Instead of sending the chips to Peter as promised, Butterfly Labs used the chips to mine bitcoins for several months and did not ship them until later. During these months, more miners entered the market and the probability of mining bitcoins was greatly reduced. When Peter finally received the chips, Draper and his partners had missed the best mining window. To make matters worse, Peter saved the bitcoins he mined in a wallet controlled by Mt. Gox, and these bitcoins eventually disappeared with the theft of Mt. Gox, making him one of the largest creditors of Mentougou.

However, instead of undermining Draper's confidence, this loss inspired his respect for the resilience of the Bitcoin system - despite the major theft, Bitcoin only fell by about 20% and is still actively traded.

Draper realized that the demand for this new digital currency was so strong that it could continue to grow despite huge thefts and could even provide us with a completely new way to trade, store value and transfer money. The demand for Bitcoin was so strong that people were willing to tolerate major mistakes and fraud just to have such a frictionless, global currency system.

In 2014, the US Marshall’s Office auctioned off more than 30,000 Bitcoins after confiscating them from Silk Road. Draper saw this as a chance to make up for his losses. A total of 31 bidders participated, and each bidder could choose to bid in nine blocks (each with about 4,000 Bitcoins). The market price of Bitcoin at the time was $618 per coin. At the last minute, Draper decided to bid above the market price and bid $632, and won all nine blocks. Draper soon realized that he could do something meaningful with these bitcoins - such as promoting the popularity of Bitcoin in developing countries. In these countries, people generally lack confidence in their own currencies, often because the government prints money indiscriminately to enrich itself, leading to increased corruption and worsening inflation. What's worse is that low-income people in these countries cannot be accepted by banks at all, and banks consider them "unbankable". These people are the approximately 3 billion "unbanked" in the world, and Bitcoin may be their solution.

It is predicted that Bitcoin will rise to $250,000 in 2025, and "Bitcoin will replace the US dollar"

In Tim Draper's view, the advantages of Bitcoin are very obvious:

1) It is a universal currency that does not require government intervention;

2) It is a way to preserve value without storing precious metals or artworks;

3) It is a frictionless currency that can be automatically circulated according to the contract without the explanation and intervention of lawyers or accountants.

He believes that Bitcoin and its underlying technology blockchain are the engines that drive human progress. The United States wisely did not impose regulations on the Internet, allowing a large number of Internet entrepreneurs to land in the United States, which ultimately created the prosperity of the Internet economy. Today, if the same "light touch" strategy can be adopted in Bitcoin regulation, it will continue to attract innovators to stay in the United States.

In May of this year, within a few weeks, Tim Draper repeatedly stated that the US dollar was rapidly becoming worthless and pushed Bitcoin as an alternative. He reiterated this point in perhaps the most straightforward way. "The US dollar is heading for extinction," he said on the social platform X, "as the dollar depreciates, people will rush to spend it." In contrast, Draper believes that people will turn to Bitcoin for security.

"Retailers will soon prefer Bitcoin," he said. "When that happens, people will start using Bitcoin for their purchases." His latest statement was in response to the renewed debate about whether Bitcoin is a store of value or a medium of payment at Bitcoin financial services company Swan.

Draper believes that the popularity of Bitcoin as a medium of payment may come sooner. He told CoinDesk in May that he expects Bitcoin to replace the US dollar as the world's reserve currency within 10 years. By then, he even predicted that Bitcoin "will be worth infinitely more than the US dollar." In the short term, however, he expects Bitcoin to reach a price of $250,000 in 2025.

One ​​of the reasons why Draper is increasingly pessimistic about the US dollar is that the US dollar index (DXY) has performed poorly this year, reflecting the market's declining confidence in the US dollar. He pointed out that the weakness of the US dollar index is related to global concerns about President Trump's trade policies.

Investment philosophy: The cycle is set at 5 to 10 years, and enthusiasm takes precedence over data

As a venture capitalist, Draper also summarized his six core investment concepts in an external interview:

Don't invest too much money in a single company in the early stage: One of the biggest mistakes Draper has seen many investors make is "too much money in the first few companies you invest in... Don't invest as much as you 'think you want to invest', because you are likely to encounter financial constraints later." He suggested that you only invest half to one-sixth of the amount you originally intended, because it is very likely that the company will need multiple rounds of financing later. When the company is developing well, you must ensure that you still have funds to continue to support and encourage these "winners."

The investment cycle is set at 5 to 10 years: Some investments take a long time to realize, and he reminds not to be trapped by projects with too long a cycle. His advice: "I wouldn't think too far into the future...you should think in terms of a five to 10-year time frame."

Don't project your entrepreneurial experience onto others: If you're a successful entrepreneur and you start investing in others now, it's easy to impose your experience and personality on those who come to raise funds. He warned: "You may start out thinking, 'Hey, if I can do it, so can others.' You'll start throwing money around. You'll think everyone is like you and can do what you did. But the reality is that's not the case. You have to calm down and really think about whether this person is really willing to make the sacrifices you've made to succeed."

Focus on mission, not money: In the early stages of investing, never start with "how much money can I make." Draper said: "If you start with the thought of 'I can make money from this'... then it's better not to do it. You should invest for the mission. If you can truly identify with the other party's mission, and you say, 'I like this mission, I like the way it will change the world, then I am willing to join', then that kind of investment is healthier."

Investment depends on "passion", not "data": During the financing roadshow, when an entrepreneur began to show him those financial models, Draper seemed a little indifferent and uninterested. The entrepreneur once thought that he was losing him as a potential investor. After a halftime break, he and his partners adjusted their strategy, returned to the meeting room, and began to talk sincerely about our dissatisfaction with the current state of the industry and the changes our company hopes to bring. When I later mentioned this experience, Draper responded, "You may be right. I'm looking for passion."

Conclusion

To this day, when Bitcoin is still sometimes questioned as a "bubble", Tim Draper has taken the lead in "all in"; when mainstream capital is still cautiously watching Web3, he has been cultivating talents, building infrastructure, and investing in visionaries for the next era. He does not regard himself as a speculator, but a promoter of change.

Perhaps in the eyes of Pop Mart investor Mai Gang, Draper is not only an enlightener, but also a person who "still ignites a spark in the capital winter."

His actions continue to ferment. Whether Bitcoin will really replace the US dollar cannot be asserted, but what is certain is that Tim Draper has bet all his investment on the world that may happen.