Make sure your business is profitable as it’s hard to get VC funding now: Tim Draper

Billionaire VC investor is a proponent of decentralisation and he has not changed his $250,000 Bitcoin price projection, he has pushed back the timeline to the middle of 2023

Famed billionaire venture capitalist, Tim Draper describes bitcoin’s crash in 2022 as a “short-term chaotic disaster.” He remains hopeful about his prediction that bitcoin’s price will eventually reach $250,000 in 2023 and that it can serve as a viable financial currency in the long run.

Draper, who founded the venture capital firm Draper Associates in Silicon Valley and is known for making profitable investments in companies such as Tesla, Space X, Skype, and Hotmail, among others, says there are risks associated with centralised currencies, citing the fall of FTX. According to Draper, Bitcoin will gain popularity once people realise that currencies controlled by a single person or a small group of people arenot good for the economy.

“The problem with centralised finance is that any one person can bring down the entire economy of a currency by just printing more of it or mishandling it. Bitcoin is decentralised,” according to Draper.

Draper is optimistic about Indian entrepreneurs and feels that they can truly make a difference in these exciting times.

ET Insights editor Tanmoy Mitra met Tim Draper, while he was in India filming for his reality show, “Meet the Drapers.” Edited interview excerpts.

How would you describe a typical day in your life? What is Tim Draper’s routine?

There are typical days – I meet with the press periodically, I usually meet with about 8 entrepreneurs in a day, on a typical day. I meet investors because we are in the business of raising money to invest in entrepreneurs. In order to ensure a favourable climate for entrepreneurs, I also have occasional conversations with the heads of state of various countries. On Fridays, I catch up on all my emails, and when I am travelling, I catch up as much as I can, typically on aeroplanes.

As an investor, what do you prioritise when evaluating a startup or an entrepreneur, is ROI a key indicator? What is your investment philosophy?

When I make an investment, I am not really thinking about the Return On Investment (ROI) or the Internal Rate of Return (IRR). When I listen to an entrepreneur, I am motivated by the question, “Is this the world I want to live in?” and that is what drives me, and I also attempt to determine if this individual is uniquely qualified to make the world that way. Then I try to picture that person in that situation. If I can do that well enough, I will make the investment.

Before we meet with entrepreneurs, we usually ask them questions such as the size of their market, whether their technology is unique, and what their background is. Then, when we meet with them, I ask a few specific questions, and if I receive the appropriate response, I adapt my interview accordingly.

It is a known fact that Tim Draper gives out his email address in public. How do you handle all your emails?

I have a team that checks emails, but they primarily deal with non-business-related messages. I want to look at the email if it is from an entrepreneur with a business plan, if it is from an investor, or if it is about something new. I do not leave any stone unturned because I am in the business of seeding firms. In order to find companies such as Tesla, Space X, and Baidu, I turn over every leaf. Therefore, it is up to you to decide if you are willing to put in the effort. I believe that it is important to have a strategy in which you always serve your customers with respect.

I am giving out my email address and letting people know that if they have a business idea, they should come to Draper.

What is Bitcoin’s future in 10 years from now? Is it going to be a good investment, or the way payments will be made in the future?

The reason I predicted Bitcoin could reach $250,000 by 2022 or early 2023 is that I anticipated that retailers would recognise that this saved them 2%, every time they accept Bitcoin. So, you would think a retailer would say, “Hey yeah, it doubles my money!” So, I expected that to happen sooner, it is coming but it is happening slowly.

I am a believer in decentralising finance; thus, I did not anticipate so much centralisation to occur. We already have central banks, so these are unnecessary. When FTX came to our door, we turned it down twice because it is centralised finance. The problem with centralised finance is that any one person can bring down the entire economy of a currency by just printing more of it or mishandling it. Bitcoin is decentralised.

The recent bitcoin crash is a short-term chaotic disaster, but in the long run it will play right into the cryptocurrency. I think the world will opt for Bitcoin because they will realise that centralised currencies like fiat money or crypto are bad for the economy.

How would you evaluate the entrepreneurial landscape in India? Is it a market with potential for startups?

When I came to India in 2019, just before the pandemic, I met some amazing entrepreneurs who had great ideas, and I was ready to back them. But their valuations were sky high, and money was so easy to get, they focused on hyping it up and raising more money. So, I held back. I believe that valuations have decreased now, which makes it a good place to invest.

Now that bear markets have arrived, businesses have a chance to demonstrate that their customers value their products and are willing to pay for them. And this is how the great enterprises will be created. In fact, the 30 largest companies in the world by market capitalisation all began roughly two years after the stock market crash, so this is an excellent time for a venture capitalist to invest.

Having said that, now is also a challenging moment for entrepreneurs, as they will experience extreme difficulty. Especially if they have already raised a significant sum of money. They will have to take a bear market view of their business in order to make it through. Bear markets can be anything from a quick V to a long L, and they can last for a long time.

Tell us about the ‘Meet the Drapers’ show. How has the journey been so far?

We did it just for fun to start with. It was a great opportunity for my family to be on the show and do something fun and for viewers to see what I see —people stating they will make the world a better place and showing how. Tens of millions of people watch the show because we are real people trying to invest in real businesses. We are not investing in a product, but in a company; we are investing in the future, which I believe people appreciate. We are really happy with how the show is working out.

What is your advice to aspiring entrepreneurs?

Every entrepreneur should start small and focus on small, active customers instead of going straight for big customers. Start small, make small mistakes, and then get going, do it again and build it again. When you have three happy customers who pay for your product or service, you can take your foot off the gas. But make sure you are making money because it is hard to get venture money right now. If you really want something to happen, you must persist with it for a very long time.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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