Entering the conference PE & VC Conference for the CEE Region the other week was a bit of a surreal experience.
No run to the airport telling my co-founder we’re going to be late. No taxi drive to the hotel. No flashy receptions hall nor badges to collect. No welcoming Prosecco flutes. No map to find the conference room for the main keynote.
Entering the ‘lobby’, instead meant walking into my study room, opening up my laptop, and click a few links. That was it.
The conference was in fact a virtual experiment by the event group 0100 Conferences to “re-connect” the old-school Private Equity industry, which is so used to in-person large-scale conferences… Yep: exactly those conferences that COVID-10 has effectively put on indefinite hold.
It was hosted on the platform built by UK startup Hopin to mimic a PE and VC event, like the famous SuperVenture conference we, Silicon Roundabout co-founders, attended back in February to meet investors for our own VC fund.
The event ended with a keynote from Tim Draper, who streamed from his office to tell both founders and investors to ‘stay brave’ and capture the current opportunity available in tech, despite COVID-19.
This may be the greatest time in the world to start a business because you’ve got some of the best technologies that are going to transform the biggest industries in the world… You’ve got blockchain…deep learning…surveillance… some really interesting technologies that are going to transform the biggest industries in the world
Tim Draper – Virtual PE&VC Conference –CEE Region
Below, I’m going to share with you what was discussed by Tim in the virtual room with us European VCs.
He closed the keynote by sharing his vision for the world that effectively translates into his investment criteria… As well as his email address: which I am going to share with you all Silicon Roundabout’s entrepreneurs out there, in case you think your startup matches his VC investment strategy.
In case you are wondering, it’s all here in this blog, so if you are interested in finding out what Tim told us European VC partners, practitioners and ecosystem stakeholders, keep on reading.
Tim on startups: the best time to be bullish about new tech
Tim Draper is one of the most recognisable venture capitalists of today. Tim founded the VC firms Draper Associates and Draper Fisher Jurvetson (DFJ), whose investments include Coinbase, Robinhood, Skype, Tesla, Baidu, YeePay, Hotmail, SolarCity, SpaceX and many others.
In promoting entrepreneurship, he created Draper University of Heroes, a residential school based in San Mateo, California, to help entrepreneurs accomplish their life missions.
The school launched startup founders from 76 countries who built 350+ companies including NVision (sold for $275 million) and crypto leaders QTUM, Spacecash, DataWallet, and Credo.
Whether you agree or not with his stances on specific tech trends or on his style of venture capital investment, Tim has undoubtedly contributed to shape the VC world of the 21st Century and continues to be an influential figure in the contemporary technology world.
During his keynote, Tim analysed some key industry trends from the vintage point of his global portfolio of companies.
He then went on to clarify what defines great entrepreneurs and why today is a great time to start a company –or indeed to back tech startup ventures.
Technology is taking us into 2 different directions
According to Tim, as the Coronavirus hit, about two-thirds of the companies he backed with Draper Associates have, weirdly, thrived in this new environment where everyone got locked up at home.
He mentioned his investments in the crypto space like Tezos and Coinbase, which saw an increase in users, and he deduced that people being in isolation intensified their use of the internet and opened up to exploring new technologies like Bitcoin or Tezos and alternative investment platforms like Coinbase.
Tim himself is a strong advocate of Bitcoin and decentralised currency systems. However, even those investors who are less bullish about a complete replacement of the existing monetary system can’t deny that people are increasingly turning their attention to alternative systems, when it comes to asset management, registration and regulation.
The first direction tech seems to be going towards, therefore, is that one of decentralisation and decentralised ledgers.
I must agree with Tim here as in Europe too we have seen the raise of actual blockchain startups (as opposed to murky ICOs that went nowhere). These companies are currently taking what was once a far-fetched hacker-driven tech (I still remember mining my first Bitcoin as a newbie web developer for fun in 2012… and losing my private keys a year later) into real world application. Like Argent, which was spearheaded early on by our investor friend and venture partner Aapo Bovellan, or our community startup Cygnetise, which helps enterprises use blockchain to manage their digital signatories.
According to Tim, this ongoing push towards decentralisation will, sooner or later, change the fundamentals behind finance, data management and asset transfer.
As per the second direction tech is taking us into, Tim points to remote technology.
Whilst this may seems obvious at first, his take on the specifics behind the disruption have more to it than just doing virtual meetings.
“The other thing that’s happening” says Tim “is [that] people are experimenting with VR they are using remote healthcare they’re using remote education”
He mentions deep learning and automation driven startups. Most of which are thriving in this new world, where social distancing massively increased the willingness to adopt those technologies that enable and empower remote work.
Not just virtual events, as mentioned before, but also difficult tasks in sectors such as healthcare or transportation, where products become a mixture of new software and new hardware.
Unfortunately, for early stage startups developing such advanced products, it’s not all sunny uplands.
Tim notes that, whilst business opportunities are exploding for both software-driven remote startups and those developing more complex systems, the latter are struggling a bit when it comes to raising money. In the example of transportation, he notes that because of the uncertainty, people (aka investors) have been a bit hesitant lately, but it seems that the tide of confidence is turning.
Once again, I have to agree with Tim here. In our UK community, for example, we have seen both types (software driven and hardware+software driven startups) being able to create new market opportunities for themselves. However the first ones also found it easier to raise venture money even in Q2/Q3 2020, whilst the latter not as much.
Despite some difference in their success with investors during the peak of the pandemia, both startup types are effectively building the blocks of a new world. Like Tim’s investment Otter.ai, on the software side, which automatically transcribes notes from virtual meetings, or the Silicon Roundabout community startup Valkyrie Industries, on the software+hardware side, which is pioneering the next generation of haptic controllers for AR and VR.
Why start a business now – and what would make you succeed
One it is 31 million Americans are unemployed… and about around the world it’s about ten times that. All those unemployed are now looking for interesting new things to do: if you’re an entrepreneur today there are some really interesting people that you can get
Tim Draper – Virtual PE & VC Conference
Bullish to say the least, in terms of what will come out of this COVID-19 situation, Tim notes that entrepreneurs today can access (probably for the first time in decades), a large pool of talent that would normally be very skeptical about leaving high-paid corporate jobs to come and work for a startup.
(We actually noticed this trend ourselves, at Silicon Roundabout, so if you wanted to try out and put up a free job advert, this is the best time to do so: http://localhost:8888/sr_community/post-a-job)
Based on what he sees with his own venture firms, entrepreneurs already woke up to this.
But what makes a good entrepreneur for Tim, especially in these strange times of “market reset”?
The list is quite short. Entrepreneurs who are best placed to create great businesses out of this opportunity are people who are Mission Driven: they know exactly what they want to do and money is not their main driver – it’s mostly about their vision, it’s about where they want to take the world with their startup.
Vision and Mission-driven attitude, therefore, make a startup “Draper-investable”
Great startups with a problem
Tim states his current dealflow is about 20,000 startups per year and, like most high-conviction investors, he normally picks about 20 or so to back out of these.
His method for narrowing down the selection focuses on problem-solving entrepreneurs.
Rather than progressing due diligence with those that, in his words, “wanted to start a company or… wanted to do this because Joe over here did it and he was successful”, he focuses on those that want to show the world there is a better way of doing something.
Again hard to fault this. In our own experience as a tech community for the last decade, we have seen far too many startups pitch “their product”.
This is not how Venture investors think.
Pitch the problem you are solving, instead.
Even before getting there, consider whether it’s a “problem worth solving”. In venture terms, this means both that the current ways are broken or inefficient and that the market opportunity for changing the “way it’s done now” will generate hundreds of million or more in revenue.
Where are we heading to? A Utopia or a Dystopia?
According to Tim, we are approaching a fork today, which COVID-19 could become the catalyst for.
Tech has the power to take us down either of these roads. He calls them the “utopian road” and the “dystopian road”, and we don’t know yet which of these we will take.
In his opinion, the dystopian road is where the governments control everybody.
From fear of the virus spreading, authorities could use technology to check on people and enforce rule beyond what we would normally tolerate. After the pandemic, it would be hard for them to relinquish that power, so Tim worries this could mean entering a dystopian world of centralisation, control and loss of freedom.
The utopian road is where technology is used to inform people and the virus is contained by empowering citizens, rather than by enforcing control.
The legacy of this utopian road would be a more modern education system that utilises technology to better serve people. It would leave companies and workers empowered to work flexibly and it would, in the short term, contain the pandemic through information spreading and individual free decisions.
The problem for Tim is that with excessive regulations come corruption and with corruption comes a loss and a lack of motivation for inspired and inspiring people to change the world. For example, through creating new tech ventures.
It’s up to us, current and future VC investors
Being a PE & VC conference, between the end of the keynote and the Q&A discussion we all participated in afterwards, it was normal that the conversation veered towards what our role is, as managers of existing or emerging venture funds.
Whilst entrepreneurs are busy building the “new world” of tomorrow, a question constantly comes up for those allocating money to their ventures.
Which ones are we going to back?
Of course, in theory, we all want to invest in those ventures which we feel could generate returns. Equity investing is still a type of business financing at the end of the day.
Tim, however, urged us fellow fund managers to also consider the long term vision of an entrepreneur and the path his or her startup will take us down.
We have an opportunity right now to lead toward that free and open society, and it’s gonna be led by entrepreneurs. So the entrepreneurs that you fund have the opportunity to lead us to the world we want to have.
Tim Draper – Virtual PE & VC Conference
That’s when he shared the main question he asks entrepreneurs after he hears them pitch: what if it works?
This factor, for a startup investor, should indeed be is as important as the entrepreneur’s dedication, drive, and domain expertise. Because, ultimately, our business is there to empower the world disruption brought about by the very companies we invest in.
So what if it does work? What sort of world we will be living in?
What does the world look like if this founder becomes incredibly successful and this startup transforms this industry or that industry?
Is it a world with a more free and open society? Is it a world where we are all more global and less tribal and less tied to geographic borders? Or is it a world where we erect walls and where bureaucrats can enforce an increasing number of rules and regulations that ultimately stifle innovation?
Considering COVID and also certain political events in the past decade, I think we all wonder sometimes if it’s not up to us, in VC and Startups, to take down those walls that fear and politics seem so eager to erect.
For Tim, the answer is a clear yes.
It’s the true entrepreneurs that are stepping up now: they’re the ones who have a vision for the future as a place where we want to end up… they’re gonna figure out how to cure the virus, or they’re going to figure out a way to open the world, or they’re going to figure out a way to feed the feed the hungry, or house us all… [and] they’re going to do in some new way that it’s coming and those are the entrepreneurs that we’re going to back
Tim Draper – Virtual PE & VC Conference
Want to get funded?
If you think you fit the above description, I’m going to share the email Tim gave us and include his recommendations as to how to pitch your startup —Which by the way you should do with all the investors you approach.
- Don’t send an email just because you ‘want to talk’ business
- Do include a pitch deck or business plan
- Check out that what Draper Associates are investing in really matches your company (e.g. via their website or their past investments)
You can send your pitch to Tim [at] Draper.vc
If you are looking to present your tech for feedback in front of UK techies, engineers, other founders and developers, you can always apply to present at the Silicon Roundabout events.
Happy building and happy fundraising to you all!