How Tim Draper made a fortune investing in Bitcoin

Tim Draper is a venture capitalist and entrepreneur based in Silicon Valley. He invests not just in boring stuff like stocks and bonds. Nope. Tim invests in early stage startups and turns them into big successes. He's like a startup whisperer. He invested in Skype before it was cool, backed Tesla before electric cars were a thing, and supported SpaceX when everyone thought it was insane and twisted a finger at the temple. He even tried to divide California into six separate states because apparently one Golden State isn't enough. Now, some folks might think Tim's a little office rocker, but you can't argue with success. He's a legend in the world of investing. A true pioneer who's made a fortune by taking risks and blazing his own trail. So buckle up, because in this video, we're going to take a closer look at the story of the one and only Tim Draper. Trust me, this is going to be a wild ride.

The way I got into blockchain and bitcoin was way back when I met this great guy from Korea and he said that he had to buy his son a sword. And it was for the son's birthday and it was $40. And I said, well, it must be a nice sword. And he said, well, no, it's just pixels on the screen. And I said, whoa, so people are buying virtual goods with fiat currency. And then I thought, whoa, maybe there will be virtual currency to buy fiat goods. And it got me thinking. And then I watched very carefully as games like FarmVille created new kinds of virtual currency. And then when bitcoin came along, it was the universal currency. It was the currency for our entire Earth. I was talking to my partner at the time, Joel Yarman. He introduced me to Peter Vasen. Peter then told me about bitcoin and how it works. And I dug in very deeply and I ended up investing in Peter's company, Coin Lab, and also investing with Peter to buy some bitcoin. And bitcoin at the time was $6 bitcoin, and he was talking about making it $4 a bitcoin because he was going to mine it for us. And two things went very wrong there. One was the company that he was working with to create the chip. It was going to mine Butterfly Labs S.A. the money for a long time and actually mined it themselves for a while. So we didn't really even get the equipment until bitcoin was at 36. But even then, my bitcoin was held at Mount Gox and that company sort of disappeared the money.

Mount Gox was the biggest and most Popular bitcoin exchange. One of the earliest bitcoin exchanges. Based in Tokyo, it was started by Jed McCaleb as a website for trading cards from the game Magic the Gathering. So the name Mount Gox comes from Magic the Gathering online exchange. In 2011, a French guy named Marc Capillay buys Mount Gox. And shortly after that, the price of bitcoin rises. The site becomes the most popular place to buy and sell bitcoin in the world. Fast forward a few Years later, in 2014, Mount Gox all of a sudden goes dark.

I thought, well, too bad, that was a great experiment. There goes 40,000 Bitcoin or something. I thought that was the end of it. After I thought bitcoin was over, I couldn't believe it. But the next day, bitcoin went down only about 15%. On the news that Mt. Gox had taken all that money, I thought, wow, people really need this and they're really using it for a lot of good purposes. So I did a deep dive and I started to figure out what it is that individuals are using bitcoin for. And it turned out that they were using it to move money around in Africa to be banked when they were unbanked, to pay people who didn't have bank accounts to pay people internationally. There were many, many applications for bitcoin at that point. I started to buy more bitcoin. And I bought a little and I bought a little more and I bought a little more and the price kept going up and up and up. And then this Silk Road auction came up where the U.S. marshal's office auction off some coins.

The U.S. marshals this week are set to auction off $18 million worth of Bitcoin. They ended up with the bitcoin when they seized the assets of Silk Road, the Amazon of illegal drugs. That was actually a lot more than that. It was an anonymous private marketplace that a lot of people were using. A lot of the transactions that they performed, actually all of them were done in bitcoin. And so the Feds ended up with it after they took down Silk Road. Now they're going to auction it off. Now this actually isn't all that different from when the Feds auction off any other seized assets from a criminal or supposedly criminal enterprise. The difference is that it's bitcoin, which is itself a very controversial cryptocurrency that the US Government is still trying to figure out its policy on. And get this, that the sale is a so called interlocutory sale, which means that the U.S. marshals actually had to get a special permission to sell it off even faster than they originally intended. Because the goods under question, the bitcoin is considered a perishable or susceptible to deterioration. Good.

It's fascinating that they would put it in that bucket. They're almost saying, oh, shoot. Like, we don't know how long bitcoins will hold their value. They've been fluctuating, but we want to cash in on them now. In that auction, there were nine lots, and I thought to myself, you know, I think I'd really like to get one of those lots. I kept talking to all these people who were talking about buying into these lots, and every single one of them was bidding below market. I thought, well, if I want to get at least one lot, I better bid above market. Market was about 618, and I bid 6 32. And it turns out I got all the lots. So I got about nine times what I really wanted. But then once I realized I had gotten it all, I thought, you know, I'm happy with this. It was not very diversifying of me to buy all that bitcoin, and it's either going to go to zero or it's going to be something very important for the world. It immediately went from 632 down to about 180. And then I started to invest it in a couple of companies, and they took the bitcoin and they immediately sold it and turned it into dollars. And there was only one company that kind of held on as they went forward, and that company is still doing very well. The rest of them, I think, are out of business. But I did that because I wanted to experiment with the idea of investing into portfolio companies, into startups. With bitcoin, the accountants charged me triple what I would normally be charged because I had to train them. And the lawyers, it was very expensive with the lawyers. Everything I was doing was cutting new ground, and none of it was really working well. So I. I stopped investing with the bitcoin. And I thought, well, I'll just hold on to it until people are ready to go. My son was very enthusiastic about me doing it. Both sons, actually. One was about to work with me, and the other one was started boost the accelerator. And he decided that after I bought that bitcoin, he would create an accelerator just focused on bitcoin. And that ended up being a great success. My father was not enthusiastic about it at all. He said, the dollar, stick with the dollar. I'm Tim Draper. I'm in the venture capital business with Draper Associates. This is my father, Bill Draper. He's one of the first venture capitalists who ever went into Indy. India has made great progress over the last 30 years. It's a great country. I have to say that I'm very optimistic.

When I was with the first venture capital company in Silicon Valley in 1959, every good entrepreneur came to us and there was no competition. Then Wall street arrived. I wondered why the president of Goldman Sachs came to see me in my little office in Palo Alto. I realized our returns were like doubling every two years. And that didn't happen in Wall Street. So he just wanted to put money in his truck. And then he came out here with a truck full of money.

What I've seen in the venture business that I used to knock on doors of companies and they would shoo me away, they'd say, no, no solicitors. Oh, that's. And now it's a very different thing. We spend most of our time filtering through all of the various entrepreneurial opportunities that we see. I serve as a catalyst to accelerate.

The transformation where we inspire by example, which is great.

So, yes, it's more competitive, but also there are that many more entrepreneurs that have never really experienced in the past. But first, let's see what's going on behind the scenes. I'm constantly backing and funding entrepreneurs that are somewhat controversial, or we would never see the amazing changes that we've seen from all the investments that we've made. Whether it was Bitcoin or Skype or Baidu or Tesla, they were all very controversial at the time. I do believe that Bitcoin will be the big winner and that there will be a lot of other coins that are used for specific purposes. There will be some failures, but that's the beauty of free market systems. My goal is never to sell my Bitcoin, but to eventually spend or invest. Really, I want to invest it. I'm going to wait for a time when I feel that the world understands it and that the world has finally embraced it. And I think that's probably five years from now.

That's all, folks, about the story of Tim Draper. And remember that innovation is the key to unlocking our future. Let's not be afraid to take risks, embrace change, and create a better world for generations to come.