A billionaire venture capitalist who made early investments in Twitter and Skype says there's a single question he asks himself when deciding which companies to invest in
- Billionaire venture capitalist Tim Draper has built his fortune by making early investments in tech startups including Skype, Twitter, and Ring, in addition to cryptocurrencies.
- Draper doesn't find it worthwhile to try to figure out how a company could fail before deciding to invest, he told Entrepreneur.
- Instead, Draper asks himself, "What happens if it works?"
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Billionaire Tim Draper has built his fortune through the venture capital firm he founded in 1985, DFJ, which counts Skype, Twitter, and Ring among its success stories, according to the firm's website.
Draper, 61, was also an early investor in Bitcoin. Forbes estimates that Draper has between $350 million and $500 million in cryptocurrency investments alone.
In a recent segment of Entrepreneur's The Playbook, Draper talked to host David Meltzer about his investment strategies and what makes a good entrepreneur.
When it comes to the question of what's fueled his success, Draper said there's one question he always asks himself when deciding whether or not to invest: "What happens if it works?"
There's also no point in trying to figure out how a company's business plan could go wrong, according to Draper.
"Who cares?" Draper said. "All these things could go wrong in lots of ways, but the thing that really matters is if it's successful, how big could this get?"
Companies with a passion for disrupting industries that have gotten lazy and provide customers with bad service at a high cost make better investments than companies that are just out to make money, he told Entrepreneur.
This attitude may have led Draper to invest in fraudulent blood-testing startup Theranos, which promised to revolutionize health care by offering affordable blood tests with only small samples. Draper has defended founder Elizabeth Holmes as recently as May 2019 on CNBC.
"How great could it be for society, for a customer, for the people of some region?" Draper said he asks himself when picking companies to invest in. "If it's great, I'm totally into it."
Draper isn't the only VC who focuses on a startup's potential to change lives before investing, as Business Insider's Shana Lebowitz previously reported. Dan Estes, a partner at Frazier Healthcare Partners, said that one of the most common mistakes entrepreneurs make when pitching is spending too much time explaining how the product could affect the market and not enough time explaining how it could help people.