China will flatline, India to cross China pretty quickly: Legendary investor Tim Draper on Trump, Elon Musk, Bitcoin

During an exclusive candid chat, Draper, founder and managing partner of Draper Associates, discusses Trump’s victory in the US elections, why Elon Musk is extraordinary, India overtaking China soon, Bitcoin’s upward swing, his investment strategies, lessons in entrepreneurship and much more.

Edited Excerpts:

Your visit to India is happening right after the historic US elections. From India it appears crypto has been booming, stock markets are doing very well, emerging markets are already feeling the heat. What’s the mood like on the ground in Silicon Valley?

Well, I've been in India the entire time since the election, so I don't know. Although I do, I'm on emails and other things. I think it's real optimism.

I kind of have this feeling that every line of regulation that gets rolled back creates a new job, and every line you put in steals a job from us. Every government worker that gets cut creates three jobs in the private sector. And every government department that gets removed probably creates 100,000 jobs. And if they get rid of the SEC, that probably creates a million jobs.

Pre-elections Silicon Valley was very divided with VCs like Naval Ravikant, Marc Andreessen, Elon Musk supporting Trump and Mark Cuban, Vinod Khosla and others supporting Harris. Has this split the Silicon Valley?

Everyone was divided. But I think they were both (Donald Trump and Kamala Harris) were good candidates and I met them both. And President Trump has an understanding of the economy that was very strong, and people voted for the economy.

This is the first time we will see an entrepreneur, Elon Musk, taking over as the co-head of Department of Government Efficiency – an entrepreneur making the government spend less. What are your thoughts on it?

I thought that was brilliant. Look at what he did with X (formerly Twitter). He downsized Twitter by 75 percent and the service has improved and grown. Elon is a gift from the gods. Elon's extraordinary. We're just so lucky he's on the planet. I think the idea of a government efficiency expert is really great, because if they cut one government job, that will create three jobs in the private sector. I do think that there is a major opportunity the US has right now economically to really bring back freedom and trust into the country.

Will we see you work in some capacity with the government? Because you were supporting both the candidates.

Well, that didn't make me any friends (laughs). Look, I've got a fabulous job. In fact, multiple fabulous jobs.

In a post Trump world, what role will India play? Several of Trump’s cabinet ministers seem pro-India and have been a bit hawkish on China?

The US will continue to grow at a pretty fast rate if Trump does all the things that he said he can do. So the US will keep growing. China is probably going to flatline. And India is going to cross China pretty quickly. And these two lines might cross at some point, too. But I don't think it's too long. If India stays an open democracy and China stays in command and control, India will pass China, may be in 10-15 years.

Over the decades you have been an early investor for founders like Elon Musk, Robin Li, Jack Dorsey, Brian Armstrong, Naval Ravikant and so many others. What were the commonalities among these visionary entrepreneurs that stood out to you?

The one thing that maybe is the line that connects all those great entrepreneurs, Robin Li, Niklas Zennström, Elon Musk, when they pitched me, they all talked about how they were going to delight their customer. So there's something about people who understand that you are serving the world. They become your sales force. Another thing is all of these big winners, they're all calm. But they are calm, wild animals – willing to do whatever it takes as they know it is going to be great for everybody.

Also Elon Musk has been quite a multitasker excelling in all the ventures he has jumped into. What gives? What does he do differently since you have known him from his early days?

He's got extraordinary people around him because he has that vision. So he doesn't have to do all of it. But he guides them and he comes up with those little things that make Tesla really great. The twist in the rocket business where you can kind of land it exactly where it took off from.

You are doing a dedicated season in India of Meet the Drapers for the first time. What’s bringing you here in 2024? How’s your tour going?

We are doing a whole season in India. We just did Mumbai. Before that, we went to Bengaluru, Delhi and Odisha. Now we will go to Goa and end it in Hyderabad.

The people are fantastic here. I said, the traffic here is beautiful in Bengaluru. And they said, what are you talking about? We're trapped. People are moving in and out of traffic. Those lines in the middle, they're just guidelines. And the people move in and out. And they're all so colourful. And whether they're riding a little tuk-tuk or whatever. They're all figuring out how to weave in and out and they all sort of accommodate for each other. It's a wonderful culture here.

From a venture capital standpoint, India went from being a difficult market to find strategic exits a couple of years back to now having bumper IPOs like food delivery unicorn Swiggy yesterday. What’s your reading of the India market? Will we see more active investments coming from your firm into Indian startups?

I'll be investing here for years to come. As long as you keep having leaders who promote freedom and trust and create very clear rules so everybody follows them. As long as you have that, I'll keep investing here. I thought I'd continue to be able to invest in China, but then they got that horrible dictator. Now I don't invest there. It's too bad because China was just taking off and then this guy just put a kibosh on it. So I'm a big fan of Indian entrepreneurs and backing them for years, even before I came to India. I backed Hotmail. I bet on Sabeer Bhatia.

A great entrepreneur isn't really thinking of an exit. They're just thinking of taking over the world and so I encourage that. As a venture capitalist, sure, occasionally we have to sell something, but we do it reluctantly. It's like sending your baby off to college. I also think people say, well, the returns aren't quite as good on Indian entrepreneurs. I disagree. And the reason I disagree is that I don't think we've given it enough time. Because as a seed investor, I'm really not looking for a return for at least seven years. And most of the big wins take 15 years to get to maturity.

So if you're judging a venture capitalist in India based on a seven-year record, you're missing seven years of growth. So you're missing the whole idea. There's a good India IPO market. I think that's a great thing. Liquidity is always good for investors. So that's a positive. And for entrepreneurs, it's nice to be able to feel like there's a way of getting some money from your business out and continuing to run it.

You have been investing in Indian startups for 8-9 years now?

So my dad backed Rediff. My dad was the first India venture capitalist back in the late 1990s. And that fund did very well. It was a huge success. I think he got his investors 17 times their money.

I have been investing in India pretty much since he started that fund because he'd bring these deals up and I go, I'll take that one. And then, Sabeer Bhatia came, And then it all blends together because all I'm looking at is the entrepreneur and not where their residency is.

How are valuations trending in the early stages post funding winter?

Seed valuations have kind of crept up in the early stage. The early stage has outperformed everybody else. And it was obvious that that was going to happen because they've been a little bit immunized. Those big, huge funds came in and they all came in together. And they saw a company and they flood it with money, and then the company dies. And they're wondering why. It's because the company went and hired 500 people. And then their overhead was much higher. And their burn rate was much higher. And they ran out of money.

We used to have this saying that a company lasts nine months from when the venture capitalist invests, no matter how big the cheque. So that's what happened…We were very happy to do well because I had seen it all happen before with the dot-com boom and the bust. This was the same kind of thing, boom and bust.

What themes are you currently bullish on?

One is computational biochemistry and data and how it changes healthcare. You throw in CRISPR and you throw in robotic surgery, medicine is going to go through huge transformations. The drug business is one that is ripe for transformation because it's run by big pharma…And now we can get medicine that's specific to you versus me instead of one size fits all, which is what big pharma relies on.

The second one is Bitcoin and everything around it. The Bitcoin blockchain, the Bitcoin smart contracts, DAOs, ordinal NFTs, all of that is happening around Bitcoin. So if you're a developer, you develop for Bitcoin first. That wasn't the case before because people were experimenting on Ethereum and Tezos. Now it's like we got to build it for Bitcoin.

The third one is space and transportation. Elon (Musk) broke a logjam here. Nobody was innovating in space. Nobody was innovating in transportation. It was real stagnation. And because the industry was dominated by the big three car companies and a few nationalistic ones around the world. But Tesla came along. They're creating new electric boats. They're creating vertical takeoff and landing vehicles, jetpacks. Now creativity is flourishing. In space, Elon broke the logjam because of SpaceX. It's amazing. So now there are rocket fuel companies, companies that are doing ways of landing on the moon, mining asteroids, mining the moon for water, moving satellites around.

Then there’s AI. AI is like the Internet. The Internet transformed industry after industry after industry. AI is going to do the same thing. It's going to go right through all the industries. So AI is a big thing for us. And then there are other categories.

Post-Trump's win, there has been this crazy rally of Bitcoin. What would the impact be for the crypto industry in the US?

Actually, it's not crazy at all. It's totally rational. Bitcoin is going to be the currency of the future. I don't know if it's five years from now, ten years from now or when it's going to be. But there will be a moment in time when you can buy your food, your clothing, your shelter, all in Bitcoin. Pay your taxes in Bitcoin. One day you would go why do I want government currency in my wallet? Why does it make sense when the government can just print it and then it inflates out? I think I'll just go with Bitcoin. When that moment happens, there'll be runs on the bank. So go buy some Bitcoin.

Even at this price, and at this point in time?

Well, I think it's cheap, because when Bitcoin really becomes the dominant currency of the world, who's going to want a government currency? That's a big question. And then the stablecoins are interesting, but they're tied to the government currency. And then there are all these other cryptocurrencies.

But there's a gravitation toward Bitcoin. I would buy it at these levels because Bitcoin's worth $2 trillion or something? But the global currency economy is $100 plus trillion. So there's no reason Bitcoin doesn't go up about 30 times from here.

What's the impact are you expecting to see in the crypto industry in the US now that Trump is in place?

I think creativity is going to fly. All these things that all the entrepreneurs were trying to do, and then they realised they had to geofence the US, cutting the US customer out of it. Now they'll be able to do it again. And I think that's great.

How is the regulatory part going to play along with that for crypto? And will we see the impact coming to emerging markets like India, where the view on crypto is still very controversial?

Controversy is always good for me as an investor. I always feel like if I'm backing something, and it's a little controversial, I'm doing my job. Well, the US has for better or for worse, led the world in a lot of different directions. They led the world in democracy and freedom. I think that was a very positive thing. Recently, they've led the world in the TSA and high regulations around the SEC, high regulations around the FDA.

The US has put in huge speed bumps. And what all countries do when the US creates something like that is do exactly the same thing in their own country. And so if the US lets down its borders, it deregulates, then the other countries in the world will deregulate too.

At this point, are you buying more Bitcoins or selling more?

Oh, I continue to buy. But I do it in this way…We accept Bitcoin for rent. We accept Bitcoin for tuition (for Draper University). We accept Bitcoin for everything. And so I just keep getting Bitcoin.