Forbes: Tim Draper's New Plan to Fix California
By Mike Montgomery
When you walk into Hero City in quaint San Mateo, California, the first thing you notice is the receptionist’s desk — it’s made from the body of a Tesla car.
The desk makes a strong first impression on the young entrepreneurs who co-work out of the space. Across the street from Draper University, Hero City is just a small part of venture capitalist Tim Draper’s empire. In case you don’t get the metaphor, Draper believes entrepreneurs can save the world.
Draper is best known as one of the founding partners of DFJ, the venture capital firm that has backed such hits as Skype, Hotmail, Box and, of course, Tesla. Over the years, Draper has expanded beyond DFJ. Draper University provides intensive crash courses for entrepreneurs in the making. Hero City gives them a place to work and find investors (maybe even Draper) and DraperTV offers video lectures from Draper’s successful friends.
But the California native is also working to modernize government through technology and creativity unbound by the rigidity of the past. Building off the theory of venture capital, Draper views his government-transformation process as “venture governance,” which can be described as the utilization of the tools of venture capital and technology applied to an effort to fix the many problems plaguing California. His Innovate Your State project, the Fix California Challenge, asked Californians for their best ideas and then let the public vote on them. They are currently winnowing down the ideas to one winner and Draper will use his money and clout to help make the winning idea a reality by turning the idea into a proposition on the ballot.
In his office at Hero University, wearing a tie showing a California divided into six new states (based on his failed ballot initiative), Draper talked about improving California, the wisdom of crowdsourcing and why you need to work on business and government if you want to effect real change.
Mike Montgomery: You’re a venture capitalist by profession. What spurred your interest in politics?
Tim Draper: I have always had a real interest in education. I had an amazing education myself. I went to Andover, Stanford and Harvard, but I always thought, what can we do to improve education? So I threw my hat into the ring to be on the state board of education. I didn’t win, but two years later Gov. Pete Wilson appointed me to the board out of the blue.
When I went in, I got the feeling they were fighting personal wars with each other and they weren’t looking out for the kids. I started to think, we have a really serious problem here. If we’re not educating our children, we’re not going to progress as a society.
Montgomery: Were you able to make any changes?
Draper: In the year 2000, I put something out on the Internet looking for ideas to improve education. The thing that grabbed me the most, because I’m a businessman and feel companies improve when there’s competition, was school vouchers. The money would follow the student, and the parents would choose the school that was right for the kid. It polled at 82% in favor. I said, this is great, let’s do this. I gathered the signatures and put some money behind it. And then the teachers’ union spent $120 million to defeat it.
Montgomery: That clearly didn’t deter you from trying to get propositions on the ballot. In 2014 you sponsored the Six Californias initiative, which would have split the state into six smaller states.
Draper: We give the most to our state. It has the highest income tax rate. How is it that a state can charge the most and provide the worst service? We used to be first in education and now we’re 41st. We were the best place to do business, now we’re 50th.
This is wrong.
As a VC, I’ve backed companies that changed their industries. Skype changed the way we make phone calls. Tesla is changing the automotive world. How do we take on the state in that way?
Montgomery: Six Californias got a fair amount of publicity but it never ended up on the ballot. What happened?
Draper: I felt we needed to create several new states that would be allowed to do new things and provide better service. We got 1.2 million signatures, which we thought was plenty. But they were discounted down to 750,000, which was just short of what we needed.
Montgomery: Did you expect the initiative would pass or did you mostly want to start a conversation?
Draper: I wanted it to get to a vote so people could really consider what that would be like. I wanted to get them excited about what that would mean for California. Just because the odds weren’t in my favor doesn’t mean it wasn’t the right thing to do.
Montgomery: How did your experience with Six Californias influence your most recent civic project, Innovate Your State?
Draper: I thought, well, that was my best idea. If we opened it up to the 38 million California residents, we could certainly get a better idea, so I decided to crowdsource. It brought in over 400 different ideas and thousands of people voted on them. We ended up with really interesting ideas about how to fix our state.
When we got down to the final eight, I started meeting with the people who came up with the proposals. We call this “venture governance.” Just like in venture capital, if we get interested in an idea I will either fund it, donate to it or help put it on the ballot.
Montgomery: What are the ideas that made it to the final four?
Draper: One is actually to divide the state into six or so supercounties. They could have more influence on how their own regions are managed.
Another idea is the neighborhood legislature. This would increase the number of politicians but every legislature would only represent 10,000 people. Everyone would really know the person representing them.
Another deals with transparency. All politicians would have to open up completely and there would have to be a three-day period between creating a law and voting on it.
Finally, there’s the add-a-law-delete-a-law idea. I think it would create enough friction that politicians won’t just willy-nilly create new laws.
I’ve already funded, and Innovate Your State is awarding grants for, another idea we got, OpenGov. It’s the idea to take all of those budget numbers, which is a total morass, and put them in simple spreadsheets and graphics. You get a really clear view of how money is being spent.
Another one I funded is called PlaceAVote, which lets congressmen send a bill to all of their constituents, who can say how they would vote. I can imagine a time when a representative is just pushing a button and saying, this is how my constituency voted.
Montgomery: Do you feel you effect more change through your VC work or through things like Innovate Your State?
Draper: I think you have to do it all. You don’t know where the big change is going to happen. All of it starts with a little guy with a little idea, and I’m the little guy finding these little ideas.
We’ve been a lot more successful with our venture capital business than with trying to change government. Something in me says, if we don’t do something soon, we won’t continue to have an economy that allows for these kinds of startups. We need to see fundamental change in government.
Follow me on Twitter at @CALinnovates.