VC10X - VENTURE CAPITAL PODCAST
Venture Capitalists (VCs) & Angel Investors share their investing thesis, screening process, value-add, exits, and more. Hosted by Prashant Choubey (@ChoubeySahab)
Adam Draper is the founder and managing director of Boost VC. Adam is a 2x entrepreneur and a 4th generation venture capitalist. For Adam, no idea is too crazy. He dreams of building an ironman suit and leads the deals in the wildest SciFi Tech investments - exoskeletons, jetpacks, rockets... Go big or go home. Adam co-founded Boost VC after his success as an Angel Investor in companies like Coinbase, Amplitude and Plangrid. In a previous life, he wanted to be a professional tennis player and has an odd affinity for Australians. He once drank an entire bottle of tabasco sauce (the big ones) in 43 seconds. He's 4th generation venture capitalist, 2-time entrepreneur, and most importantly, he’s a friend :)
We talk about:
Adam Draper’s story & how he started BoostVC?
I grew up in California, went to high school in Massachusetts. And then I actually took a year off. I took a gap year between high school and college and tried to play professional tennis, ended up going to UCLA the next year.
Then I majored in English, which I speak. Actually, you know what, I think my English major has actually paid dividends. I've learned a lot. I write more than the average person.
In college, my friend Thomas Foley asked me to start a company with him. And so I founded a company called Expert Financial, which was a secondary market for private securities. Out of that, we ended up failing for numerous reasons, some being just naivete, we were young entrepreneurs, some being hiring, firing, and fundraising.
We had to learn everything while trying to figure out what we were doing. And in sort of my last year. Which was we ran it for four and a half years. I realized that I learned so much that I was able to actually help other founders and I started to do that just on the side for fun and then I started to invest in a few and so I was fortunate enough to be able to invest a little bit of money into a couple of companies.
A couple of those companies ended up being things like Coinbase, Amplitude, Wave, Benchling and I was very fortunate to just sort of like the character that I was investing in. I hadn't formalized it into a fund, I was just sort of individually investing and I decided, hey, how do I do this as an entity? How do I mentor? Startups in bulk was sort of my thought process and that was called an accelerator.
So I launched Boost VC as an accelerator for startups, very quickly realizing that we needed a focus if we were going to take any piece of the market. We ended up being the first fund to ever focus on Bitcoin-related startups and then from there we were able to sort of grow our assets under management and we ended up raising a few subsequent funds. We ended up moving from investing $10,000 to investing $500,000.
And now what we are today, at BoostVC, our mission is to accelerate the Sci-Fi future. We invest $500,000 into 20 deals a year and we run an onboarding program for those companies to sort of get up to speed and move faster.
What is the definition of venture capital?
I think the definition of Venture Capital matters a lot because early stage venture capital is so much different than growth stage venture capital, and it's so much different than private equity, which is a whole different beast.
But at its finest form, what we are trying to do, what we are trying to accomplish is the acceleration of innovation. And we're trying to take capital to provide capital and partnership to make businesses grow faster to more people. And what technology is, what we're trying to get to the world is something that saves everyone time.
What venture capitalists are trying to do is find the products, find the people who can build those products, who are going to provide a service that will save everyone on the planet more time. The best products do that. That's what the best products do. Venture capital is matching the builders with the capital, with the power to actually work on that, work on the problems and solve them at scale.
Being the 1st investor in Coinbase
I was the first investor in Coinbase. I met Brian Armstrong. We met at a place called RedRock. And the reason I always say RedRock in Mountain View is because I have hit straight dingers from RedRock. So I invested in Benchling, Plangrid, Coinbase, all at RedRock. I need to go back there and start taking meetings again.
I met with Brian Armstrong. Brian Armstrong, first off, just an incredible human. He had two, three failed startups previously. He was working at Airbnb, but he had just recently left. And Airbnb was a billion dollar company at that time, and he was leaving what was known to be an enormous business, and it was just like taking over the world. He was one of the first 150 employees there to start a company in a market that was $100 million.
The entire market, you took every single token, every single token at that time and put them into a pool. It was 100 million dollar market. So the cost of the price of a bitcoin was about $10. I was like, well, this is sort of an irrational thing for this really great, talented person to be doing.
I have a saying now, it's rational people doing irrational things. Follow those people. And what he said to me, and the reason I'm telling this story is what he said to me was, at some point, the world's going to be on one financial infrastructure. And I feel that that's been what I've been investing towards in this market for the last ten years. It's been a decade now that I've been investing in supporting entrepreneurs in this market of crypto. And it's all about bringing a more transparent and open market to the financial world.
There are great people and then there are people who are trying to take advantage of people. That happens in every industry. But how you avoid it and how an ecosystem is built is based on great people. And so you want to look for the same people you always look for. You want to look for high integrity, high energy, high trust, and high commitment to what they're doing. And the commitment either needs to be for the mission at hand or the partners around the table and they need to have a high commitment level to either of those two things.
Comfortable being wrong in short term
In the short term you want to be wrong. You want the world to be like completely against what you are doing and not believe in it and it's disheartening. Imagine having everyone you've ever looked up to, like every single investor, VC, whatever, every single person dismiss the thing that you have spent the last years doing, right?
They would say things like, oh, is that Bitcoin thing still a thing? And I'm like, yeah, I've invested in 70 Bitcoin related startups. This is like my life. And yeah, this is a hard conversation for me to have right now. And so you want that though, if you're in early stage venture where you're trying to unlock the people who think differently and who can actually change things, like you need people to doubt it not just the person, they need to doubt the entire possibility that there could be another way.
And that's always been my exciting adventure is trying to find and uncover those secrets, those treasures. That's my job, I get to do it every day and it's awesome.
Putting up a bat signal for outrageous founders
I feel that what I'm trying to build is the venture fund that focuses on the peak of human endeavor. We want to be a part of history, we want to be a part of the historical moments of humanity's breakthroughs and that's exciting to me. But if I'm going to be investing in those things, I can't think that anything is not possible.
I need to be able to put up a signal and a microphone that attract people who are building in the most outrageous things that people don't believe are possible. At BoostVC, we see the reason that we ended up focusing on cryptocurrency was because it was a large density.
Whenever you can find those pockets of ignored spaces, that's a really good place to invest, and that's a really great place to find people and support them and accelerate their growth. We've done this for the reason we're not only crypto is we've done this for crypto. Web, three bitcoin, whatever you want to call it.
We've watched every word be used over the last decade. Virtual reality, we've been supporting for seven years. Six, seven years, and we have 70 investments in that space.
When you find a person who has had to go up against everyone believing that they're wrong, like, that's a very specific type of person. They've had to argue about what they do to hundreds of people over their lifetime, thousands of people over their lifetime. And it means that every time they argue, they have to refine it. They have to understand it better. And so the people who really are great founders, they're very clear in what they're doing or they're confident in their abilities to just adapt to the market.
The tweet that caused an uproar
Context: The tweet read, “At BoostVC, we'll still be investing 500K in 20 deals a year, but we will only entertain founders who are willing to receive money between 2 to 6 million valuation.”
People were saying, that's not an enough number for good founders, great founders. You are possibly just outright rejecting a lot of good deals by putting that condition. So what's your opinion on this? Why did you make this rule?
Here’s Adam’s response:
So I think that there are two pieces to the answer to this. It's what the market expectations are and then how Boost VC has always invested.
At BoostVC, our mission is to accelerate the Sci-Fi future. As I've sort of discussed, our goal is to believe first. We do that in investing in the peak of human endeavor. So we try to find these communities and we define that as Sci-Fi like the peak of human endeavor. These communities we define as building the scifi future. And we want to spend our time with the most dynamic humans who can teach us things we can learn from and we can help.
And in order to really understand that, you sort of need to understand where we came from. Okay? So I founded BoostVC with $500,000 as my first fund. So $500,000 is not normally a fund size. That's like a seed rounds for a start up. And we looked around, we were like, hey, in order to solve we're trying to solve the problem of network and information for startups.
So we launched an accelerator and we were investing $10,000 to $20,000 for five to 7% of a company. If you do the math on that, we were investing at between a $200,000 valuation and a one point something valuation as far as millions go. Fantastic. And you know who took those deals were people like Ether, Scan, Repo, ShakePay, like these companies who today are huge, massive hits in specifically crypto, because that was where we spent our time.
There were other companies like Cobalt, which is a security company, and Seven Shifts, which is restaurant scheduling software, who have also performed incredibly well over the last year. I think one of them is worth 300 million, one's worth 400 million. But we were investing incredibly insanely early. If I were to gauge, it was like raw, raw talent and sort of like scatter shot.
But we believed first and we gave people a shot, which is always giving people a shot is how I talk about it. But we believe first, a few years into this, we raise more funds because we were starting to perform a little better. And with the larger fund, I think something that is sort of counterintuitive with a larger fund, in order to pay back partners, you have to start to invest more money. But also we started to see this huge gap in the market. We were investing $10,000 to $20,000, right? And then we were forcing the companies to go fundraise, which isn't right for the company.
Think of that habit, your investors suddenly forcing you to go out and get more money. It's not what's right to build a healthy business. And so we looked at the market and we said, okay, there's this gap where we're trying to get our companies to raise $500,000. We're trying to get them 500k because in early stage Sci-fi, they just need to be able to build their product to prove it out, to get to the next level. 500k generally gets you there or it gets you close.
And so we changed, we changed our model. We were like, wow, we just get them all the money upfront and invest all that money so that they can focus on other things. Not fundraising, not dealing with VCs. And suddenly our program changed and evolved.
So three years ago, we did this and we said $500,000 for 15% of the company. And what's super interesting is that's roughly what my Tweet was, right? But 3 years ago, we made this and it was outrageously awesome to the market. So three years ago, we announced this $500,000 for 15%. And the market loved it. They were like, these guys get it. These amazing human beings. This team understands what the company needs.
And over the last three years, what's happened is the power dynamics shifted completely to the founder, which is great. Hey, if you can go out there no product, raise $5 million at 100 million dollar valuation. Hey, more power to you, right? Like, more money in founder's hands is a great thing. And I actually sometimes think it does a disservice to the company in those capacity. I think the number of hugely successful 5-10 million dollars pre product companies, you need desperation to really succeed as a business.
The number of successes has been fewer than you would think. But it also showed founders started to just have their ego wrapped up in how much money, how fast they could get an uptick. And we started to get pitches that were and we're going to raise a Series A in six months at 3 X evaluation. That started to be a common phrase that people would use when they were pitching to us. And we were like, and still it's hard when the market is so incredibly excited to be very concentrated and keep to your rules. And that was our rule. A rule was 5-15%, but we started to break it. And so we started to go outside because we wanted to invest, we wanted to participate and help these companies. And if we found a company, the goal is always to find the company first and not fitted in the valuation. Like, we want to find the company and then work with them and work out of partnership.
We started to be like other people and we really have been restricted. Like, we started to be very strict on around our rule set. And so when we started to realize things were getting a little outlandish, like, we participated in a $20 million valuation. And that doesn't make sense from an investor's perspective.
From where we're taking risks, that isn't the spot we can play. And so what we ended up doing was just sort of reiterating what we did three years ago. Basically the same deal in a tweet, and the market hated it. And you want to know the people who actually resisted it the most were investors. Investors didn't like the idea as much. I got reached out to direct messages by, like, 20 founders who are like, hey, I think I fit your deal. And I was like, great, you've realized the value of what we're trying to provide here.
One of the things I wanted to cover was a lot of people have reached out. A lot of investors and other founders reached out, and they said, “no good founder will take this deal”. And I thought about that a lot, because it's an interesting point. Right? At the end of the day, though, what is a good founder, other than someone who's trying to solve someone else's problem at scale? I think what they're really saying is, like, the traditional good founder who's able to raise $2 million at a $15 million valuation. $20 million, $4 million, whatever. Won't take that. But I've built a career at BoostVC supporting the leftovers.
By that, what I mean is and this is not a negative, this is a positive thing Chris Dixon gave us a great presentation, and I think about it all the time when I'm investing in my earliest career as an angel investor. When I was investing, I was 26. I had not invested in a single company. Okay, think about that. I had invested in one company. It was called Path. It was sort of like Instagram, but not. It was an amazing team, amazing company. I'm so glad that I was a part of it. I learned a lot from it. It didn't end up succeeding.
But if you think about what, I was 26 and I was investing, and, like, if it was a traditionally good deal, I wouldn't have seen it. Like, I was 26, I was an investor. If it was traditionally good, I shouldn't have seen it because it would have been done by traditionally great investors. And so I come in, and I'm meeting with anyone who's willing to meet with me at the earliest stages, and you want to know who wants to meet with me at the early stages?
Brian Armstrong from Coinbase. Spencer skates from Amplitude. Saji from Benchling. There's something about them that isn't traditionally great. There's something about them that they're either spending time in a market that people don't believe in yet, but they're all great humans.
They're amazing builders. All every single one of those teams I listed, best builders in the world, like, could build whatever they wanted. And what they ended up focusing on and building, they were passionate about.
So my answer to what makes a great founder is I want people who are searching for partnership. I want people who are really searching for someone who wants to work with them and someone who's going to support them through tough times and support an ecosystem through tough times.
If everyone is picking someone great over and over again. If everyone's staring at the same person and saying, this person is great, they're overvalued. I want to find the undervalued underdog, and I want to make them great. I want them to become the star. And so that's what we do at BoostVC.
What’s a deal breaker for you?
My team probably knows what my deal breakers are more than anyone else, but one of them is I don't like when you've shaken on a deal and then they change the deal terms. It shows a flexibility around real trust.
And so I immediately say, what ends up happening is we will make a deal offer, they will shake, we say yes. So once they say yes and they have signed, that's a deal, right? Like once they have signed and shaken a deal, but then they will sort of shop that and get a better deal from someone else and come back and they'll say, hey, we signed, we shook, but we have this better deal. I'm like, don't change the deal and we have a deal. And it happens. It doesn't happen often. People are generally true to their word, and sometimes they're thinking this is what's best for their company. And at that moment they might be right. But also at that moment, they are showing a sign of a compounding habit problem.
The deals that have been broken, I'm generally pretty glad that they broke. I have a few that I'm sad about, but in general, I think it's good to just stay true to your word. And that's sort of one of my bugaboos.
Founders are well-trained at pitching
One of the problems is people have gotten coached so well to pitch that on Zoom, everyone looks the same and everyone sounds the same and they've gotten good coaching. Like, everyone's well coached now.
Like, they all understand the right things to hit and the right like, I think it's up the level of the quality of founder. Also, like, on the positive side, on the negative side, it's harder to cut through the bowl. Like everyone sort of like put their either virtue signaling or signaling what I want to hear or whatever.
And I want real people. I want genuine I want them to speak from their soul, not from what they think I want to hear, because those are two different things. But people right now on Zoom sort of sound the same when they're speaking from the soul or what I want to hear. And they've gotten better at it. I would say that's more of a challenge. That's not a hard no thing, just a challenge for VCs.
Rapid fire round
Industries BoostVC invests in: Sci-fi, De-sci
Investment Stage: Lead pre-seed deals
Typical check size: $500,000 check
Pitch Adam at: email me, Adam at Boost VC, other is through Twitter at Adam Draper. Figure out an interesting way to pitch me. I'll probably see it like if it's through a video or something funny. You sort of want to do interesting things. People build interesting things like you want to be memorable. And what is going to get me or any investor to think about you at the dinner table later is how I think about how a pitch should be.
Follow Adam at: @AdamDraper on Twitter. I really don't have Instagram, so if you were following someone on Instagram, who is me? It's probably not me.