Pando

Meet the Drapers! From military industrial complex to reality cable in four generations

By Dan Raile , written on April 10, 2015

From The News Desk

"Show me a hero and I'll write you a tragedy." - F. Scott Fitzgerald

On Wednesday night, as tech industry elites and the press who love them gathered in a mid-Market loft for the premiere of the second season of HBO’s “Silicon Valley,” I went to visit a glassed-in storefront on 3rd Street in downtown San Mateo.  A custom road sign announced that I was "Now entering Hero City", Tim Draper’s accelerator-slash-co-working space-slash-VC satellite office space.

Across the street from Hero City is "Draper University of Heroes," where crews were busy into the early evening preparing the set for “Startup U", a reality show that will follow the spring class through its seven week, seven-days-a-week immersion in the institution's "ecosystem of innovation", with areas of instruction including: "Futurology", "Term Sheets", "Disruptive Innovation", "Power Up Your Network", "Warrior Mindset", and "Lie Detection".

The cost of Draper U's program is $9500, but the school's website mentions the availability of named scholarships, and "Additionally, in the application there is space to make an extraordinary offer in exchange for a tuition discount. We encourage students to be very specific, creative and entrepreneurial in what they offer. For domestic students, there is a layaway option – pay 2% of your annual income for 10 years. In some circumstances, Draper University staff will work with students on a monthly payment plan to be paid back within one year." An elite for-profit educator for the future, and possibly an elite faux prophet California scheme for the ages.

"Startup U" is the latest in a string of reality shows produced by Ugly Brothers’ Studios, creators of “Hardcore Pawn,” “Bar Rescue,” “Catch a Contractor” and other such reliable cable mainstays. Classes begin on Monday, and the show will debut in the fall on ABC Family. Tim Draper is an executive producer.

It’s fitting that the Draper show was bought by ABC Family, because the Draper empire is a family affair through and through. Tim Draper is himself the son and grandson of Silicon Valley venture capitalists, and his son Adam has recently taken up the family business. Like his father before him, Adam adopted the VC mantle well before his 30th birthday, running his venture capital/accelerator, Boost VC, in the basement of Hero City. Tim’s daughter Jesse Draper has dubbed herself “the Valley Girl,” and has become a media personality of sorts. The most recent dispatch from the Valley Girl is her glowing profile of the founders of Thumbtack, published in the current issue of SV. Magazine.

With well over 100,000 paying professionals on the Thumbtack platform as of Q4 in 2014, [Founder Marco] Zappacosta has created a service that provides over $2 billion in annual business for these vendors. That figure exceeds both Yelp (94,000 paying pros) and Angie’s List (52,000). Clearly, we know whom to watch going forward!

The fact that Draper Associates was an early investor in Thumbtack doesn't make it into the Valley Girl's article. But the overlap shouldn't be surprising: The entire Draper operation is a vertically integrated money machine that uses promising young entrepreneurs as its raw materials. As Tim Draper explained to VentureBeat in January: “It all revolves around growing entrepreneurs and providing deal flow for Draper Associates."

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Making Of The Drapers

The flow of all these deals has its headwaters in the heart of the American military and industrial complex. William Henry Draper, Tim Draper's grandfather, founded Draper Gaither & Anderson in 1959, one of Silicon Valley's earliest venture firms and the originator of the practice of setting up limited liability companies to serve as funds.

Before coming to California, W.H. Draper had an astounding career. He was an infantry major during WWI, then returned to his native New York City to join the investment bank Dillon, Read & Co., which specialized in overseas investments in Soviet bonds and German industry  throughout the '20s and '30s. During the second world war he served as a major general in the Army, and directly afterward as Chief Economic Advisor to the U.S. Army during the German Occupation. In 1952 he became the de facto senior American official in Europe.

In San Francisco's pubic library I found a December 21, 1952, profile of W.H. Draper, published in The New York Times Magazine and titled "No. 1 American in Europe." The profile was written by Times star reporter Theodore H. White who later won a Pulitzer for his "Making of the President" book about JFK and acclaim for "Breach of Faith," his account of the fall of Richard Nixon. On Draper, White wrote:

The actual title of Draper's job offer only a clue as to its nature. He is, officially, the Special Representative of the United States in Europe and, by executive order, the Special Representative of the President of the United States.

He is also, and at the same time, the chief of the Mutual Security Agency in Europe, the United States' Permanent Representative on the Council of NATO, and chief coordinator of all American diplomatic, military and economic problems from Turkey to Iceland... White goes on:

Draper prides himself that, in the same room [in the former Paris residence of the Duke of Talleyrand, which W.H. Draper and his 379 directly reporting staff made their headquarters], more facts and figures, more top-secret cables from the entire globe, more hushed influences intersect than in the office of any other twentieth-century diplomat.

Among his duties and accomplishments was rejuvenating German industry, solving inter-European political squabbles, and distributing $1.2 billion of American aid, while jumpstarting European industry to improve the balance of trade with America – in part through the practice of "offshore procurement" by which the U.S. funded armaments factories in Europe, then bought weaponry manufactured in those factories to arm NATO, some $700 million worth in 1952 alone. Draper was also responsible for negotiating the reorganization and reformation of Europe's armies under NATO, and coordinating their responses in a crisis.

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We Could Be Heroes

Cut to the present day and the Drapers' vision for changing the world through investment is structured more along the lines of a Stalinist Sharashka - the cream of the Soviet Gulag system, where top-flight engineers and social scientist prisoners developed rockets, surveillance tech and propaganda techniques in exchange for better conditions than their rock-breaking fellow unfortunates.

The Draper complex in San Mateo puts its entrepreneurs up in the rooms of the former Roaring Twenties' Benjamin Franklin Hotel, tucked into bunk beds, three or four to a room. The accommodations are shared among the students of the seven-week course and out-of-town members of the Boost VC startup cohort, internally referred to as “the tribe.”

Classes at Draper University don’t start until April 13; of the 90 or so members of the current tribe, only three are women.  It that ratio holds true for Draper U then occupants of the female dorms will at least be able to score more personal space than their male counterparts. Not that anyone has much time for relaxing. The University program is intense, and a current member of the Boost VC tribe told me she only goes to her room to sleep, spending most of her waking life working in the Hero City basement along with the rest of the tribe.

The trappings of this unique anthropological subgroup appear quite bizarre to the unaccustomed. Guests of Hero City are buzzed silently in through the glass doors by an invariably female receptionist perched behind the Tesla desk. On the opposite wall, the aesthetic tone is set by a mural in primary colors, depicting a comic-book Tim Draper grinning and ripping his shirt open to expose the Draper University of Heroes logo tattooed on his muscular torso. Draper is joined on the wall by Batman & Robin, Superman and Wonder Woman and together they lead a pack of (ethnically and gender diverse) lab-coated and hard-hatted team players. Wonder Woman, with the Lasso of Truth raised over her head, forever shouts “Unleash the HEROES!”

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Full Bitcoin

My own visit to Hero City coincided with a startup/VC happy hour, followed by a fireside chat with Adam Draper. It was a diverse crowd, by some metrics: There were white men in sneakers, white men in boat shoes, white men in flip flops. There were older white men and quite young white men. There were several Asian men. There were even several representatives of an extremely rare demographic, the “young VC”. But, in a crowd of over a hundred minglers, I counted no more than 10 women. I found myself talking to one of them, an event planner down from San Francisco to pick up tips, who told me that when she’d come down the steps, she felt like she'd entered a frat party.

That party was broken up by Adam Draper, who looks a bit like Colin Hanks if he beefed up for an action role, who put his hands to his mouth and did something like a pig holler to beckon the crowd to the fireside chat portion of the proceedings. “Owwwooooooooooo! We are gonna get this started!” The crowd of "his companies" and his venture capitalist network parted to let him make his way to the stage.

Once the crowd got seated in the adjoining conference room -- women in the back and around the perimeter, to a one -- Draper shared the story of Boost VC, from its origins in 2012 to its current status as the world’s premier accelerator for Bitcoin startups. He shared tips for future Bitcoin startups –"Don't directly attack [early Boost investment] Coinbase, they just own the market"– and his vision for the cryptocurrency's future.

On how he first decided to invest in Bitcoin:

"After talking with [Coinbase founder Brian Armstrong], I sat on the toilet as any brilliant person does and picked up a copy of the Economist that had been sitting there for like a year and a half, and read this article about how the value of Bitcoin was surging. And that is why I invested in Bitcoin. There’s a lot of luck in this game."

 He went on to explain his first visit to the oracle, Marc Andreessen. [Disclosure: Andreessen is an investor in Pando]

"It was the first time I had met him. Marc wanted to talk about Bitcoin, and I wanted to talk about Boost. So we talked about Bitcoin [Pause for understanding laughter]. I told him I was investing in Bitcoin companies and wanted more of them in Boost and Marc said ‘why don’t you just do full Bitcoin?’ I thought about that for a while, and eventually that is what I decided to do. And then Andreessen didn’t even invest in that fund, though he has since."

 Thought Leadership, ladies and gentlemen.

Adam Draper also announced that his next Boost tribe would be half Bitcoin and half Virtual Reality, which was met with stunned silence and coughs from the assembled Bitcoin enthusiasts.

The interview ended with Draper intoning “Heyo!” and pumping his fist. Most of the crowd followed him out of the room, to mingle loudly beyond the metal garage-style doors of the space, as those of us who stayed strained to hear a panel discussion on the exciting opportunities for Bitcoin to improve the lives of the world's underbanked and underserved, which we could barely hear above the din.

All this and more, America, coming to a TV near you this fall.

As Marc Benioff told Kara Swisher during a very different fireside chat at the Lesbians Who Tech Summit in early March, the responsibility for improving Silicon Valley's gender ratio lies most heavily with early stage startups, whose formative hiring decisions will cement the culture as the company grows. If the crowd of Bitcoin entrepreneurs Wednesday night in Hero City is any guide, that change in ratio may be further away than many would prefer.

The younger generations of the Drapers are simply carrying on family tradition with their manly pursuits. They may not be as soft-spoken or well-haberdashed as their prestigious forebear, but there seems to be some resemblance of style, nonetheless. As White wrote in that same NYT Magazine profile, "Both critics and admirers agree on the essential quality in dispute – that Draper is a 'doer' and 'performer,' a demon for detail and administrative efficiency. But in weighing this quality they disagree."

The primary gripe of those critics was that W.H. Draper rushed to rehabilitate German industry by working in partnership with the cartels which then controlled it, rather than disassembling them and starting anew. Modern day critics might level a similar judgement of today's Drapers: Even as the family attempts to inject new energy into the tech industry with their cartoony offices and their embrace of reality TV, they're doing little to challenge the nepotism and overwhelming maleness that has long been core to how Silicon Valley does business.