How to Start a Disruptive Tech Company, as Seen by Draper University CEO
Entrepreneurship has a long association with risk and the ability to take risk. Draper University is a private school that encourages innovation and helps students to launch their own startup. They select the students based on their entrepreneurial spirit, desire to change the world and their grit. There is a great focus on emerging technologies at Draper University, with an Executive Blockchain Program in place, for example.
We talked with the CEO of Draper University, Andy Tang, on his vision about emerging technologies and disruptive developments. “I got out of school in 1995, and at that time there was something called NCSA-browser, and I was fascinated by this idea of connecting to other people”, recalls Tang.
“Little did I know, later this thing evolved into Mosaic browser and then the Internet and it brought innovation. That has triggered plenty of years of innovation and counting, that changed the way we communicate, the way we do commerce; that changed the way we book flights, hotels; that changed the way we think about computing on the go - I have my cell phone and I can order taxis”.
Andy is excited about developments like Bitcoin and Ethereum, and he thinks that in the next 20 years we could see a decentralised revolution or even transformation of new companies. “Blockchain is the second biggest innovation that I’ve seen in my career”, he emphasises. “Now I have a little bit of advantage and pattern recognition, I see things happening again”.
Talking of investments, he says while he likes social media, he does not invest so much in search engines because Google is dominant and he doesn’t really want to waste money. But there is still potential in decentralised search, communication and social media. Tang thinks if we can change the basic foundation of the internet, we could change it all. He quips, “And every time I think about it I get very excited, so, you can tell, I’m probably encouraging a lot of our students to join the transformation”.
Loyal Customers, Supporters Instead of Shareholders
Risk is central to entrepreneurship and it extends to new forms of fundraising like ICOs. However, Andy is of the view that ICOs should not be viewed as security offerings but as a way for companies to establish their own currency value exchange system. He sees ICOs as the natural next step from thousands of years ago when people were storing value to barter for goods and services.
He notes that it is also a progression of technology as society has evolved. He thinks that we are now on the road to a time when businesses and individuals can also issue their own currencies and “pick the burden off centrally managed currencies”. Token holders should think of themselves as loyal customers, supporters instead of shareholders. “Just like you would buy an item and it becomes highly sought after, the value of goods and services of the company goes up and you are entitled to those goods and services”, Tang explains. “Think of it as you’re buying, you’re prepaying for goods and services that become more valuable over time.”
“Try to predict what happens tomorrow, this will help you guide your decision-making.”
The students at Draper though are enthusiastic about the ‘ICO craze’. It was the background of the students that drove the interest. Tang tells us, “For example, we have two students that were solving their unique problem - the infrastructure for the blockchain. This particular student team is one Chinese student and one American. They’ve looked at blockchain technology and they want apply this to the Chinese system but the Chinese cannot do so in China.”
Andy sees his role with these kind of students as an enabler; he says that while he is making an investment he is also helping students ‘find their areas’. He thinks that we need a lot of enabling technologies that developers can choose from and while some tech will survive, some will not.
Short Term Pain for Long Term Gain
The CEO of Draper University advises his students to make short term sacrifices for long term gain. He thinks we are reliving the history of internet as it was in 1996. There would be rises and falls, and he thinks even when the prices of cryptocurrencies like Bitcoin and Ethereum fall it is still healthy. “Try to predict what happens tomorrow, this will help you guide your decision-making”, he explains. “Short-term sacrifices are long-term gain, so there will be setbacks but don’t get discouraged”.
Talking about the value of bitcoin Andy reflects further. He thinks there is nothing special about gold, but then why is gold precious. The reason according to him is the limited stock of the precious metal.
“If you look at bitcoin, it’s the same commodity”, he says. “It’s a way for humans to find a fair system so we could barter, we could trade. You write great articles, so your company could use some credit to barter with the baker down the street so they would give you some bread. And that’s a bartering system. We happen to use gold, and before that we used shells, because shells were scattered. Then we discovered there are a lot of shells and now it’s time we try something a bit more efficient”.
“My kids may say, “Oh, you were thinking of bitcoin? What a joke!” But at least we tried to innovate - you only miss innovation because you continue to avoid risks.”
“We only kept digging into the mountains or earth to find more gold or we trust the third party like the government to print out our currency”, he continues. “ Why go back to gold if you could just create a cheaper gold to produce”. But would Bitcoin always hold its attractiveness, given that it is expensive to mine? The answer lies in not missing out on taking risk.
“I mean bitcoin works right, 20 years later when my kids are 26 years old, they may say, “Oh, you guys were thinking of this bitcoin? What a joke!” It’s possible, anything is possible, but at least I feel like we tried to innovate - you only miss innovation because you continue to avoid risks”.
The Upside of the Appreciation of Value
In a decentralised world, what role would cryptocurrencies play? Andy feels that these currencies could facilitate different types of infrastructure enabling technology. There could be different ways of communication in which these tokens could interact. There could be rival tokens and some might come up on the top.
“I see this is a very unique aspect of decentralization where the users also could participate and that is the upside of the appreciation of value”, he explains. “One thing I’ve learned from the millennial generation is the transparency - you can democratise anything, which is the way to go. Wealth creation shouldn’t be concentrated on a few and then the process of wealth creation should be very transparent and open and people shouldn’t try to hide it”.
While bitcoin appears to be volatile and there is all the talk of bubbles, Andy feels that there will be people out there who are long-term supporters. If you take a 20-year view, the technology has the potential to solve a lot of problems. As an example, farmers in developing countries could probably use blockchain contracts to hedge prices, something which only large agricultural companies are able to do so today.
Tang explains, “Let’s say I want to buy an insurance policy, if there is tornado in my area and the prices drop over two dollars, I want someone to hedge that for me. Okay, done! You don’t need to call your banker or your lawyer, your accounting, you don’t have to worry about getting paid, it’s done. And that’s the efficiency, you don’t even need your bank account.”
If the decentralised future happens that is great, and if it turns out to be different than we envisage it today, it is fine as well. However, if it does happen, the world would be a very different place according to Andy Tang.
We have seen time and again the wealth-creating and decentralising powers that new technologies can achieve. Perhaps the most striking is the mobile revolution in Africa.
Where before there were informal banking practices, there are now formalised micropayment platforms; where there once was little access to information, there’s now the whole world wide web. All this despite much of the continent not having any fixed broadband infrastructure.
Even now, companies like m-Pesa are continuing to innovate and democratise technology for the benefit for millions across Africa.
As Andy describes, we’ve been on a long journey from shells and gold to bitcoin and mobile credit being stores of value. But value is only created by belief, and that belief must be rewarded with value for any fiat currency to take hold.
If Bitcoin and DLT are really the keys to a fully decentralised, democratised future, they must first prove themselves to the masses- and it’s up to us and the innovators to spread the word.
This article was prepared with the help of the Draper University and co-authored with BDJ tech writer Shivdeep Dhaliwal.
Illustrations by Kseniya Forbender
To contact the editor responsible for this story:
Margarita Khartanovich at [email protected]