Rand Paul, the undeclared yet arguably front-running Republican presidential contender, was trying to impress 40 young tech executives and entrepreneurs. Over happy-hour beers in San Francisco earlier this spring, the Kentucky insurgent fielded standard-issue queries on his opposition to National Security Agency spying practices and the Affordable Care Act. But Chris Morton, co-founder of BlockScore, an online fraud-prevention company, asked a question that tested Paul’s tech chops: What did the senator think of Bitcoin?
Turns out that not only was Paul enthusiastic about its possibilities, but before its recent troubles he had asked his staff to explore how he might go about accepting campaign contributions in the digital currency. “People were impressed,” said 29-year-old Garrett Johnson, the founder of SendHub and the organizer of the event.
Wooing the Patagonia-wearing, Blue Bottle coffee-sipping denizens of Silicon Valley, and especially San Francisco, may seem like a fool’s errand for much of the GOP, but not for Paul, who recently made his second swing through the Bay Area in as many years. Indeed, his libertarian leanings, which can rankle Republican Party pooh-bahs, resonate in the Valley, where folks are messianic about private enterprise’s potential to solve all the world’s challenges. (Exhibit A: Google CEO Larry Page saying he’d rather bequeath his wealth to entrepreneur Elon Musk than to philanthropy.) Among the technorati, Paul’s willingness to engage ideas outside the mainstream isn’t a liability — it’s his strongest virtue.
On his recent trip in late March, he talked like a native too: publicly delivering a harangue against the federal surveillance regime at Berkeley, which earned him two standing ovations in the liberal stronghold, and privately dropping by investor Tim Draper’s entrepreneurship school and gamely entertaining the billionaire’s quixotic pitch for splitting California into six states. (Paul says he’s dubious but hasn’t formed an opinion.)
It’s all part of Paul’s high-stakes gambit to expand the GOP’s appeal in precincts generally hostile to conservatives. “I see almost unlimited potential for us in Silicon Valley,” Paul tells Fortune in an April interview in his Capitol Hill office after his trip. “Many more of them are libertarian-leaning Republicans than they are Democrats, and they may not know it yet.”
The consequences of Paul’s offensive will reverberate far beyond the tech capital. The first challenge for any presidential bid is building the donor network to sustain it, and there are good prospects for Paul in Silicon Valley. The area is home to a cadre of super-rich techno-libertarians such as investor Peter Thiel, who contributed more than $2.7 million to Super PACs supporting the presidential run of Ron Paul, Rand’s father. (Thiel declined to comment for this story, but Rand Paul confirmed that the two are in touch.)
Paul isn’t eyeing the tech community just as an ATM. He also wants to associate himself as nearly as possible with the idea of the place as a gleaming economic engine. He wants voters to see him as a change agent, the Next Big Thing, come to turn out the obsolete designs. “I see Hillary Clinton as an old-world model, in the sense that she’s a pro-surveillance-state, pro-war Democrat,” he says of the potential presidential rival. “I could see that if you had a Republican that’s a little more reluctant for war, more protective of privacy, that you could have a complete transformation, where people completely switch places.”
Paul started currying favor in the tech world less than a year ago. A week before his first visit as an officeholder, in May 2013, he stole the spotlight at a Senate hearing meant to shame Apple for its tax-avoidance strategies. After John McCain, the top Republican on the chamber’s investigations panel, laced into CEO Tim Cook, calling Apple’s offshore sheltering maneuvers “completely outrageous,” Paul rose to the company’s defense. Apple deserved an apology from Congress, he said, declaring himself offended that lawmakers were “bullying, berating, and badgering one of America’s greatest success stories.” The antigovernment diatribe was vintage Paul. It also channeled tech’s own fear and loathing of feds whose regulatory interest in the industry has tracked its zooming success. So Paul got a hero’s welcome from executives when he turned up to tour the campuses of Facebook, Google, and eBay. Facebook founder Mark Zuckerberg, just back from Europe, even hustled into the office to introduce himself.
A parade of tech honchos has followed suit. Cook, who hadn’t met Paul at the time of the hearing, dropped by his Senate office on his next trip to Washington. And Paul has forged connections to a range of deep-pocketed investors, including Thiel, Marc Andreessen, and Sean Parker.
Just as Paul was launching his charm campaign, the industry’s relationship with Washington was growing more fraught. The week after his trip, news broke that Edward Snowden — who contributed $500 to Ron Paul’s 2012 presidential campaign — had leaked documents revealing a vast program by the NSA to spy on Americans. The agency was collecting sweeping amounts of consumer data from Internet giants without the companies’ knowledge, a fact that stirred outrage among their executives.
But those same execs may not be aware that Paul stakes out a more challenging position when it comes to the industry’s responsibilities. He contends that consumers need the ability to sue tech companies that violate the terms of their user agreements. That’s won him praise from privacy hawks. “His views on consumer privacy are intriguing because they suggest a higher level of accountability than others who go to seek the support of the tech titans,” says Marc Rotenberg, executive director of the Electronic Privacy Information Center.
Like many sectors, tech has a complicated relationship with Washington, sparring with it even as the industry serves its agencies. Palo Alto-based Palantir’s data-sifting software won it work for the CIA and NSA. In late March — as the CEOs of Google, Facebook, Netflix, and Palantir itself traveled to Washington to present their concerns over NSA spying directly to President Obama — Palantir co-founder Joe Lonsdale, a Thiel acolyte, co-hosted a fundraising dinner for Paul at a San Francisco steak house.
Paul waves away any suggestion that technology developed by his supporters compromise civil liberties per se. “I am conscious of the fact that the more technology you have, it could be abused,” he says, “but I’m not against spying.” Instead, he argues, sprawling U.S. surveillance should be retrofitted into a stricter legal framework. Few in Congress would disagree with that, with broad bipartisan support for reining in the NSA.
The irony for Paul is that the more the government meddles, the louder his message stands to resonate with Silicon Valley. Google opened its first Washington office in 2005 as a one-man shop; by 2012 it had spent $18.22 million on lobbying, more than any corporation except General Electric. That same year Google employees were the top corporate source of campaign funds for Ron Paul’s gadfly presidential bid. As the Kentucky senator seeks to demonstrate he’s more than his father reincarnate, he has a new generation of tech companies to pitch. Upstarts like Airbnb and Uber that have been shaped by their clashes with incumbent market players and the pols who protect them should prove receptive to Paul’s free-market gospel.
For all the goodwill he could tap, Paul risks hitting an artificial ceiling. Execs at consumer-oriented companies have never faced more peril in publicly pledging their alliance to conservative values (and some of Paul’s own views — he’s pro-life and anti-gay marriage, and he voted against the Senate immigration bill promoted by the tech industry — remain highly toxic in the Valley). Witness the ousting of Brendan Eich, chief of the web browser maker Mozilla, after his opposition to same-sex marriage came to light. Considering the climate, Johnson, the entrepreneur who organized the Paul happy hour in San Francisco, wouldn’t identify the company that lent its offices for the event.
So Paul’s most consequential allegiances will be with those tech impresarios whose day jobs give them the freedom to do whatever they choose. That list begins with Thiel, who created PayPal with the hope that it would compete with government-issued currency. It instead became an online payment system that’s now part of eBay.
But the dream of a post-government currency lives on — indeed, for many that is the appeal of Bitcoin. Paul has apparently given Bitcoin quite a bit of thought and has an idea of how to strengthen it by pegging its value to that of, say, 10 established retailers. “I’d make it exchangeable for stock. Then it’d have real value,” he says. Sounds like an idea worth pitching. Says Paul with a laugh: “If only I could get some money.”
This story is from the May 19, 2014 issue of Fortune.
