Interview by Tory Newmyer

Sen. Rand Paul outside the U.S. Capitol in October, 2013

FORTUNE -- Sen. Rand Paul, the libertarian-leaning Kentucky Republican and likely presidential contender, sat down with Fortune's Tory Newmyer in April after his latest swing through Silicon Valley to talk about his efforts to build a base there. Edited excerpts:

You talked in Berkeley about how the Republican Party needs to acknowledge there's something wrong with what it's offering, the way Domino's (DPZ) did with its pizza. What can Silicon Valley teach the Republican Party about making a better pizza?

I think there's a big debate in any political party when they lose. We've lost twice at the presidential level, so everybody's debating what should we do. Half the people say, "We believe too strongly in things and we need to dilute that message a little bit, be a little more like the Democrats or a little bit more moderate to win." I'm of the opinion that with the things that are our core beliefs, we actually should be bolder. So for example, on believing in low taxes and less regulation, our last couple of candidates were for revenue-neutral tax reform -- not sexy, not exciting, and really not destined to do too much to the economy other than shift the tax burden from one person to the other. Frankly, nobody is going to knock on a door for you if you're saying, "Hey I'm for revenue neutral tax reform. Vote for me." And so frankly on our core issues of taxes, regulations, balanced budgets, I think we should be more hardcore, or bolder than we've been.

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But then we have to take our core message and find out other extensions of our message that might attract people if presented to them that haven't been attracted to them in the past. So even on tax cutting, I think we should make the argument that the historical, government stimulus -- Obama had one when he came into office, almost $1 trillion, $800 billion -- that that kind of stimulus doesn't work as well as if we'd cut taxes by $800 billion. They're not equivalent. The reason they're not equivalent is if you're the economy and you give me $800 billion and I give it back, I've got to choose who to give it to. And the way business works is the vast majority of businesses fail. I use the statistic nine out of 10 -- it may or may not be right, it may be eight out of 10. Whatever the number is, the majority of small businesses fail when they start. So if I give the money to you and say, "Start a Pizza Hut," I'll be wrong eight or nine times out of 10. But if you've already got a Pizza Hut and I gave you a reduction in taxes, I'll be right 100% of the time. Give it to somebody who the consumer has voted upon.

What have you learned from your conversations with entrepreneurs like Peter Thiel and others in Silicon Valley?

Almost everybody I talk to out there from Peter on will say, "You know what? We think Silicon Valley is a little more libertarian than it is Democrat, even though 80 to 90% of the money went to President Obama." And it's been a deterrent to some Republicans going out there. Many more of them are libertarian-leaning Republicans than they are Democrats, and they may not know it yet. But actually most of them do know it. Frankly a lot of people who supported President Obama will say, "You know what? It turns out I am a lot more fiscally conservative than President Obama on taxes and regulation." They're not happy about either one of those. But they're more moderate on social issues than the Republicans are.

You've got an apparent supporter in Joe Lonsdale. A company he co-founded, Palantir, got startup funding from the CIA venture fund to enhance the surveillance agencies' ability to sort data. What would you say to civil libertarians who look at the capacity they've developed and say it presents the potential for problems?

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Rand Paul on his pursuit of Silicon Valley