- The video features a conversation with Ron Conway, an experienced angel investor.
- Ron got into angel investing after working at Altos Computer and being mentored by Don Valentine, the founder of Sequoia Capital.
- Ron's best investment decision was to invest in internet software in 1994, before the industry boomed.
- Ron and his team got deal flow by talking to every single internet company at the time.
- SV Angel invests in the character of the founder first and the idea second.
- Determination and goal-driven qualities are important factors in choosing founders to invest in.
- Failure is a normal part of angel investing, with a failure rate of around 40-60%.
- The winners in angel investing have to compensate for the losses.
- Ron emphasizes the importance of passion, leadership qualities, and determination in founders.

- Out of 750 investments, only 3 founders were found to be crooked
- Co-founders not getting along is a common issue that can be difficult to predict
- To judge whether founders will get along, observe their interactions during their first presentation
- It is important for angel investors to meet and get to know everyone on the team
- The biggest value angel investors can add to portfolio companies is helping them build out their management team and secure partnerships and distribution
- Angel investors should encourage founders to make decisions and avoid procrastination
- It is important for angel investors to let founders run the company, but also provide guidance and advice
- Y Combinator stands out as an accelerator due to its screening process and mentoring
- Advice for new investors: adopt a portfolio approach, invest in sectors where you have domain expertise, and spread investments across multiple companies
- The metric for success in investing is winning and achieving a hit
- Giving back to the community and being civically engaged is part of being a member of a community.

- The speaker emphasizes the importance of giving back to the community and being civically engaged while angel investing.
- The speaker praises the students in Parkland, Florida for their potential to create change and encourages everyone to follow their example.
- The speaker mentions attending a march on March 24th and encourages others to do the same.
- The speaker gives advice for attending Demo Days, including taking notes and focusing on a specific sector for investment.
- The speaker discusses the potential of the blockchain and cryptocurrency space and suggests studying it thoroughly before investing.
- The speaker recaps the topics covered in the video, including investing mechanics, deal flow, meeting with companies, and the future of angel investing.
- The speaker emphasizes the importance of transparency, integrity, and collaboration within the startup ecosystem.
- The speaker expresses gratitude to the speakers and team involved in organizing the event.

- Ramon Requero and Craig are mentioned in the video
- Putting the course together was more work than expected
- The course was fantastic
- The video is done and thanks for joining
- Demo Day invites and other details will be handled next week

- Ron Conway, an experienced angel investor, discusses his investment strategies and experiences.
- He emphasizes the importance of investing in the character of the founder and their determination.
- Angel investing involves a high failure rate, but the winners compensate for the losses.
- Evaluating co-founder compatibility is challenging but observing their interactions during presentations can help.
- Angel investors should focus on helping portfolio companies build their management teams and secure partnerships.
- Y Combinator stands out as an accelerator due to its screening process and mentoring.
- New investors should adopt a portfolio approach, invest in sectors they have expertise in, and spread investments across multiple companies.
- Giving back to the community and being civically engaged is important in angel investing.
- The speaker encourages attending a march on March 24th and provides advice for attending Demo Days.
- The potential of blockchain and cryptocurrency should be thoroughly studied before investing.
- Transparency, integrity, and collaboration are crucial in the startup ecosystem.

Startup Investor School is a free, 4-day course designed to educate early stage investors interested in investing in startups. We'll cover the fundamentals of investing, from investing instruments to legal and accounting basics to evaluating startups and managing deal flow. Our hope is that more people, from a wide range of backgrounds will consider investing in startups and that those who do will be better at it.

Learn more at https://investor.startupschool.org/

That was a, I think, a fantastic summary of how to think about what it means to be a good investor.

Paul Graham actually wrote an entire essay about what it means to be a good investor with Ron Conway as the subject of the essay.

And so this is, I think, for me, the perfect way to Put a wrap on this course.

I'm gonna have a brief conversation with Ron.

We'll take a few questions Unfortunately, he does have a hard stop so he can't hang around and that's that's actually too bad for you because I've learned most of what I've learned about angel investing from watching Ron and from from talking to Ron he's an incredible resource, but the there's a lot of resources out there that Ron points to for how you learn about doing these things.

In fact, there's a reading list that will be on the website that SV Angel and Ron recommend for how you learn about being an investor.

By the way, since I've had a quote from everybody, I have a quote from Ron too.

Ron said, referring to entrepreneurs, You can't learn to be ambitious and driven.

And I think that's like something I keep in mind every time I talk to entrepreneurs.

I think entrepreneurs can become more formidable, but if you say, ah, maybe they'll figure it out and they'll eventually work hard and be driven, that's probably not the investment you want to make.

Ron has been angel investing certainly since before some of you were born and before I even thought about what an investment might look like.

Can you describe a little bit how you got into that?

I'm born in San Francisco, raised my kids in Atherton, then moved back to San Francisco.

But my first job was at National Semiconductor, and a few folks from there went off and I went with them, and I was a founder at Altos Computer, and this was a microcomputer in the late 70s that was disrupting the mini computer industry.

And At Altos, our lead board member and investor was Don Valentine, who was the founder of Sequoia Capital.

He and I took a liking to each other and after we sold Altos to Acer, Don suggested that I go observe board meetings with him and start mentoring founders and consider angel investing.

I loved the leverage of giving founders advice and quite frankly not having to do the work.

I did the work at Altos and found out I didn't like managing people, that I was a much better mentor.

And so in 1994, I decided to start investing full-time.

And the best investment decision I ever made was to invest just in internet software, which in 1994, that was 2 years before Netscape was even founded, and you see how huge the internet software industry is today.

Everyone was investing at the time in semiconductors and hardware.

What strange epiphany did you have that made you go

I teamed up with Ben Rosen, who was then the chairman of Compaq.

And all we did is think about what is the most disruptive industry on the horizon that will grow by thousands of percent a year?

Whatever industry that is, that's the industry we want to be part of.

And growth is the lifeblood of innovation.

A lot of folks here have asked questions about, so how do you start?

How did you guys, how did you in the beginning get deal flow?

Well, it was easy because back then, there was only about 1 internet company being founded per month.

So we would literally just look for any internet company, and for 2 years, we talked to every single internet company.

But Ask Jeeves and PayPal were 2 of our first companies that we invested in that we got excited about.

And an anti-spam company called Brightmail.

I remember well, what was it about Ask Jeeves and PayPal that convinced you to write a check?

For SV Angel, it's always been the character of the founder.

We invest in the founder first, the idea second.

So at each of these companies, we were impressed with the founder.

Today it's intuitive, within 5 minutes I can decide if I like a founder or not.

Back then it took a 1 or 2 hour meeting to figure out, hey, Do we like the character of this founder, the integrity of this founder?

But it's the person first, the idea second.

So I sort of had a question, you put a lot of thought into what you like in founders, and I know you guys have a whole thing on that.

Back then, you had to meet for an hour or 2.

When you actually sat down, whether with Ben or all by yourself, and decided to invest, What broke the tie?

What probably mattered the most was the determination of the founder.

Because these founders don't know it in the beginning, but starting a company is the hardest thing you'll ever do, and that's why we have such admiration for founders and are advocates for founders.

And If a founder is determined, we know that he or she will see it through.

That they will try every trick in the books to go build a big company, to recruit the best team.

So a lot of it is the passion, the leadership qualities that we think that they're possessing at this early stage, but it's really the determination and goal-driven.

We met Zuck when he was 19 years old the summer he came out here that he was supposed to go back to Harvard And never went back But he was very very driven, And he was driven by metrics and user experience.

He didn't care about getting his name in the paper or anything else.

That's the type of founder that it immediately, hey, this person's gonna build a successful company.

By the way, since we do have limited time, if anyone has questions as we go along, feel free to just raise your hand and we'll try to fit it in.

As you look back at the, you've made hundreds and hundreds of investments, hundreds and hundreds of decisions, some have worked, some haven't.

As you look back, without naming names, What have you gotten wrong?

Like when have you looked at a founder and said, I've got, this is a founder in the SV angel mold and been wrong about it and why?

Yeah, 1 thing that I want to bring up is keep in mind, 40% to 60% of every company you invest in is going to completely go out of business.

So failure is part of the angel business model.

Because we've been doing it for 25 years.

In the beginning, your failure rate will probably be over 50%.

Lots of angels, After their first company goes out of business, they drop out and I'm like, what are you talking about?

not, just so we're clear, you will write a check and never see that money again.

And that's why the winners have to win big.

So yeah, so the thing is that there's a lot of investments you make where you say, you know, I took my shot.

But sometimes you can look back and say, I should have known.

When you look back at some of the ways maybe your criteria were wrong or you misread the criteria or something happened, What goes wrong?

Out of 750 investments, we have 3 founders, literally, that were crooked.

A lot of times it's that the co-founders don't get along.

And co-founders not getting along happens a lot.

And it's something that you really have to grapple with, because usually 1 of them has to go.

But we do look for that now, that, oh, these founders don't get along, you know, we don't want to be the divorce lawyer again.

If we're in the company, We are the divorce lawyer.

How do you judge whether founders are going to get along or not?

You just watch how they interact when they're making their first presentation.

Does each 1 have their own turf and what they like?

Or does the engineer, hey, that engineer, he's gonna feel like he's a marketing guy someday.

Guess what, that's gonna be a problem someday for that company.

It does sort of get to the point that it sort of behooves angel investors to see the whole team.

When I went to Google, I saw Larry and Sergey going in.

But going out the door, the operations guy was Salar Kamangar.

Salar Kamangar is the guy who figured out the business model.

And at the time he was an operations guy.

And I stopped at the door, well I sat down with him, he was so young looking, I sat him down and I said, do your parents know that you're here?

And he said no, and I said, so Where are you at school?

And I said, boy, are they going to be pissed.

But yes, definitely get to know everybody in the building, get to know the assistants, get to know the culture.

If you can get a feel for the culture of a company, you'll feel much better about the investment.

Post-investment, what's the biggest value you add for your portfolio companies?

Okay, this is a good, I'll repeat the question.

Post investment, what's the biggest value you add for your portfolio companies?

In addition to general mentoring, initially it's introducing them to other members of the team.

Once a company starts to take off, they've gotta hire engineers, marketeers, salespeople, and helping them build out that management team is the biggest thing you can do.

If they need partnerships to build traffic, if they need distribution, then we introduce them to our contacts at Apple, Twitter, Facebook, Google.

The beauty of it is a lot of these companies we helped get off the ground.

So when we introduce somebody to Google, a lot of times we're introducing to somebody we placed at Google.

But these founders need help building the team and getting distribution for whatever the product is, in addition to all the day-to-day mentoring that we give them.

And most of the time lately, it's getting them to get off their asses and make decisions and execute.

There's a wave of procrastination going on in startup land right now that's making me crazy.

So if you see a founder procrastinating, you can help them by saying, hey, you can't build a big company by procrastinating.

You gotta make decisions, even if it means making a mistake and move the ship forward.

I'm spending a lot of time giving that lecture today and some of them are companies with a billion dollars in sales thank you but they could be 10 billion if they made decisions quicker.

Getting this right is really important I remember I was actually doing this kind of talk with Ron once and someone asked a question and you know, Ron demurred a little bit so I was sort of saying, what would we do in this situation?

I sort of explained, well you know, if you're running, you know, I did a little office hour thing.

And after I finished my little spiel, he said, well, as an investor, I try to let my founders run the company.

In this case, I'm just saying run it faster.

So you have to be careful of the kind of advice you give, because it is not your company to run.

And if you think you're going to have to run the company, It's probably not going to do that well because you're probably not going to spend that much time with it How did you get involved with YC?

Funny enough Chris Saka introduced me to Y Combinator And it took some convincing because I said oh another accelerator But the first time I ever came to YC, which is now well over 10 years ago, I looked at Paul and Jessica.

And then the advice that they were giving them was so impeccable, you knew that group of founders was going to be successful.

And that's why YC today is head and shoulders ahead of any accelerator.

The second best accelerator is like 10 floors down, thank you.

And it's because of the screening process and the advice and mentoring that they give founders.

So there's a bunch of investors here who some of them have invested, some of them who want to invest.

If you're going to give advice, 1 or 2 bits of advice to a new investor, say, for example, a child of yours was going to get into investing, just say, what's the, And you had just a little bit of time here.

Well, I'm in favor of the portfolio approach.

Hopefully, it's a sector where you have domain expertise.

And in that way, you can add value to the companies you invest in, because you know the space well.

And I would invest a little money, like 25k each, in 5 or 10 companies, so that you have a portfolio.

Many, many angel investors that I know, they invest in 3 companies a year.

Oh, my God, one-third of the portfolio went out of business.

This is the shit, so I don't want to do it.

You should spread it across 10 companies, 25K each.

Hopefully 1 of them hits and then you're playing with the house money for the rest of your career, which is basically what I've been doing

Yeah and and get to the point where you're playing with the house money

how long did it take you to realize you were good at this?

What metrics did you look at early on to figure you were good at it?

How long did it take you Ron to figure out you were good at it and did you use any metrics to measure yourself?

We just invested away but within 2 years Ask Jeeves went public and Ask Jeeves was a big, big win.

And once you get a win and you're playing with the house money, then you can focus more on adding value to founders, being an advocate for the founder, and not worrying about hits anymore.

The lucky thing about SV Angel, every fund we've ever started, early on we've been able to identify a hit, and in our own mind, the investors don't realize it, but in our own mind, we know, hey, this fund's gonna be okay, it's gonna be a moneymaker, And let's just go about our business and add value and help founders.

If you keep helping founders and building your relationship network so you can solve more problems for them, you'll be successful.

You may have just answered this, but I want to return just briefly to what we started with.

So Paul wrote, it's a theme we've come back to several times here, but Paul wrote the Ronco Principle using you as an example, but to point out that actually being good wasn't a personality aberration, it was a strategy.

Well, I think giving back to the community and being civically engaged is part of being a member of a community.

And today, more than ever, we should all be civically engaged while we're angel investing.

You can do 2 things at once, and you can encourage founders to be civically engaged, locally and now, especially nationally.

And right now, I'm drawing a ton of energy from these students in Parkland, Florida Where we have a bunch of 17 year olds who might change the country Thank you.

Thank you for clapping But I know you're clapping for these students.

I hope they solve the gun safety movement and then they go solve a whole bunch of other issues because they're all gonna go register to vote.

I hope everyone here is gonna march on March 24th.

I'm flying to DC and I'm gonna march in the main march, but there's 500 other marches.

And I love it that all, every student in America is talking to their parents and their grandparents about it.

And this is a real movement that could make change and slap some sense into Trump and his pals.

So every, I'm sorry I don't have time for any more questions because Ron has to run, but 1 last point.

Everyone here is getting a virtual invite to Winter 2018 Demo Days.

Still hard to say Demo Days instead of Demo Day.

And 10 of them will actually get an in-person invite.

Do you have any parting advice for people who are going to Domo Day?

Take lots of notes, because it moves really, really fast.

I sit up in front, I pay attention, I try not to get distracted.

Even for the ones who aren't going to be there, just who have all these companies to listen to and to

But I would try and pick a sector that you're going to be an expert at, hopefully it's related to something you already know about, and go invest in that sector rather than investing hodgepodge which is gonna force you to try and become an expert if you're gonna help these founders in too many industries.

And 1 fascinating 1 right now is the whole blockchain crypto space.

If you're really ambitious, focus on that as a sector because I think that is Web 3.0, I think it's the next wave of the internet, and it's pretty fascinating.

But it's a hard 1 to get your arms around, because it's work in process.

Thank you so much for coming in with us, Ron.

I just wanted to do a brief recap of what we covered here.

We started with, I don't know if I can't remember, it's been so long.

Yeah, we started off with sort of why do this?

I think Sam gave an awesome talk about why and what your motivations might be for investing and how you ought to think about what you invest in.

And then we went and talked quite a bit about the mechanics of investing.

You guys raise your hand if you guys think you know how a safe works?

Raise your hand if you've actually modeled it.

So all of you who didn't model it, but think you know how it works, you're wrong.

And that's actually not wasn't our intention.

The reason we invented the safe was because we wanted it to be quick and easy and cheap and simple.

And it turns out every time you do anything, there are unintended consequences.

So we've tried to remedy that by creating tools for people to actually understand them.

So as you go and invest in SAFEs, please, we haven't yet, but We're going to put up a spreadsheet you can use to model it.

You can use AngelCalc, which is actually quite easy to model it.

Understand what you're doing and how it works and how that conversion works.

You can actually see the formula, do the math, figure it out.

We will probably tweak the safe perhaps to remedy some of the confusion.

We're almost 100% sure when we do that, the unintended consequences will make things even worse.

So we're hesitating, but we'll probably do something.

So, we talked about how, we talked about how to get deal flow, we talked about how to go about starting, we heard a bunch from a variety of angels who became super angels, who became pros, some of them are still angels, Some of them are still on their own investing their own money.

We talked about how to meet with companies, how to make your key investment decisions.

And we talked about how to do this in a serious way.

This actually means a lot to me because I did this for years without being very serious or rigorous at it.

And I don't really want to talk a lot about how much money that cost me.

Talked about deal flow and we talked a little bit about what today looks like and a tiny bit about what the future is going to look like.

I personally believe that angel investing, the way we've talked about it here, will persist for a long time.

Equity may evaporate and go away in the future, but it will not be the near, near future.

I think ICOs will be part of our world and we'll have to factor that into our decision-making processes, but so will angel investing.

I just want to repeat 1 of the key things that to keep in mind here when we talk about being good.

Don't, I'll say it again, be penny wise and pound foolish.

And that sort of leads to sort of a final plea before we go do our networking and drinking and eating thing, which is let's all work together to make the ecosystem better, to add and keep consistency, honesty, integrity, and transparency in the system.

We can all do our part for these things and we all win when it's this way.

There's a lot of reputational downsides to being a venture capitalist of any kind and I believe that came because in the past it actually might have helped VCs to act badly.

You've heard a lot about that especially early stage.

There's no win for you and there's no win for the companies and there's no win for the entire ecosystem.

Aaron mentioned that we've both written about this.

I wrote a post called Transparency and Startup Investing.

And I actually think part of this was due to convertible sort of becoming the modus operandi of how people mostly raise early-stage capital, but We don't have to give up on transparency.

If your parada is getting taken away, you should be told, so you can have that conversation.

If you're getting converted, you should be told what your conversion price is, and indeed, how it was calculated, and you should check it.

And you should be given the information you need to check it.

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Ron Conway - Startup Investor School Day 4