- Ron Conway, an investor, discusses his early investments in Twitter, Facebook, Snapchat, and Pinterest.
- He invested in Twitter after the founder, Ev Williams, refunded investors from his failed startup, Odeo.
- Conway was impressed by Williams' integrity and invested in Twitter without knowing much about the product.
- He became involved with Facebook through his previous investments in Napster and Plaxo, and was impressed by Mark Zuckerberg's vision and confidence.
- Conway saw the potential of Snapchat due to the pattern recognition from previous successful social apps like Facebook and Twitter.
- He believes that social apps have the power to change communication behavior and sees opportunities for more companies in this space.
- Conway acknowledges that not all companies in this space will explode, but praises the persistence and iteration of unsung heroes like Ben Silberman of Pinterest.
- Silberman's dedication to user feedback and continuous improvement eventually led to Pinterest's success.

- The speaker is involved in both philanthropy and investing, with 80% of their time spent on investing and helping companies.
- They credit the SV Angel team and Shanna Fisher for discovering Pinterest, and describe the founder, Ben Silberman, as calm and focused on the product.
- The speaker mentions helping with introductions and funding for startups like Pinterest and Airbnb.
- In terms of fundraising, the speaker advises founders to focus on finding investors who can add value rather than just focusing on valuation.
- They also emphasize the importance of keeping the fundraising process moving quickly and confirming agreements in writing to avoid misunderstandings.
- When evaluating founders, the speaker looks for qualities like product focus and a determination to avoid distractions.

- The speaker values entrepreneurs who prioritize focusing on their product over engaging with press and media.
- Decisiveness is a crucial trait for successful entrepreneurs, both in making product decisions and building and managing their team.
- The ability to recognize deficiencies and hire powerful individuals to fill those gaps is important for growth and maturity in a company.
- The climate for starting a company has significantly improved, with lower costs and more investors willing to take risks.
- The shift from web to mobile and the importance of user design and interface has been a major change in the industry.
- The speaker is surprised and satisfied by how quickly entrepreneurs mature and adapt when faced with rapid growth and the need to manage large teams.

- Ron Conway, an investor, discusses his early investments in Twitter, Facebook, Snapchat, and Pinterest.
- He invested in Twitter after being impressed by the founder's integrity and invested in Facebook due to his previous investments in related companies.
- Conway saw the potential of Snapchat based on previous successful social apps.
- He believes social apps have the power to change communication behavior and sees opportunities in this space.
- Conway praises the persistence and iteration of unsung heroes like the founder of Pinterest.
- The speaker is involved in both philanthropy and investing, with a focus on helping companies.
- They credit the SV Angel team for discovering Pinterest and emphasize the importance of finding investors who can add value.
- The speaker values qualities like product focus and decisiveness in evaluating founders.
- The climate for starting a company has improved, with lower costs and more investors willing to take risks.
- The shift to mobile and the importance of user design and interface have been major changes in the industry.

Jessica Livingston interviews Ron Conway at Startup School 2013

We're delighted to have you here, and we're gonna jump right into things I Wanted to talk about Twitter first because Jack Dorsey's coming here later, and they're going public.

They're doing so well I want you to take me back to when you first invested and what you saw in them and how you first invested.

Sure, I got to know Evan Williams because Back in 1998, we invested in Google.

And so we knew Google from the early days.

And then over time, Evan left Google and went to start an incubator called Obvious Corp.

And Odeo was 1 of the companies that was incubated at Obvious Corp.

And Odeo was in the podcasting space, which was very interesting to people at the time.

And Ev, to his credit, felt so bad about Odeo going out of business, it was Ev's second startup.

He gave all the investors their money back, which was pretty amazing.

And I said, Ev, you don't need to do this.

Investors are big people who know that you can lose money.

40% of all of our startups go out of business completely.

And I said, Ev, you're just in that bucket.

And he said, no, I feel so bad, I wanna pay the investors back.

And I said, fine, but whatever you do next, I'm investing 75K in that.

What was it about Ev though that made you say, you know, I'm in the next 1, just count me in.

Well, it was that he had such amazing human feelings about feeling bad about going out of business.

We tried to get Odeo to a soft landing and I can't even remember, maybe we did.

But he felt bad about it And I said, wow, what a great person.

You know, at SVAnger, we invest in the people first.

And when you have somebody do something as impressive as that, you want to invest in the next 1.

And When they said Twitter, I said, hey, I don't care what it does, here's the money.

So when he said, okay, Ron, here's what we're doing, here's what you're investing in, what did you think?

Well, he was nice enough to say, you should go talk to Jack Dorsey, because Twitter came out of the mind of Jack Dorsey.

And so Ev said, hey, 1 of our partners at Obvious Corp is Jack, and he has this product vision for Twitter, and this is gonna be the next company that we all spend a lot of time on.

There were other companies in Obvious Corp as well, but Twitter was the 1, they took the spotlight off of Odeo, put it on Twitter.

And I went and had lunch with Jack over in South Park in San Francisco, and I just said, hey, I'm investing, tell me what it is.

What did you think when he said, here's what it is, 140 characters, what was your reaction?

My reaction was, hey, great, let's see if it works.

And with any product, it's do the users like it?

So if the product takes off, it's a good product.

And like Facebook and Snapchat and so many of these others, it started taking off right away.

And the big problem Twitter had was keeping up with the growth.

The fail whale became more prominent than the bird.

Speaking of Snapchat and Pinterest, and I'll throw in Facebook.

You invested in all of these very early before they were big.

I'd love for you to just remember back to what the founders were like or what you thought about the product way back when they started.

I guess Snapchat's newer, but the other 2 are older.

So well I feel like we've talked about Twitter.

Facebook, so Facebook, I started with Sean Parker, because we invested in Napster, then we were the first investors in Plaxo, that was Sean Parker's second company.

And so, when Sean became the president of Facebook, he came to me and said, hey, come and mentor me and Mark.

And so the first time I met Mark and Sean, funny enough, it was just a few weeks after they had moved to California, and the Facebook metrics were already like this, going straight up, just like Twitter a few years later.

So The amazing thing about Zuck is the vision and confidence that he had, not arrogance, but confidence that this thing is gonna keep growing.

And at the end of the first meeting I said, how many users is this thing gonna have in a couple of years and he looked me in the eye and said 300 million and it ends up he was off by 700 million because Facebook has over a billion users today but but he was thinking big then.

I feel like you with Facebook I know you've told me that you were a little bit skeptical about the social networking thing at first But you must have seen something special in Mark when

well What what what got me excited at Facebook was the growth?

You know the user adoption and engagement the amount of time that people were spending on the site.

So even though I'm not a big Facebook user myself, even today, you never argue with the users.

And Facebook was picking up users very, very quickly.

If you look at, we invest in people first, so Facebook, I was investing in Sean Parker's reputation and then learning about Mark.

With Twitter, I was investing in Ev and learning about Jack.

And then fast forward till a year ago, we see Snapchat.

Now with Snapchat, I could see the pattern recognition.

You know, so Facebook, Twitter, you have Instagram in there, even though we didn't invest.

So Snapchat's 1 that we said, wow, this is probably gonna be a big app.

Because there is this phenomenon happening right now where applications and social apps in particular are changing the way people behave and how they communicate with each other.

And Facebook, Twitter, and Snapchat, and Instagram prove that.

And so there's a huge opportunity for more companies in this space.

I don't, because I'm not a founder, but I'm sure people out there have ideas on what is the next social app?

Because social apps are changing the way people communicate.

People started communicating with photos and now you have Snapchat, which is really just photo messaging.

I mean, who would have predicted that even 3 years ago?

Do you think the founders knew they were gonna just explode like they did?

Because all of these stories have that in common, can't argue with the user growth.

Well, there are a lot of companies, though, that didn't explode that are in these spaces, but I think every founder thinks their company is gonna explode.

The founders whose company don't explode and they keep iterating until it does, are really unsung heroes.

Ben Silberman of Pinterest was here last year and I love his story because it was a really long road for them, both with users and with getting investments.

Do you remember when you first met Ben and what made you think they were good?

Yes, Ben and Pinterest is a great example of a founder where it didn't explode right away like Twitter, Facebook, or Instagram.

Ben Silberman had to keep iterating for a year and a half, which we heard about when he spoke last year.

But here's a guy who is very persistent and stayed close to his users.

He had focus groups, mainly with groups of women, that he would bring together in a coffee shop, and then he would call them the next day to make sure they were still using the product and keep getting feedback and iterating until the product took off.

In the case of Pinterest, I didn't discover the product.

At SV Angel, we meet once a week for 4 hours.

Lots of people think I'm not involved in SV Angel or something because I'm involved in philanthropy and civic engagement, but no, 80% of my time is still spent on investing and helping companies.

But I'm not the picker, the rest of our team are pickers.

And a couple of years ago, David Lee and Kevin Carter said, hey Ron, listen up, This is an app that we think is going places, Pinterest, and Pinterest was in its infancy.

And we co-invest with Shanna Fisher on the East Coast, and there's nothing like a woman's intuition.

And Shanna Fisher was barking in our ear as well saying hey this app is really really cool, it's where people pin their aspirations and so So I didn't discover Pinterest the SV Angel team and Shanna Fisher discovered it.

But I went to meet Ben and what I saw was a very unusual entrepreneur.

Because a lot of you entrepreneurs are outspoken and aggressive.

So entrepreneurs are type A or you're in the Ben Silverman category, very shy, soft-spoken, but very cerebral and thoughtful.

And so the first time I met Ben was in Mountain View, and I think we were chasing an allocation for the next round.

So I was saying, hey Ben, what can I do to help you?

We just go to the entrepreneur and say, give us a hard project and we'll fix it.

So Ben gave me a few projects and off we went.

But what I noticed about him is he's a founder that actually has a calming effect.

So there's a lot of founders who at the Friday team meetings wind up their team.

In the case of Ben Silberman, he winds up the team in a cerebral way by actually making everybody calm.

And entrepreneurs like Zuck and Jack Dorsey and Ben Silverman are successful because they didn't care about the outside world.

All they cared about in the early days, and today as well, is is the product the best it can be and are users loving it?

And you know I don't want to do a press interview.

I just want to keep building a great product and those end up being becoming great big companies.

Are you able to tell us any of the hard projects that he asked you to do?

You know, with Pinterest, lots of introductions.

Hey, let me introduce you around at Apple.

Let me introduce you around at various companies where they didn't have relationships.

You know, if the iPhone is your first platform, and we can help get you in front of people at Apple because Apple respects your judgment, that'll help a company grow.

I ask because I actually have sort of inside knowledge on all of the hard problems, or most of the hard problems that Ron has helped the Y Combinator startups fix, and most of them can't even be told

Yeah, most of them have to do with funding.

So most of the, a lot of the hard projects are funding, or in a lot of cases, M&A transactions, where we don't publicize the activity.

But with Pinterest, with all of our companies in general, we always help with the series A round, and then if the company wants it with the ongoing rounds of financing as well.

So we probably can't get into that 1 even though there's a great 1 from a hotel room?

Yes with with Airbnb that that one's been discussed quite a bit.

Okay well let's talk about fundraising because I did have a question for you on that I'm gonna jump to that quickly.

What are the biggest mistakes that you see founders make in fundraising?

And what are some of the best qualities people show when they're fundraising?

I guess the biggest mistake I see with founders in fundraising is founders are not focusing enough on finding the investor who can add the most value.

A lot of founders are worried and concerned about valuation and dilution.

And I think valuation and dilution is secondary to If you can bring in a top-tier investor who adds value to the space that you're in, that's worth millions and millions to your valuation.

In the case of Airbnb, They had a host of investors trying to invest.

This is, it's heresy because we had the negotiation in a hotel room when we should have had it where Brian Chesky was staying, which is at an Airbnb host location.

But what Brian Chesky got that night was oh no we should go with the investor who adds the most value so Andreessen Horowitz invested at a multi-billion dollar valuation but there were other investors who even wanted to pay more.

And I said to Brian that night, hey, I think Jeff Jordan at Andreessen Horowitz could do a lot for this company.

And Brian Chesky for the next year, every conversation we had, which is often, he started with thank you, and I go, what are you thanking me for?

Oh, thank you for Andreesen Horowitz and Jeff Jordan, because Jeff did this, this, and this today.

The other thing is keep the process moving quickly.

For sure, get 1 term sheet ASAP so you have a forcing function.

Because investors really don't like making decisions as quickly as an entrepreneur needs them to make a decision.

So if you can get a forcing function, which is basically a term sheet out of anyone, then you can truthfully call the other investors, and I can call them on your behalf and say, we have a term sheet, we're gonna accept it in 24 hours.

And we did this during the Airbnb financing.

There was all kinds of disarray and we just said, hey, today's the day.

Everyone submit your term sheet by 05:00 or you're not in the running But if you get 1 term sheet you can do that So so keep the pace up don't lose momentum And then once you get any inkling of an agreement send an email that commits the investor to that agreement.

You're not being annoying, just follow up.

Yeah, it's just a short email just confirming dot dot dot, you know, and it's just confirming that that Well in the case of some commitment, I am delighted that you committed to invest at a hundred million valuation My lawyer is going to call you tomorrow Then it's in writing that that investor has committed.

Because have you seen over the years fuzzy memories?

seen many, many transactions that fail because somebody doesn't remember what they said.

It happens even more on M&A transactions.

If we're trying to get a company a soft landing and we get the soft landing committed, those are the ones that people will try and wiggle out of.

And a soft landing is when someone gets acquired sort of early on.

Yeah, basically where Hey, this is not going to be the next Facebook.

Let's but we have a great product Let's take that product and make it part of Facebook and when you put Facebook's user base with it, you know, we can fulfill the dream of the product.

And that's where you see people not confirming and getting into trouble.

Yeah, correct, because there's optionality on transactions like that, and in the case of the company, the startup needs that transaction to happen so they don't end up with the pressure of Phil.

Yeah, they don't have a whole lot of leverage.

But I imagine you guys help out in that area a little

So digging down a little bit into founders again, what are sort of promising signs that you see when you meet all these people?

Well, I think product focus is really, really important.

And I didn't realize this probably to the last, you know, I've been angel investing since 1994, only in internet software companies.

And we invest in people, we invest by intuition.

But it's in the last 5 years that I've really looked for founder qualities that say that they're rifle-focused on the product, the quality of the product.

Ben Silverman, Jack Dorsey, It's just crucial.

So when we see that they don't want to be distracted because they just want to focus on the product.

And we have lots of bloggers and press people who call us and say, hey, get Ben Silberman to talk to me.

Well, eventually you say, hey, why won't you talk to this guy from Fortune?

I'd rather get a million more happy users than talk to somebody at Fortune Magazine.

It's on the way to building a big company.

The other factor that we look for is decisiveness.

It is so important to make decisions and keep momentum and growing your company and You know founders make lots of decisions about the product, you know Let's change this on the product and we'll get better metrics.

You need to use the same skill set for building your team and deleting from your team.

You need to hire fast and you need to fire fast.

Because if there's deadwood in your company, Everyone in the company already knows it.

And you can actually make morale go up if you make a decision that, hey, that person's not working out.

Even if they're a co-founder, you've gotta make those decisions.

And I imagine you see people struggle with that a lot because it's hard to hire a co-founder.

You've got to be decisive, you have to have a clear vision.

When I'm talking to an entrepreneur, I'm saying, are other people gonna work for him when he or she tries to hire somebody?

So even though these companies are young and only have 5 people, when I'm talking to an entrepreneur, I'm saying, wow, can this person manage a thousand people?

And there are types of people where I nod to myself and say, yeah, that person can manage a thousand people.

What if someone, when they're first starting, really can't manage a thousand people?

Are you able to say this person can grow or have you seen examples of people who have grown into that role?

Well, yeah, I think I think in the early early days of Twitter I think Jack Dorsey had trouble managing.

And Jack Dorsey thought about his shortcomings and went and made Twitter better, then left Twitter, invented Square.

How obvious, plugging a credit card reader into, you know, the earplug of an iPhone.

I got the very first demo of Square from Jack and watched him build Square flawlessly, hiring a management team that if he has a deficiency, he makes sure to hire somebody really powerful in that area.

So recognizing the deficiency and then building your team around that with everyone recognizing what everyone's deficiencies are.

Yeah, that's growing and maturing while you're building these great companies.

So I think we have time for like 2 more questions.

I think you can tell me if these are good because we've got to end on a high note.

You've been doing this for like 20 years.

What has changed and what has been the same since when you first started and now?

If you think back to when I started my first company, Alto's Computer, in 1979, in order to, I know this is unbelievable, but it's important for this group to know it.

In 1979 to get your company funded, you had to be growing, you had to be doubling every year, and you had to be at least 20% pre-tax profitable.

So investors basically would only invest if you were already successful.

If you go today, just the cost of starting a company is tiny, and there's lots of people willing to take risk and invest.

So the climate for starting a company is significantly better today.

Watching the internet convert from the web to mobile, you know, this thing's not a phone that's in your pocket, it's a computer.

And what, you know, some of these social apps that are running on the phone first, it's so, so, so different from everyone writing for the web.

There's this migration, especially of the social companies to cities.

Another phenomenon is, you know, back, you know, when Google started in 1998, the algorithm was the intellectual property.

Today, it's the user design and the user interface that leverages an application.

So, the world has shifted from algorithm IP to design and user interface IP being the most important.

So there's been lots and lots of big changes.

What about last question, in all these years, what have you been surprised by?

The biggest surprise and satisfaction for me is watching entrepreneurs mature at the speed of light when they have to.

So if you pick Larry Page at Google, Jack Dorsey, Zuckerberg, Ben Silverman, these companies take off.

Those founders have got to mature, manage thousands of people, and keep their product focus, and all 4 of those examples, they met the expectation.

But think about what happens when they go home at night.

You know, their companies are hiring 10 people a day, and they're forced to mature and adapt to that growth.

And watching that happen and helping them do it is the most satisfying thing you'll ever do, which is why I'm not retired.

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Ron Conway at Startup School 2013