- Ron Conway, the founder of SV Angel, has funded around 650 startups since 1994, including successful companies like Google, Facebook, Twitter, and PayPal.
- Conway started as a founder himself, co-founding Altos Computer in the late 70s and taking it public in 1982.
- Startups have changed in terms of workplace culture (less drinking) and the need to focus on product and consumer satisfaction.
- Conway made the best decision in 1994 to only invest in internet software, recognizing the disruptive potential of the internet.
- He believes the internet is still in its infancy and there is plenty of opportunity for growth, especially with the addition of e-commerce.

- The speaker discusses some of the biggest missed investment opportunities, including Salesforce.com, Pandora, Palantir, and Kickstarter.
- Investors often miss out on innovative ideas that are not easily recognizable or fit into existing patterns.
- The speaker emphasizes the importance of investing in the entrepreneur and building a long-term relationship.
- The speaker shares the story of investing in Twitter through a previous failed investment in Odeo.
- The speaker believes in not arguing with growth and focusing on happy users before considering monetization.
- Google's founders were honest about not knowing how they would monetize the company initially, but focused on providing a superior search engine.

- The speaker met Larry and Sergey at a holiday party and asked about their company, Backrub.
- David Sheraton introduced the speaker to Larry and Sergey and mentioned the concepts of page rank and relevance.
- The speaker saw potential in Larry and Sergey as determined and strategic entrepreneurs.
- The speaker introduced Google to Sequoia and recommended Mike Moritz as an investor.
- Google secured investments from both Sequoia and Kleiner Perkins.
- There was some negotiation and pressure to secure funding for Google, with the speaker playing a key role.
- The speaker also discusses his involvement with Facebook's funding and the role of SV Angel in helping companies get funded.
- Facebook received funding from Jim Breyer at a higher valuation than Google.

- The speaker discusses the importance of Excel as a venture capitalist and mentions that Don Graham, a mentor to Mark Zuckerberg, is on the board of Facebook.
- Mark Zuckerberg spent time at The Washington Post to learn about being a CEO and followed Don Graham.
- Some venture capitalists said no to investing in Facebook.
- The speaker mentions the high return on investment for Google and discusses Larry and Sergey's lack of awareness of their future success.
- The speaker shares a story about meeting Larry and Sergey at a party in 1998.
- The speaker explains that they invest in people first and look for traits such as leadership, determination, and fearlessness.
- The speaker emphasizes the importance of product focus and caring about happy users.
- The speaker mentions Highlight and ends the discussion.

- Ron Conway, founder of SV Angel, has funded over 650 startups since 1994, including Google, Facebook, Twitter, and PayPal.
- Startups have changed in terms of workplace culture and the need to focus on product and consumer satisfaction.
- Conway recognized the disruptive potential of the internet and decided to only invest in internet software.
- He believes there is still plenty of opportunity for growth in the internet, especially with e-commerce.
- The speaker discusses missed investment opportunities and the importance of investing in the entrepreneur and building relationships.
- The speaker shares the story of investing in Twitter and Google, emphasizing the importance of happy users and product focus.
- The speaker also discusses their involvement in Facebook's funding and the role of SV Angel in helping companies get funded.
- The speaker mentions the high return on investment for Google and the importance of investing in people with leadership, determination, and fearlessness.

Ron Conway, partner at SV Angel, at Y Combinator Startup School on October 20, 2012.

Presented in Stanford Memorial Auditorium by Y Combinator and the Stanford Technology Ventures Program.

The funny thing is, we're sitting in the back saying, which stories can we tell and which ones are too secret?

Because for every, Bronco's like an iceberg.

For every story where you hear how he saved the day, there's a bunch where you can never tell how he saved the day.

He's cleaned a lot of brains off the back windows of cars.

He laughs nervously but does not contradict me.

So Ron, and Ron, like officially Ron is SV Angel, right?

You are the limited partner or something like that of SV Angel.

David Lee's the managing partner because I don't like being a fiduciary, I am just the largest investor.

But officially, Ron Conway doesn't invest in your company, it's SV Angel that invests in your company.

So if you ever see that in a cap table, that's Ronco.

So how many startups have you funded now?

Including, can you name some of the more successful ones?

Ask Jeeves was the first big liquidity event that we had.

Google, Facebook, Twitter, PayPal, Pinterest.

And then the YC companies, Airbnb and Dropbox.

The YC companies that are already getting to very big scale.

Even though I don't invest in hardware today, the company that I co-founded was Altos Computer back in the late 70s.

And we ended up taking that company public in 1982.

My experience at Altos plus 2 other startups that I co-founded is what gives me such respect for what entrepreneurs go through.

The theme all day is that, hey, it's not easy.

Back in the late 70s, in order to get venture capital, you had to have high growth and be profitable.

So why did people take venture capital if they were already

Well, in the case of Altos, it was a hardware company, so we had a lot of cost of goods and marketing, And so we wanted to build a war chest to keep building the business.

In fact, our VC was Don Valentine from Sequoia who is really, I think, the patron saint of venture capital.

What's changed about startups since then?

Well, I think it's, I'd rather talk about what's not changed.

Okay, sure, actually that was gonna be my next question.

Because what's not changed is what Jessica talked about, which is you have to have determination and conviction.

You know, what has changed is in the workplace, people drink less.

That's not what I thought you were gonna say.

In the back of my mind I've been saying, hey wait a minute, I wanna answer the question about what has changed.

At Altos we had a CFO who was in her 60s and at 05:00 every day she would wheel around the booze cart.

Everyone would have a drink, chit-chat for a little bit.

But then it motivated everyone to stay until 9 or 10 o'clock at night.

Now our kind of motto was work hard and play hard.

Yeah, yeah, we actually, we did it via multitasking.

I think the startups today know how to segment a little better and they have happy hour on a Friday.

So, what else has changed besides drinking less?

Well, I think what's not changed is the fact that once you have to focus on growth.

Back in the hardware days, you didn't have to focus, in my opinion, on product or consumer satisfaction as much.

Yeah, it was more like, you know, ship, ship, ship, and get it out, and if it doesn't work, take it back and fix it.

Because hardware was so hard to ship that if you could ship at all, that was consumer satisfaction.

And then if it didn't work, we had this big RMA department, return material authorizations.

But today, what's changed, and now, well, SV Angel, and the best decision I ever made in 1994 was only to invest in internet software.

But that was the best decision I ever made, is that in 94, thinking this thing called the internet is going to be really disruptive.

then, like 1994, it probably meant the internet, not the web.

Like the web sort of existed, But had you heard of it when you

decided to go into internet investing back in 1994

well, it would be It would be more like people would say TCP IP yeah as often as they would say the internet.

And people would talk about email, but they'd have to explain what email was.

So you sort of didn't get in at the ground floor of internet investing, you got in in the basement.

You had to go up to get to the ground floor.

Slowly went up the stairs to the first floor.

How did you, like, that was a really good decision, it turns out, to get into internet investing in 1994, but like, how did you do that?

Well, I was co-investing with Ben Rosen at the time.

After founding a couple of companies, I discovered, because I started dabbling in angel investing, that I really enjoyed mentoring entrepreneurs more than being the entrepreneur myself.

So in 94 is when I sold my second company and went home and told my wife, hey, I found a new job.

And she said, I didn't know you were looking.

And I said, yeah, I'm gonna do this angel investing for the rest of my life.

But I sat with Ben Rosen, who is then the chairman of Compaq.

And we said, innovation is all about growth.

So we said, let's just find a sector that's growing like crazy, or is going to grow like crazy, and be disruptive, because innovation is disruptive.

And we said, hey, let's just throw all in on the Internet.

So our only rule is Internet software, and off we went.

And sitting here today, still, only Internet software.

I still think we're in the infancy on the Internet, though.

Just add a little touch of e-commerce on top of the internet.

And you're talking about an opportunity that's as big as all the internet today, especially with Facebook and Open Graph helping companies go find their customers.

And Pinterest will probably be, in fact I'll quote the monetization guy at Twitter.

I won't even take the risk of misquoting.

But the monetization guy at Twitter told me a couple of weeks ago, he goes, hey, Twitter's on a tear now.

Like Google and Facebook, once they get to stride, Twitter's got a really nice growth rate now.

And this guy said to me, but will never grow like Pinterest was once they decide to monetize because they will be an e-commerce engine like never before.

And they'll, There'll be many other companies like that that take advantage of e-commerce.

Can you remember some big ones you missed?

This is in 1998 and 99 when the bubble was starting to take effect.

And I thought $30 million valuation for salesforce.com was a little too high.

Pandora, I had just gotten out of Napster.

Napster finally had to declare bankruptcy because of all the egos in the VC world and in the music world.

I don't think it's just egos in the music world.

So for that reason, I didn't invest in Pandora.

Didn't understand the size of the market.

Even though we invest in the entrepreneur first, in the case of Pandora, I made a dumb move and said, hey, I'm not sure I get how big that market is.

Kickstarter, we could have invested in early as well.

Didn't really get what crowdsourcing was.

It's the lifeblood for a lot of startups, and we have the Jobs Act that takes the legal confusion out of crowd sourcing.

Do you think there's a pattern to what investors miss in general?

Like not just you, but investors in general.

If founders are working on something that's good, but investors are not gonna get, like what kind of things do investors not get?

Well, I think investors don't get probably the stuff that is the first 1.

Ben talked about how hard it was to raise money.

If you look at a virtual pin board, that's a brand new idea.

So I think investors, even though they like to say, I'm in venture capital, I take risk, they look for pattern recognition, which in this business is probably a mistake.

With SV Angel though, we invest in the entrepreneur first.

And all of our biggest successes is when we said, hey, wow, that's a really forward-thinking idea, but let's go run with it.

I want to invest in every 1 of their companies.

So when I invest in an entrepreneur, I'm investing for life.

Unless they do something wrong, I want to invest, for example, in Sean Fanning's sixth startup, Airtime.

It makes it more interesting when you have this awesome relationship with a founder where they know me like a book and I know them like a book, so we can move fast and give each other advice.

Yeah, so back to Twitter, back to Twitter.

I had invested in Odeo with Evan Williams and his team.

Jack Dorsey was part of that team, so was Biz Stone.

And Odeo didn't work out, and Odeo was in an incubator called Obvious Corp.

So it was a classical incubator who had like 4 or 5 projects going on.

Jack was the father of the Twitter project.

Evan Williams was magnanimous to the investors and gave the investors their money back.

Here's an entrepreneur that felt so bad and he had made a little bit of money, not a ton of money, certainly not enough to give your money back.

He made a little bit of money selling Blogger to Google, but he felt an obligation to pay the investors back.

I said, Ev, this is going to sit in the bank until your next 1.

So I invested 75K in Twitter, sight unseen, 0 due diligence, because I believed in that entrepreneur.

And then I got to know Jack and look at Twitter today.

So you were already signed up for Twitter.

What did you think of Twitter as an idea?

So Twitter, it wasn't long before Twitter's growth rate on users and numbers of tweets was straight up.

They're just now, revenue's gonna catch up with it, and it's gonna be an awesome company.

So whenever we see a company that's growing at 1,000% a month, And in the early days when you're successful, you will grow at a thousand percent a month because going from 1 users to 10 users.

But if they're happy users and there's word of mouth, because Twitter never advertised and there's good word of mouth and good PR, that's the greatest company you can get.

So Twitter, you thought basically, I don't know what this thing is, but the graphs seem to be going

But, yeah, yeah, But it's growing, which means users like it, which means it's gonna be successful.

Because if you look at Google, Facebook, and Twitter, none of them had any idea what the monetization outcome was gonna be.

All they focused on was happy users and getting lots of them quickly.

And that ends up, that's a great strategy.

That's what Ben Silverman is doing at Pinterest today.

So they just knew that there was an important problem to be solved and they sort of had faith they would be able to make money somehow.

But now, Google's the 1 who probably took the biggest risk because now Ben can at least look back to Google, Facebook, and Twitter and say, wow, they made sure they had like a hundred million happy users and then they thought about monetization.

And you actually don't need to think about monetization that much.

Once you get to 100 million users, it gives you time to figure out, hey, wait a minute.

There's ways to turn this into a really Viable business.

So when Larry and Sergey were starting out doing Google, they really didn't have they didn't know how they

I still have Google's first 10 page investor slide deck and you get to the last page and it says thank you.

It doesn't have the, it does not have the spreadsheet that is usually the last page.

They said we have awesome technology and it will lead to monetization.

And we're not gonna tell you something we don't know because we don't know how we're gonna monetize it.

And that was a novel thing in those days.

And that's why people misconstrued that as arrogance, when in fact, Larry and Sergey were just being really bluntly honest with the investors that came in to see them.

They were like, hey, if you look at our search results, and they were so much better than the prior search engine, which I was an investor in, Ask Jeeves, you know, if you can't figure that out, you're crazy.

Now, I know I figured it out, And I knew Ask Jeeves really well.

The minute we started doing Google searches, when we went in to see Larry and Sergey, we said, hey, can 1 of our guys play with the search engine while I talk to Larry and Sergey?

And just because Google said, we're based on relevance and page rank, those are really easy words today, but back in 1997, when you said I have a search engine based on page rank.

If other people like that page and they springboard off of that page, then that page must be awfully good.

So I'm going to send more people to the pages that people like.

So what did you think when you first met them?

On University Avenue, they had moved out of the garage in Menlo Park into the office.

And then I think Danger after that, which is now Android, was in that 1 office.

So I actually heard about Google through David Cheriton, who's a very famous Stanford professor and a founder himself.

We were at a holiday party 6 months before I actually met Larry and Sergey, and I said, hey, you're in the labs at Stanford, what's cooking there?

Because David was an investor in our fund, and we said to all of our investors, hey David, you can invest in the fund, but you gotta tell us when you see something interesting.

So at this Christmas party, we were both in tuxedos and we both hate tuxedos.

I said to get our mind off this, tell me about what's going

To get your mind off the uncomfortable tuxedo.

And he said there's this company called Backrub, but they're not ready to see you yet.

But when they are, you know, I'll introduce you.

Did he say you should invest is going to be the biggest technology company of the decade.

David Sheraton was the 1 who said the 2 magic words, page, rank, and relevance.

And back in 1997, those were not buzzwords.

Those were like, hey, talk to me about, and then he explained what they meant.

So what did you think of Larry and Sergey when you met them?

Did they seem like they were gonna be super successful?

Did you know as soon as you met them that this was like a historic, historic company?

Well, because we've invested in 650 companies, by then it was probably 300 companies in 1997.

You know, I had a good read on entrepreneurs.

Keep in mind, for every company we invest in, we say no to 30.

What I saw was 2 entrepreneurs that were great scientists, but very, very strategic and determined.

Because they said to me, Once they said, hey, we want you to invest, they said, hey, you have to go get Mike Moritz to invest in our company.

Yeah, I introduced Sequoia to Google in that round.

And I said, hey, Mike Moritz is a great guy.

And to bootstrap this company, because at the time, Alta Vista was the search engine.

And they said to do that, we got to do 2 big OEM deals.

Yahoo's 1, Morris will arrange that for us if we get him, and that happened.

And then they were already talking to John Doerr at KP, and I didn't have to figure out the door piece door and KP were on the board of AOL And

they so they got Google and Kleiner in that first round because they were on the boards of AOL and Yahoo Respectively.

Yes, and that okay so once they got both to agree to invest, then KP didn't want Sequoia and Sequoia didn't want KP.

After a month, Larry and Sergey said, now after a month, Google is exploding.

You can tell that this is a technology that people are going to use for 50 years.

And Larry and Sergey got exasperated and they called me 1 Friday and they said, hey, you told, the first day I went in there I said, hey, let's just do a quick $10 million round, I'll lead it.

And I'm an angel investor, but I knew for this technology We we could round up the money and syndicate that they said hey you said You said a month ago.

I said I can do it by Monday And I actually believed it because then I knew even more about the company and the quality of these 2 founders.

But I did call KP and Sequoia and I said, hey, these founders are very determined.

They're going to do it with you or without you.

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Ron Conway at Startup School 2012