David Lee at Startup School NY 2014

• Current Market Context: David Lee characterizes the present moment as the most exciting period for founding companies, citing active opportunities in mobile computing, drones, virtual reality, Bitcoin, and bioinformatics.
• SV Angel Investment History: Since 2007, Lee and the SV Angel team have reviewed over 6,000 business plans and worked with approximately 500 founders, including those behind Airbnb, Dropbox, Twitter, Snapchat, Pinterest, Square, Stripe, and GitHub.

Criteria for SV Angel Investment Decisions

• Team Over Idea: The firm prioritizes founders first and ideas second, operating on the belief that ideas evolve while people remain constant.
• Founder Profile: Preference is given to founders who have built things for themselves or where the company is an organic extension of their life story.
• Communication Skill: A "good elevator pitch" is critical for articulating vision to employees, investors, and customers in a noisy market, even if the founder lacks traditional charisma or public speaking polish.
  • Case Study: Rick Morrison of Comprehend Clinical secured investment after 45 minutes in a coffee shop by authentically explaining how his platform would utilize data digitization and Obamacare to transform inefficient clinical trials.
• Listening and Adaptability: The ideal founder is a "good listener" who synthesizes multiple inputs to refine their vision while remaining strong-willed.
  • Case Study: Following initial rejections, Morrison persisted by asking investors for specific feedback on why they said no, adapting his product from a hosted solution to a SaaS model based on market signals, which eventually led to a Series A round from Sequoia Capital.

Guidance for Founders Selecting Investors

• Value Add Priority: Founders should prioritize an investor's ability to add value over valuation or equity dilution.
  • Case Study: SIF Science founder Jason Tan accepted terms less favorable to his equity stake to secure mentorship from PayPal co-founder Max Levchin, whose hands-on guidance was deemed instrumental to the company's success.
• Expanded Financing Landscape: The current environment offers more financing options than ever due to AngelList, the Jobs Act, and crowdfunding platforms like Kickstarter, giving founders greater choice and leverage.
• Strategic Selection: Founders must identify their specific "known unknowns" and select investors who can specifically help address those challenges.

Core Philosophy and Career Advice

• Reputation as Asset: The most significant long-term asset for a founder is their reputation, which is built by leading by example and controlling controllable variables.
  • Example 1: Google founders Larry Page and Sergey Brin attended every SV Angel best practices seminar in 1998.
  • Example 2: HelloSign founder Joseph Walla proactively created a list of key contacts to meet at an SV Angel cocktail party, while most other founders viewed the event as unproductive.
• Acknowledgment of Difficulty: Founders are warned that following their passion requires accepting a "steep price" and that the journey involves significant ups and downs, as illustrated by Lee's father's 30-year career building fortune cookie machines.
• Conclusion: While the principles of being a good leader, listener, and communicator are simple, executing them consistently is described as "simple but not easy."