Ron Conway at Startup School 2012

Investment Philosophy and Track Record

• Ron Conway identifies as the largest limited partner at SV Angel rather than a managing partner, a structural choice made to avoid fiduciary responsibilities.
• Since 1994, SV Angel has funded approximately 650 startups, with a 100% focus on internet software investments made in that same year.
• Notable liquidity events and portfolio companies include Google, Facebook, Twitter, PayPal, Pinterest, Ask Jeeves, Airbnb, and Dropbox.
• Conway co-founded Altos Computer in the late 1970s, taking the company public in 1982, which informs his respect for the difficulties entrepreneurs face.

Market Evolution and Industry Shifts

• 1970s vs. Today: In the late 1970s, venture capital was reserved for high-growth, profitable hardware companies; modern startups often require VC funding despite not being profitable.
• Workplace Culture: Conway notes a shift from the "work hard, play hard" era of daily drinking at Altos to modern, segmented happy hours on Fridays.
• Product Focus: The industry has shifted from shipping hardware and fixing defects later (via RMA departments) to an intense focus on consumer satisfaction, product quality, and user experience from day one.
• Market Maturity: Conway maintains that the internet is still in its infancy, predicting massive future growth in e-commerce integration with platforms like Facebook and Pinterest.

Investment Strategy: "People First"

• Founder-Centric Approach: SV Angel prioritizes investing in the entrepreneur over the specific idea, often committing to fund an entrepreneur's subsequent ventures (e.g., investing in Sean Fanning's sixth startup).
• Twitter Investment: Conway invested $75,000 in Twitter "sight unseen" with zero due diligence because Evan Williams (an existing Odeo founder) repaid his previous investors, demonstrating exceptional integrity.
• Growth Metrics: Conway rejects traditional pattern recognition, relying instead on exponential growth metrics (e.g., 1,000% monthly growth) as the primary indicator of success, citing Google, Facebook, and Twitter as examples where monetization was secondary to user acquisition.
• Google Deal Orchestration: Conway personally orchestrated Google's Series A funding after founders Larry Page and Sergey Brin threatened to close the round without Sequoia and Kleiner Perkins, a move that secured investments from Mike Moritz and John Doerr.

Specific Investment Decisions and Misses

• Missed Opportunities: Conway admits to missing investments in Salesforce.com (citing valuation concerns in 1998-99), Pandora (due to prior Napster bankruptcy hedging), Palantir (market size misjudgment), and Kickstarter (failure to grasp crowdsourcing).
• Facebook Investment: SV Angel helped facilitate Facebook's VC round by triaging a list of 20 VCs; Jim Breyer ultimately led a round at a $30 million valuation higher than the initial $50 million offer from The Washington Post's Don Graham.
• Google ROI: Conway estimates a 300:1 return on his Google investment if sold at all-time highs, though the peak valuation remains a future possibility.

Forward-Looking Statements and Market Predictions

• Monetization Potential: Conway quotes Twitter's monetization lead predicting Twitter will surpass Pinterest's growth upon monetization, viewing it as a future e-commerce engine.
• Innovation Cycle: He asserts that there is still significant invention to be done in the tech sector, aligning with Ben Horowitz's view that the industry is far from saturated.
• VC Misses Pattern: Investors frequently miss companies like Twitter and Pinterest because they rely on pattern recognition for novel concepts rather than evaluating the founder's vision.

Criteria for Selection

• Trait Assessment: Conway claims to make a go/no-go decision within 10 minutes of meeting a founder by evaluating 50 specific traits related to leadership, drive, and communication.
• Essential Qualities: He requires founders to be fearless leaders with strong charisma to recruit teams, citing the need to work "24 by 7."
• Product Obsession: Successful founders in the SV Angel portfolio (e.g., Jack Dorsey, Mark Zuckerberg, Ben Silbermann) are described as craftsmen obsessed with product quality and user happiness, often preferring to stay away from public relations.