Mar 9, 2018, 11:12 AM ETCourse, Conference Presentation, Fireside Chat, Panel

Ron Conway - Startup Investor School Day 4

Core Investment Criterion: SV Angel prioritizes the character and determination of the founder over the idea itself; integrity and "goal-driven" fortitude are deemed more critical than initial metrics.
Sector Focus: Conway identified the Internet software sector in 1994 (two years before Netscape), driven by the thesis that innovation requires an industry capable of growing by thousands of percent annually.
Failure Rate Reality: Angel investors should anticipate a 40% to 60% failure rate; Conway notes that a 40% failure rate over 25 years is considered "pretty damn good" for the industry.
Portfolio Construction: New investors are advised to spread capital across 5 to 10 companies with checks of approximately $25,000 each to mitigate risk and avoid the high failure rate associated with small portfolios.
Key Early Investments: SV Angel's first major wins included Ask Jeeves, PayPal, and the anti-spam company Brightmail.
Co-Founder Dynamics: A significant source of investment failure involves co-founder friction; Conway advises observing founder interactions during early presentations to detect territorial conflicts or misaligned roles.

Primary Value Add: The most critical post-investment support involves helping founders build management teams, secure partnerships, and establish distribution channels via the investor's network (e.g., Apple, Google, Facebook).
Addressing Procrastination: A major friction point for investors is founder procrastination; active investors must push founders to make rapid decisions, even imperfect ones, to move the company forward.
Investor Boundaries: Investors should advise founders to execute faster rather than attempting to run the company themselves, as investors generally lack the time to manage operations effectively.
Team Vetting: Investors are encouraged to meet the entire founding team, including assistants and operations staff, to gauge company culture and identify key talent like Google's early operations lead, Solar Comandar.

YC Model Validation: Y Combinator is distinguished from other accelerators by its rigorous founder screening process and the quality of mentorship provided, rather than financial support alone.
Crypto and Web 3.0: Conway identifies blockchain and crypto as "Web 3.0," representing the next wave of the internet, though he notes the sector is complex and requires deep study before investment.
Security Evolution: While the SAFE instrument was designed to be simple, the YC team acknowledges unintended consequences; they plan to create modeling tools (e.g., spreadsheets, AngelCalc) to help investors understand conversion mechanics.
Transparency Standards: The ecosystem requires higher integrity regarding pro-rata rights and conversion calculations; YC suggests a standard form for founders to request clear breakdowns of conversion terms to ensure transparency.

Civic Duty: Conway argues that being a "good investor" includes being civically engaged, citing the Parkland, Florida student movement as an energizing example of youth driving national change.
Ecosystem Accountability: Investors must avoid being "penny wise and pound foolish," as reputational damage from bad actors harms the entire ecosystem; honesty and transparency are now essential for long-term success.
Course Recap: The session covered the mechanics of SAFEs, deal flow generation, and the importance of rigorous modeling to understand investment terms.
Demo Day Logistics: Virtual invites for Winter 2018 Demo Days have been sent, with 10 selected candidates receiving in-person invitations; attendees are advised to take detailed notes during the fast-paced presentations.

Angel Investing Persistence: Conway believes traditional angel investing will persist despite the potential rise of equity alternatives like ICOs, which will need to be factored into future decision-making.
Continuous Improvement: YC intends to gather feedback on the course to refine future iterations, acknowledging that unintended consequences often arise from process changes in startup finance.