Key Moments
David Lee at Startup School NY 2014
Y CombinatorKey Moments
Investor David Lee shares SV Angel's startup evaluation criteria, investor selection advice, and key lessons.
Key Insights
Focus on founders first, ideas second; founders shape ideas, not vice-versa.
Effective communication of vision is crucial, even for non-charismatic individuals.
Great founders are strong-willed but flexible listeners, able to synthesize diverse inputs.
Seek investors who offer significant 'value-add' beyond just capital.
A founder's reputation, built through leadership and attention to detail, is their greatest asset.
The current startup environment is exciting, with more opportunities and financing options than ever.
THE EXCITING LANDSCAPE FOR STARTUPS
David Lee opens by emphasizing that there has never been a better time to start a company, citing advancements in mobile computing, VR, drones, Bitcoin, and bioinformatics as fertile ground for innovation. He shares his extensive experience at SV Angel, having worked with over 500 founders and reviewed thousands of business plans, highlighting that the most famous portfolio companies represent a small fraction of the startups they evaluate. This sets the stage for his insights into what SV Angel looks for and broader advice for founders.
FOUNDER-CENTRIC EVALUATION AT SV ANGEL
SV Angel prioritizes founders over ideas, believing that while ideas evolve, people are more constant. They favor founders who build something that is an extension of their life story or passion. Lee stresses that their criteria may differ from other investors. A key element is the 'good elevator pitch,' which is less about public speaking prowess and more about the ability to clearly articulate a vision. In a noisy market, this skill is critical for attracting employees, investors, and customers, conveying authenticity and conviction.
THE POWER OF LISTENING AND ADAPTABILITY
Another crucial quality SV Angel seeks is 'good listeners, strong-willed but flexible.' This refers to founders' ability to process multiple inputs from investors, advisors, and mentors, and synthesize them into a cohesive vision and decision. In contrast, inflexible founders with a fixed point of view, who ignore feedback, are less likely to receive backing. Lee illustrates this with the example of Rick Morrison, founder of Comprehend Clinical, who persistently sought feedback, adapted his product based on customer and investor input, and ultimately secured funding.
SELECTING THE RIGHT INVESTORS: VALUE ADD IS KEY
Lee advises founders to be discerning when seeking investment, focusing on 'value-add' rather than solely on valuation or dilution. He explains that value-add means different things for different founders and companies, but the core idea is identifying investors who can offer significant help beyond capital. He uses the example of Jason Tan of CIF Science, who prioritized mentorship from PayPal co-founder Max Levchin over more favorable financial terms, understanding the long-term benefit. While 'green' money is sometimes sufficient, founders with choices should seek strategic partners.
THE FOUNDATIONAL IMPORTANCE OF REPUTATION
The most significant lesson from Ron Conway, Lee shares, is that a founder's reputation is their biggest asset. Building this reputation involves leading by example, maintaining unwavering focus on the startup, and controlling what can be controlled. Lee cites examples like Sergey Brin and Larry Page attending every seminar and Joseph Walla of HelloSign proactively identifying key people to meet at events. These actions demonstrate dedication, resourcefulness, and a commitment to best practices, which build credibility and foster success.
NAVIGATING THE MODERN FUNDRAISING ENVIRONMENT
Lee highlights the evolving landscape of startup financing, noting the impact of platforms like Y Combinator, AngelList, the JOBS Act, and crowdfunding. These avenues expand the options for both debt and equity financing, creating a more favorable environment for founders. While many challenges remain, the increased availability of capital and resources empowers founders to be more selective about who they partner with. He concludes by reiterating that while the principles are simple, executing them effectively is challenging work, and SV Angel is excited to engage with new founders.
Mentioned in This Episode
●Products
●Software & Apps
●Companies
●Organizations
●Books
●Concepts
●People Referenced
Common Questions
SV Angel prioritizes founders first, believing that ideas can evolve but strong founders remain consistent. Key traits include having a clear vision, being able to communicate it effectively, and being a good listener who can process multiple inputs to make informed decisions.
Topics
Mentioned in this video
Chairman of Sequoia Capital, who acknowledged Rick Morrison's persistence.
Mentioned for his quote about 'known unknowns,' relevant to founders anticipating challenges when selecting investors.
Founder of CIF Science, used as an example of a founder who prioritized value-adding investors over terms.
Co-founder of PayPal, who offered to mentor Jason Tan and significantly contribute to CIF Science.
Co-founder of Google, cited as an example of a founder who consistently attended best practice seminars, demonstrating focus.
Founding partner of SV Angel, speaking at Startup School NY 2014.
Cited by Ron Conway as an example of a founder with exceptional listening skills.
Co-founder of Google, cited as an example of a founder who consistently attended best practice seminars, demonstrating focus.
Founder of HelloSign, who proactively networked at an SV Angel CEO Summit.
Prolific angel investor and founding partner of SV Angel, known for inventing the class of angel and seed investing.
Mentioned as an example of someone with magnetic charisma, contrasting with the type of speaker preferred for startup pitches.
Founder of Comprehend Clinical, used as an example of a founder with a compelling vision and strong listening skills.
Legislation that has expanded financing options for startups, particularly through crowdfunding.
A document used metaphorically to describe Ron Conway's list of criteria for evaluating companies at SV Angel.
Mentioned as a factor contributing to the timing and opportunity for companies in the healthcare data space like Comprehend Clinical.
Jason Tan's company focused on preventing fraud for e-commerce.
A platform mentioned in the context of expanding financing options for startups.
A company that SV Angel has invested in.
A company that SV Angel has invested in.
A company that SV Angel has invested in.
A company that SV Angel has invested in.
An accelerator program where David Lee first encountered Rick Morrison at demo day.
Rick Morrison's company, which focuses on making clinical trial data actionable and usable.
Company co-founded by Sergey Brin and Larry Page, mentioned as an example of success potentially linked to founder focus.
An investment firm where David Lee is a founding partner, known for investing in numerous successful startups.
A company that SV Angel has invested in.
A company that SV Angel has invested in.
A company that SV Angel has invested in.
A company where David Lee's father worked as a senior engineer in the mid-1970s.
Company co-founded by Max Levin, who offered mentorship to Jason Tan.
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