Key Moments
Ron Conway at Startup School 2012
Y CombinatorKey Moments
Ron Conway has funded over 650 startups since 1994, but famously missed out on Salesforce and Pandora. He believes in investing in founders for life, not just their first idea.
Key Insights
SV Angel, founded by Ron Conway, has invested in approximately 650 startups since 1994, including Google, Facebook, Twitter, PayPal, Pinterest, Airbnb, and Dropbox.
Conway shifted to exclusively investing in internet software in 1994, a decision he attributes to being 'scarred' by hardware, and believes the internet is still in its infancy.
He famously invested $75,000 in Twitter 'sight unseen, zero due diligence' because he believed in the entrepreneur Evan Williams, even after Odeo failed.
Conway invested in Google after hearing about its 'page rank and relevance' technology from a Stanford professor and attributes his early success to relentless founder determination.
He invested in Facebook because of its exponential user growth metrics, even though he didn't fully grasp the business model initially, stating 'you can't argue with metrics'.
Conway's investment philosophy prioritizes backing founders ('people first') with drive, leadership, and determination, often over five to ten minutes of conversation, and he views it as a lifelong commitment.
A foundational philosophy: investing in people, not just ideas
Ron Conway, a prominent angel investor and partner at SV Angel, emphasizes a core philosophy of investing in founders ('people first') above all else. With a track record of backing approximately 650 startups since 1994, including titans like Google, Facebook, and Twitter, Conway's approach is deeply rooted in his belief that the entrepreneur's personality, drive, leadership charisma, and determination are the most critical factors for success. He asserts that after meeting a founder for as little as '10 minutes,' he can often determine if they possess the necessary traits to build a great company. This philosophy extends to a 'lifelong commitment' to entrepreneurs, where he aims to invest in their subsequent ventures even if a prior one falters, highlighting a unique dedication to fostering long-term relationships within the startup ecosystem.
The evolution of venture capital and startup culture
Reflecting on his early days as a founder of hardware company Altos Computer in the late 1970s, Conway highlights significant shifts in the startup landscape. He notes that raising venture capital was once predicated on a company being both highly profitable and fast-growing, a stark contrast to today's environment. Beyond financial requirements, Conway points out cultural changes, humorously noting that startups today 'drink less' than in his early career. While the 'work hard, play hard' motto may have evolved from daily happy 10-minute breaks with a booze cart to a more segmented Friday happy hour, the fundamental need for determination and leadership remains constant, as emphasized by Jessica Livingston.
Strategic shift to internet software in 1994
A pivotal decision in Conway's investment career was his shift to exclusively investing in internet software in 1994, a move he attributes to his negative experiences with hardware. This foresight proved incredibly prescient, as he recognized the disruptive potential of the nascent internet, even in its early stages when terms like TCPIP and email were not common parlance. He describes getting into internet investing not at the ground floor, but in the 'basement,' slowly ascending. Despite this early entry, his commitment to this sector has remained unwavering, with him still believing that the internet is in its infancy and holds immense future opportunities, particularly when combined with e-commerce.
Investing in Twitter: a testament to founder belief
Conway recounts the story of his $75,000 investment in Twitter, a move made 'sight unseen' and with 'zero due diligence.' This investment stemmed from his prior backing of Odeo, a venture by Evan Williams, Jack Dorsey, Biz Stone, and others. When Odeo failed, Williams, despite not having made a fortune, felt compelled to return money to his investors. Conway, recognizing Williams' character and potential, encouraged him to hold onto the funds for his next venture, which turned out to be Twitter. This 'pre-booked, pre-boarded' commitment underscores Conway's strategy of backing promising entrepreneurs, demonstrating profound trust in their ability to succeed.
Google's invention and early funding challenges
Conway's introduction to Google was initiated by Stanford professor David Cheriton, who mentioned a project called 'Backrub' and its core concepts of 'page rank and relevance.' Despite Google being barely known at the time, Conway recognized its potential and understood the founders' ambition to disrupt existing search engines like Alta Vista. He played a crucial role in facilitating Google's crucial first-round funding by introducing them to venture capital firms Sequoia and Kleiner Perkins. The process was contentious, with both firms vying for a stake, leading to a month-long negotiation. Conway ultimately ensured the deal's closure by setting a firm deadline, highlighting his determination to support groundbreaking technology and founders.
Facebook's exponential growth as a key investment driver
While Conway admits he didn't initially 'get' Facebook, he was compelled to invest due to its 'insane' user growth metrics. He observed that every meeting with Mark Zuckerberg and Sean Parker revealed dramatically increasing numbers, signaling a powerful demand for the product. Conway views 'growth' as the 'lifeblood of innovation' and believes that when a company achieves a significant user base, like 100 million happy users, monetization strategies can naturally follow. This perspective contrasts with the traditional focus on immediate profitability, emphasizing instead the importance of user adoption and satisfaction as precursors to business viability. In Facebook's Series A funding, he helped triage potential VCs, leading to Jim Breyer's investment at an $80 million valuation, a significant jump from Don Graham's initial offer of $50 million.
Missed opportunities and patterns in investor oversight
Conway candidly discusses significant investment misses, including Salesforce.com, which he deemed too highly valued at $30 million in 1998, now valued at $21 billion. He also mentions Pandora, PayPal, Palantir, and Kickstarter as companies he either passed on or didn't fully understand at the time. He identifies a common pitfall for investors: a reliance on 'pattern recognition' that can lead to overlooking truly novel ideas like Pinterest or early Twitter. Investors often struggle with concepts that are entirely new, preferring familiar paradigms, which can lead them to dismiss potentially groundbreaking ventures and the founders behind them.
The essence of a founder: traits that define success
Conway reiterates that his investment decisions are driven by identifying key founder traits. He looks for individuals who are 'fearless,' 'communicators,' dedicated 'leaders,' and possess immense 'determination.' He likens founders to 'craftsmen' who are obsessed with product quality and user satisfaction, citing examples like Ben Silverman, Jack Dorsey, and Mark Zuckerberg. The ability to build a great company hinges on having the charisma to recruit a strong team and the unwavering resolve to overcome obstacles. This focus on the entrepreneur's character and potential, rather than solely on the current business model, is what defines Conway's unique and highly successful approach to venture capital.
Mentioned in This Episode
●Products
●Software & Apps
●Companies
●Organizations
●Concepts
●People Referenced
Common Questions
Ron Conway has funded approximately 650 startups since 1994 through SV Angel.
Topics
Mentioned in this video
Mentioned as a successful early investment by Ron Conway.
Its growth trajectory is used as an example of how user growth can precede monetization. SV Angel invested in Google based on its technology and founders' honesty.
A location where Ron Conway received the calls confirming Google's funding round.
Cited as a future e-commerce powerhouse, with its monetization potential being significantly higher than Twitter's.
A disruptive force in the music industry with 40 million users, whose co-founder Sean Parker was featured on magazine covers. Its disruption is compared to Google's potential.
Sean Fanning's sixth startup, which Ron Conway expressed interest in investing in.
A classical incubator where Odeo and other projects were housed.
The search deal with Yahoo was a strategic goal for Google founders to bootstrap their company, and Mike Moritz's position on Yahoo's board was a factor in his involvement.
A hardware company co-founded by Ron Conway in the late 70s, which went public in 1982. Its challenges, including shipping hardware and fundraising, shaped his perspective.
An investment Ron Conway could have made but missed due to not understanding the market size.
A Y Combinator company that Ron Conway highlights as having reached significant scale.
Company where Ben Rosen was chairman.
Mentioned due to its board's connection with Kleiner Perkins, which influenced investments in Google.
Mentioned as an example of a company whose founders are intensely focused on the product.
An investment firm founded by Ron Conway, which invests in entrepreneurs. Its philosophy is to invest in people first.
An investment made by SV Angel, initially through Odeo, which demonstrated strong user growth before revenue caught up. The investment was based on belief in the entrepreneur.
A previous venture by Evan Williams and his team, which included Jack Dorsey and Biz Stone. It didn't work out, but investors were given their money back.
A significant early investment for SV Angel, highlighted for its rapid growth and challenging monetization path. Ron Conway initially didn't fully grasp its potential.
A Y Combinator company that Ron Conway highlights as having reached significant scale.
The venture capital firm where Don Valentine was involved, and later a key investor in Google.
Co-founder of Odeo and later Twitter. He repaid investors from Odeo, demonstrating integrity.
A venture capitalist at KP (Kleiner Perkins), who was instrumental in Google's early funding round, partly due to KP's connection with AOL.
Co-founder of Andreessen Horowitz, cited for his view that there is still much left to invent in the tech space.
Associated with Napster and later Airtime, he is described as a shy and non-malicious person.
Co-founder of Twitter and part of the Odeo team. He is described as the 'father' of the Twitter project and is known for his focus on user experience.
A Stanford professor and founder who first introduced Ron Conway to Google (then called Backrub) and mentioned 'page rank' and 'relevance'.
Founder of SV Angel, an angel investor who has funded approximately 650 startups since 1994, including Google, Facebook, and Twitter. He emphasizes investing in entrepreneurs.
Mentioned as someone currently implementing a strategy similar to Google's early focus on happy users at Pinterest.
Mentioned in the context of a party hosted by Ron Conway where Ben Horowitz showed a picture with him.
The managing partner of SV Angel.
CEO of The Washington Post, who offered Facebook a $50 million valuation and later became a mentor to Mark Zuckerberg and joined Facebook's board.
Chairman of Compaq, and a co-investor with Ron Conway in identifying internet software as a key sector for investment.
Founder of Facebook, described as 19 years old at the time of the discussion, and was mentored by Don Graham. Conway invested in him based on growth metrics.
Provided early funding to Facebook before the major VC round.
Ron Conway's venture capital investor for Altos Computer, described as the 'patron saint of venture capital'.
Co-founder of Twitter and part of the Odeo team.
A venture capitalist from Sequoia whom Google founders, driven by the desire for a Yahoo search deal, wanted to invest in their company.
President of Facebook, introduced Conway to Mark Zuckerberg. Known for being an 'edgy' person.
Provided funding of $80 million pre-money for Facebook, surpassing The Washington Post's offer.
An investment miss for SV Angel because they didn't initially understand crowdsourcing.
The original name for Google, mentioned by David Cheriton to Ron Conway.
The venture capital firm associated with Jim Breyer, which led Facebook's funding round with a higher valuation than The Washington Post.
A Facebook technology mentioned for its role in helping companies find customers.
A significant investment miss for Ron Conway, who deemed its $30 million valuation in 1998-99 too high; it is now valued at $21 billion.
A platform Evan Williams sold to Google, providing him with some capital before starting Twitter.
An investment miss due to Ron Conway's hedging on the music space after the Napster experience.
The first company Ron Conway's fund had a significant liquidity event with, and later contrasted with Google's search technology.
City where Google was initially located in a garage.
A city where Ron Conway was located when he received the confirmation of Google's funding.
Location in Menlo Park where Google moved into an office after being in a garage.
Location in Palo Alto where Ron Conway first met Mark Zuckerberg.
More from Y Combinator
View all 576 summaries
14 minInside The Startup Reinventing The $6 Trillion Chemical Manufacturing Industry
1 minThis Is The Holy Grail Of AI
40 minIndia’s Fastest Growing AI Startup
1 minStartup School is coming to India! 🇮🇳
Found this useful? Build your knowledge library
Get AI-powered summaries of any YouTube video, podcast, or article in seconds. Save them to your personal pods and access them anytime.
Try Summify free