Focused on the Internet:
Ron Conway has focused solely on investing in the internet since 1994, believing it would revolutionize industries. He takes a portfolio approach, investing in the top ten companies in each sector and hoping for one to become a breakout success.

Rapid Deal Flow and Organization:
Conway’s investment pace is remarkable, with one company invested in every six to seven days. To manage this, he formed Angel Investors LP in 1998, raising funds and hiring a team to process deals and conduct due diligence.

Investment Returns and Market Volatility:
Of the 500 companies Conway invested in, 225 were during the peak of the internet bubble in 1998-1999. When the bubble burst in 2000, 78% of those companies went out of business, highlighting the high-risk nature of venture investing. Google’s success helped bring the market back, as its IPO provided a substantial return for Conway’s funds.

Deal Flow and Due Diligence:
Conway emphasizes the importance of developing a reputation and attracting entrepreneurs for a steady deal flow. Processing this deal flow and conducting due diligence require a team of four to five people to evaluate the potential of each opportunity.

Investment Selection:
Out of the five new deals Conway sees daily, he invests in only one, turning down 29 out of 30 proposals. This selectivity ensures that investments are made in companies with the highest potential for success.

How Ron Conway Learned About Google:
Ron Conway discovered Google at Vivek Ranadive’s holiday party in December 1998. David Cheriton, a Stanford professor and Angel Funds investor, mentioned Google to Conway.

Google’s Initial Name and Concept:
Google was initially known as “Backrub.” David Cheriton described Google’s search algorithm as a quality search based on page rank, relevance, and popularity determined by users.

Conway’s Interest in Google:
Conway’s recent experience with Ash Jeeves, a public search company, gave him knowledge of the search space. He recognized Google’s potential and wanted to meet the company immediately.

Initial Funding and Conway’s Persistence:
Google had already secured funding from Andy Bechtolsheim, Ram Shriram, Jeff Bezos, and David Cheriton. Despite their initial reluctance, Conway persistently pursued a meeting with Google for three months.

Meeting Google and Evaluating the Search Engine:
Conway and his technical partner visited Google on University Avenue, where they met with Larry and Sergey. They conducted a demo of Google’s search engine, which impressed Conway’s partner.

Conway’s Strategy for Securing the Investment:
Conway engaged Larry and Sergey in conversation while his partner thoroughly tested the search engine. Midway through the meeting, Conway’s partner signaled his approval, indicating the search engine’s potential.

Initial Interaction with Google:
Ron Conway expressed his desire to invest in Google at an early stage. Larry and Sergey initially prioritized securing investments from prominent venture capital firms, including Sequoia Capital, due to its partnership with Yahoo, which Google saw as a potential distribution channel.

Negotiating the VC Round:
The process of finalizing the VC round faced challenges due to the involvement of two prominent firms, Kleiner Perkins Caufield & Byers (KP) and Sequoia Capital. VCs generally prefer to operate independently, and their collaboration was particularly difficult during the height of the internet boom.

The Ultimatum and Sequoia’s Response:
Ron Conway employed a strategic approach by threatening to raise $10 million in an angel round if KP and Sequoia did not cooperate. This ultimatum prompted both firms to agree to work together, although it resulted in a reduced allocation for Ron Conway’s firm.

The Significance of Google’s Partnership:
Conway recognized the immense potential of Google and emphasized the importance of securing an early partnership with the company. He believed that having Google and Sequoia Capital on board would provide significant benefits to the company’s growth.

Investor Understanding of Google’s Technology:
In the early stages, many investors struggled to comprehend the significance of Google’s technology and its potential impact on the market. Ron Conway and his team persisted in promoting Google’s potential, recognizing the transformative nature of its search engine.

How to Succeed as a Non-Technical Investor:
Non-technical people can succeed in the venture capital industry. Find a technical person to help you with due diligence and code reviews. Get involved at inflection points in the company’s history.

Ron Conway’s Role as an Investor:
Conway helps companies get a great angel syndicate, lead them through the VC round, and pick the right VCs. He also helps companies get distribution, recruit talent, and manage management turmoil.

Conway’s Approach to Product Strategy:
Conway does not get involved in product strategy or engineering decisions. He believes that entrepreneurs know their product and engineering better than he does. Conway focuses on helping companies with company-defining events.

The Angel Community’s Role:
The angel community has a variety of ways to interact with companies, both in terms of funding and helping out. Conway believes that angels should focus on helping companies at inflection points in their history.

Types of Angel Investors:
Individual angel investors: Typically make 1 to 5 investments per year, which can be challenging for building a diverse portfolio. Angel groups: Larger funds comprised of experienced internet entrepreneurs, like SV Angel. They provide a network of resources and deal flow. Super Angels or Micro VCs: Have institutional backing and act more like fiduciaries, competing with traditional VCs.

SV Angel’s Unique Approach:
SV Angel is a $20 million fund led by David Lee, an ex-Googler, lawyer, and engineer. Their investor base consists solely of internet entrepreneurs, similar to traditional angel funds. SV Angel operates as a “friends and family” fund, fostering close relationships with their portfolio companies.

Differentiating SV Angel from Small VCs:
SV Angel does not take money from institutional investors, avoiding the oversight of multiple stakeholders. They prioritize helping entrepreneurs rather than acting as fiduciaries, offering a more personalized approach.

The Importance of Choosing the Right Partner:
When securing funding, entrepreneurs should focus on the individual partner rather than the fund or its investors. Key factors to consider include the partner’s value addition, network, business acumen, and ability to provide guidance during challenges.

SV Angel’s Focus on Entrepreneurs:
Ron Conway emphasizes the importance of treating entrepreneurs as friends and family, fostering a supportive environment. This approach is appreciated by entrepreneurs and sets SV Angel apart from traditional investment firms.

Evolution of the Angel Community:
The angel community has seen a surge in the number of investors, leading to more startups, innovation, and the dominance of Silicon Valley in technology. More funding sources mean more great companies and ideas funded, benefiting the ecosystem. VCs are still investing at the seed stage, contrary to common belief. Super angels and micro VCs have been doubling or tripling every year, further strengthening the ecosystem.

Advice for Aspiring Entrepreneurs:
Bootstrap as long as possible: Many entrepreneurs have successfully bootstrapped their companies to profitability, like Michael Arrington with TechCrunch. Secure quick traction and monetize it: Getting quick traction and monetizing it early on can enable entrepreneurs to avoid the need for external funding. Understand your numbers: It’s crucial to have a solid grasp of your company’s numbers, including revenue, expenses, and projections. Practice persistence and resilience: Entrepreneurship involves facing many rejections and obstacles. Persistence and resilience are essential to overcoming these challenges. Build a strong team: Having a talented and dedicated team is vital for the success of a startup. Seek mentors and advisors: Mentors and advisors can provide valuable guidance and support to aspiring entrepreneurs.

Bootstrap vs. Funding:
Try to bootstrap for as long as possible to secure multiple investors and higher valuations. Seek funding after developing a working program and gaining traction (e.g., user base). Avoid seeking funding with incomplete code and limited traction.

Product Development and Release:
Prioritize releasing a beta version of the product early to gather user feedback and iterate. Avoid perfectionism and delays in releasing the product. Google’s approach of releasing beta software and iteratively improving it is a successful model.

Angel Funding vs. Venture Capital:
The amount of traction determines whether to approach angel investors or venture capitalists. Venture capitalists require more proof points, a business model, user traction, and growth. Angel funding can help build a syndicate of investors and establish the company’s pedigree. High-pedigree angels can attract other investors and create buzz around the company.

Growth as a Key Factor:
Silicon Valley emphasizes growth as a key metric for investment. Market segments with high growth potential (e.g., several thousand percent per year) are attractive. Demonstrating growth to investors increases the likelihood of securing funding.

Investment Focus:
Ron Conway and his firm exclusively invest in internet companies. Their current focus is on the “real-time” sector, where users spontaneously contribute content to the web. Examples of real-time companies include QA sites, content sites, flash sales platforms, and Twitter.

Missed Investment Opportunities:
Ron Conway missed out on investing in Salesforce.com due to valuation disagreements during the market crash in 1999.

Advice for Entrepreneurs:
Gain operating experience by working in a company before starting your own venture. Be decisive and willing to make tough decisions, including firing underperforming employees. Start angel investing with a syndicate that complements your skills and expertise. Focus on building a strong deal flow and conducting thorough due diligence. Keep up with industry trends by seeking insights from younger experts.

Personal Attributes for Success:
Be decisive and trust your gut when making investment decisions. Prioritize the entrepreneur’s qualities over the business idea, as ideas often evolve. Develop strong people skills and intuition to assess entrepreneurs effectively.

Establishing a Reputation for Helping Entrepreneurs:
Ron Conway and Ben Rosen gained a reputation for actively participating in board meetings and turning them into business development sessions. They focused on securing distribution deals for companies like Ask Jeeves, resulting in successful outcomes.

Attracting Investors to the Next Generation of the Internet:
Conway approached successful entrepreneurs like Mark Andreessen, Jeff Skoll, Piero Mediar, and the founders of Yahoo and eBay to invest in the next generation of the internet. These investors gained significant wealth and were encouraged to refer deal flow to Conway and his partners, recognizing their expertise in evaluating startups.

Evaluating Companies in Cluttered Spaces:
Conway evaluates companies in cluttered spaces by considering the number of competitors and the presence of intellectual property barriers to entry. In highly competitive markets, he looks for entrepreneurs who demonstrate exceptional execution skills and have a clear strategy for outperforming competitors.

Execution-Based Investments:
Conway acknowledges that some spaces are execution-based, where the focus is on speed and efficiency in execution rather than intellectual property. He invests in entrepreneurs who have a clear plan for executing their vision and a track record of making quick decisions and hiring talented teams.

Assessing Companies Targeting Large Competitors:
When evaluating companies targeting large competitors like Google or Facebook, Conway considers the segment they are pursuing and the presence of intellectual property advantages. If it’s an execution-based play, he is less likely to invest unless there is a unique intellectual property advantage.

Advising Companies on Runway and Fundraising:
Conway recommends that companies raise $500,000 to $1 million in the angel round to gain traction and show results. Startups should aim to raise the next round four to five months before running out of money, or open the angel round at the last valuation if traction is limited.

Promising Monetization Models:
Conway highlights the flash sales and flash marketing space as promising monetization models. Companies like Gilt Group and Groupon have demonstrated exceptional success with these models, emphasizing the importance of innovative approaches to monetization.

Missed Opportunities:
Conway acknowledges missing out on investment opportunities in successful companies like Gilt Group, highlighting the challenges of accurately predicting market success.

Mobile Computing and Gaming:
Mobile computing and gaming are experiencing massive growth, as computing shifts from traditional computers to mobile devices.

Location-Based Services:
Location-based services, especially those that integrate commerce, are a rapidly growing area. Foursquare is expected to move in this direction.

Online-to-Offline (O2O) Commerce:
O2O commerce, which connects online platforms with offline transactions, is a new and emerging trend. Examples include Shopkick, which provides in-store information and coupons, and Milo, which allows users to reserve and pick up items from local stores.

The Importance of Team over Idea:
When starting a business, it’s more important to find the right co-founders and build a strong team than to focus solely on the idea. The team’s ability to execute the idea and navigate market challenges is crucial for success.

Introduction:
Ron Conway, a prominent angel investor, provides valuable insights on evaluating startups, market size, and the realities of startup outcomes.

Investment Criteria:
Conway emphasizes the importance of considering the market size when evaluating a startup’s potential. He contrasts this approach with Don Valentine’s focus on the idea and team.

Startup Success Rates:
Conway acknowledges that 40% of startups in his portfolio fail. He encourages entrepreneurs to be aware of this statistic and highlights the improved failure rate compared to the bubble burst era.

M&A as a Liquidity Event:
Conway emphasizes the significance of mergers and acquisitions (M&A) as a common liquidity event for startups. He cites examples of successful M&A exits, such as AdMob, Zappos, and YouTube. He encourages startups to embrace M&A as a positive outcome, rather than aiming solely for an initial public offering (IPO).

Conclusion:
Conway encourages entrepreneurs to pursue their ventures with resilience, knowing that failure is a possibility. He emphasizes the importance of focusing on market size, accepting M&A as a valid exit strategy, and being proud of achieving positive cash flow and merging with other companies.