Ron Conway at Startup School SV 2014

He's back for a day or an hour. There's lights behind that thing. Um, okay, so I interviewed Ron on this stage. We're on stage at Startup School in 2012, and the video's on YouTube. And Ron told a lot of the good stories then, so I'm not gonna ask him about that stuff. Um, but Ron has an infinite supply of stories for anybody. If there's anybody out there who doesn't know who Ron Conway is, basically just remember this sentence: Ron Conway is the man. Not in the sense of like working for the man. Yeah, not that man. That man, the other man. He is like the investor. I tell Y Combinator startups just this blanket advice: if Ron Conway wants to invest in you, take his money. Um, so that's all you have to remember about Ron Conway.

Um, a baby YC is procreating. So Ron is famous for investing in founders, and so I wanted to ask you, when you say you invest in founders, what that means is you invest in people with certain traits. Can those traits be acquired, or is it just the case that some people have it and some people don't? Because these people all are interested in starting startups. Right? So I'm gonna try and get the stuff out of your brain and blow it out onto the audience. It will be helpful to them without being sloppy.

Well, I, you know, I have said before entrepreneurs are born to be entrepreneurs. Then once you're an entrepreneur, you're a serial entrepreneur. You're probably gonna start companies for the rest of your life. Or if you're like Zucker or Larry Page, you know, it might be the only company you start, but you are an entrepreneur for life. And I think most entrepreneurs do correctly self-select, and I think that entrepreneurs are born. Have to be born with some of the basics.

So, which traits have to be inborn and which can be learned? So, the basics I think would be you have to have a hell of a work ethic. You talked about it at your Stanford class. You have to be ambitious. You have to be aggressive, and you have to be tough because starting a company is the hardest thing on earth to do. And I don't think people realize that until they do it. Since I've watched thousands of entrepreneurs do it, I know how hard it is. Plus, I started my own company, Altos Computer, in the 70s, so I know from personal knowledge how hard it is. And I started another couple of companies as well.

And so you think the driven part has to be inborn, for sure. You can't learn to be ambitious and be driven. Obviously, you have to be curious. You have to be intelligent. I think being a founder is like a vocation. But if you have those basic skills, you know where you're determined, you're tough, you have a huge work ethic, you know you're completely rifle focused, then there's other things that you have to learn. You have to learn to hire a management team. You have to learn how to manage these things. You're not born with these things. You have to want success so badly that you learn how to manage, you learn how to find a management team, you learn how to recruit people, and then spread your vision and motivate them to be just like you and be fanatical about your business.

So, how can they tell? How can these people, you know, it would save them a lot of trouble if you could tell them now whether they're gonna succeed in starting a startup. How can they tell if they're driven enough? Well, I mean, are you willing to work 24/7? The really great entrepreneurs are 24/7. The word moonlighting is not even in their vocabulary. I mean, if they're dating somebody or they're married, they warn their spouse that they're not first in line, that this company dream is first in line, and that you have this vocation. You know, it's like being a priest or a nun. That your duty is to your company. No, it has to be that fanatical.

And if you look at all the successful entrepreneurs, they are that committed about it. That is a hard commitment. But once you're willing to make that commitment, you know, then you know that solves the work ethic check-off. If you have that commitment, then your passion is probably infectious. It probably means you can in fact find other people and make them as excited about your idea as you do. So, you can use it. So you have to be a good communicator. You've got to be able to excite other people.

For the management part, you can use a trick of leading by example. Yes, right? You don't have to use leadership techniques. You just say I'm gonna go do this, and everybody goes and does it with you. Correct? But for management and recruiting, you do have to educate yourself. You have to get advice about that. Now there's many, many books and blogs about how to do that. So, if you have the desire, you can DIY. You can do it yourself because there's lots of resources out there for you to educate yourself on these skills that you have to acquire that you're not born with.

They don't have to worry about managing people yet, though. That's like a good problem to have. Yeah, yeah. The Fried's, you've gotten to a certain point. You can look forward to hire people that you then have to manage. Yeah, the first thing you gotta do is your idea has to be infectious enough that you have to find a co-founder. Since most companies start with at least two people, they usually start with two people who know each other. And so, they're able to feed on each other's excitement and then go from there.

So, when you're deciding who to invest in, um, this is not just a way to get Ron's money. It's also a heuristic for figuring out what works because how many startups have you invested in now? Since this is my 20th year of angel investing, so anniversary just like it's the tenth Startup School. And in the twenty years, we've invested in over seven hundred and fifty companies. But in investing in 750 companies, each of which has a founders team, we have talked to thousands of companies about potentially investing. Because for every company we invest in, we look at 30.

So, whoa! Yeah, 21,000 companies. That's why I asked to be angels up to 13 people. You realize you have looked at 21,000 companies? Yes. Now, I didn't look at them all because SV Angel was 13 people. Now, funny enough, I don't do any due diligence anymore. I just help portfolio companies with hard unique problems, but the SV team is completely built out now, and they do all the diligence. Okay, I've had a lot a picker. How does the SV team, how does the SV Angel team work?

Well, we're up to 13 people. If you look at me, you could call me the grandfather because David Lee and Bryan Pokorny, aka Coach, they're becoming the wise old men. I mean, they've been around me now for close to 10 years each, and so they have the pattern recognition. They're now solving all the problems I used to solve five years ago, so everybody's escalating their role. And then you have Kevin Carter and Topher, my son, who are also becoming wise old men because they've been around SV Angel for five years. But we are rifle focused on generational planning. I believe this industry belongs to young people.

And so, you know, Topher and Kevin are getting close to 30, and we've actually said, hey, when you're 30, you know you better make sure we have four or five people at SV Angel in their 20s because the people in their 20s are the good pickers. And then as you get wiser and older, you're a better advice giver to the founder. Interesting, interesting. So, there's that interesting thing that in the adventure business picking and giving advice are different earth skills that peak at different ages. Correct, in our opinion, absolutely.

So, I'm an age bigot, and I keep telling our team make sure we hire and bring in really smart 20-year-olds because in 30 years, I hope they're Ron Conway and they're being interviewed, you know, by Sam. You need investors who actually, he’ll use instant messaging apps that like make the photo disappear and stuff like that. Yes, right? Yeah. Kevin Carter on our team at 24 at the time, he picked that company. He tapped me on the shoulder. He goes, that's important. Go fly to LA and spend time with him. Okay, and that worked out. That worked out.

Yeah, by the way, if you want a list of the companies Ron has invested in, it would be shorter to give a list of the ones he hasn't invested in. Um, just like assume that if you've heard of some big famous startup, Ron is an investor, and you'll, you'll pretty much be right. I just assume it. Um, so what about, um, what should people do? I was just talking about this, what people should do in college if they wanted to start a startup later. What do you think people should do before starting a startup? Do you have opinions about that?

Well, I, you know, what whether or not they're in college for me really doesn't matter because there are founders who didn't go to college at all. There are founders who went to some college and dropped out, and then there's some that went all the way through college. Larry and Sergey went all the way through college and dropped out of the Ph.D. program at Stanford. So I don't think it's about where you're at. I think it's about when the idea comes in your mind, that compelling idea that aha moment that says this is it, this is a company, and it's usually based around a personal experience where you have that aha moment, and you're so motivated by it and taken by it that if you're not in school or if you're in school, it doesn't matter, you stop what you're doing and go pursue that idea.

So what you want to do is you want to set yourself up so you have these aha moments, these personal experiences. Correct? I do. And you could almost be anywhere for that to happen. I mean, for Chad Hurley and Steve Chen, they were at a dinner party, took a video, and found out that there was no easy way to upload that video and just share it with the other guests. With Zuck, it was like, I don't want to go through the physical hardcopy Facebook at Harvard. Why can't that just be on my computer? And then, ten years later, why can't that be on my phone?

You know, so, you know, Shawn Fanning, his roommate wanted to share songs with other people in his dorm, so Shawn Fanning hacks together a music sharing app. So it's based around a need and an idea, and all that creates the huge companies. In all of the cases you mentioned, the need was the founder's own need. Absolutely. All the biggest companies are based on a founder who had a need, hacked it together, and then said, hey, wait a minute, other people probably want this. And then they start to grow on their own.

Notice what you said— the realization that other people might want it comes afterwards. Correct? So it really, it's not even supposed to be for other people in the beginning. Yeah, a lot of it is serendipity, huh? But, but once the serendipity phase gets over, then you need to start thinking about product-market fit. You know, who is the customer for this? It's all about users, which is why YC is so successful. Once you come up with the idea, then the YC's mantra is, well, how do you find users who also want this product? Because unless you create a market, there's no need for the product.

When you look at startups and you're thinking of investing in them, do you care a lot about the story about how they started working on the idea? I absolutely do. I mean, the more compelling and personal the story is, the more excited I get about the company early on, even though I don't know whether or not it's gonna be a huge, huge company. But what I've said probably to a lot of people in this room, one of the first questions I ask is, what inspired you to start the company? And it is an inspiration. You know, when it goes into your head, you are inspired by it. And then you are driven by it.

So do you also care a lot about this story about how the founding team— do you pay attention to that? Yes, they're very important too. And, as I said before, most companies have a couple of founders, and it's very important to know how those two founders met, how they interact with each other. Remember when we first meet them, it's usually two or three people, and I'm always watching how they interact. If one person starts answering the other person's question and interrupts them a lot, you know, ding ding ding—warning signal. Those two founders probably aren't going to get along forever, and they're probably right now fighting about who's gonna be the CEO when in the early days, it doesn't matter who the CEO is. It matters if you can find users and you have a compelling product.

Hmm, so how can these people? They're interested in starting startups. How can they find potential co-founders when they have someone they're thinking of starting a company with? What sort of filter should they apply? How can they tell if this person would make a good co-founder? Well, most co-founders, that you know, when I think about this, most co-founders are collaborating and end up coming up with the idea together. If you look at Facebook, Pinterest, Google, there are two founders for all—two or three—there's two founders for all these companies, and they actually come up with the idea together.

Yes, one of them is the one that says I feel the need, but the co-founder ends up being a friend of theirs or a colleague who says, wow, I agree with you and I want to work on that—not, well, I think that's goofy and I don't want any part of it. But it's the co-founders, usually somebody who shares like 99% of the excitement and inspiration of the person who came up with the idea. So, you don't—Chad Hurley and Steve Chen— you don't just want to work on interesting problems, you want to work on interesting problems with other people.

Absolutely. It's a collaborative process. You know how excited are you gonna get or accomplish something if it's you? I mean, there are single founder companies out there, but very few. Why? Why do you think there are so few? Because I can tell you from looking at Y Combinator applications, a huge number of single founders applying to YC, maybe half the applications are single. Wow, I didn't know that.

Yeah, well no, but like they're just disproportionately unlikely to get accepted. Yeah, so there you go. There you know food. You heard it here. If you apply to YC, there should be two of you, but not if that means like putting something out on Craigslist. Obviously applying to YC, yeah, don't do that. And it obviously can't be forced. So if you get this idea in your head, think about, you know, Mark Zuckerberg or Ben Silverman. Yo, Ben Silverman's idea, when he started Pinterest, was really obtuse. Yeah, where he said, I think people should be using the internet to discover things, and people looked at him like, wow, what's that about?

Well, you know, I used to collect things when I was a kid. If you put those collections on the Internet and enough people put on their collections, people start discovering things that they’re interested in. It sounds so lame, doesn't it? I—history has proven that it was not lame. No, I know, but all, but at the time, I'm so lame—time it took him forever to get funded. So, what did Ben Silverman do? Everyone he talked to, starting with his mother, who I think is the biggest Pinterest on earth, he evangelized his product and talked to anyone he could find and said, what do you think of this?

And then you find someone who says, Jesus, I think that is awesome. That is so interesting! Can I work with you on it? Kaboom! You have a co-founder. You have somebody as excited as you are about this brand-new neophyte idea. Alright, so if you have actually built the thing with another person, that's a good sign that they would make a good co-founder because they have the same credibility as you. Um, so how do people know when their idea that they're so excited about is actually bad? If—what if—how can they tell if a lame-sounding idea is actually lame or if it's just one of these ideas that sounds lame in the beginning because it's such an outlier?

Well, I mean, you have to be careful about that because a lot of ideas that seem like they're bad end up being huge. So, I think it’s about persistence and conviction about your idea. How can you tell as an investor? Oh, see, these couple of the ideas seem still seem okay. As an investor, I cannot tell that. All SV Angel invests in is people. So, we—and so, yeah, we don’t even know. We cannot predict the success or failure, and 40% of our investments fail. We think that failure rate is lower than most of the industry, but we can’t tell. So we invest in the traits of the individual.

Okay, so let's talk about specific individuals. Ben Silbermann, for example. What traits did he have that made you invest? Okay, for him, it was his rifle focus on the product. Now, keep in mind, rifle focus on the product also applied to Larry and Zip, you know, Dropbox, AirBnB. It applies to every successful founder is they were rifle focused about the product to the point of being rude. And a lot of them get accused of being arrogant because they're so focused on the product.

Because other people will say, hey, will you come to this event, or will you get interviewed by the New York Times? And they're going like, why would I ever want to do that when I can make my product better? Because guess what? I went from ten thousand users last month to twenty-five thousand users, and in the next month, if I can get it to fifty or a hundred thousand users, why would I want anyone to distract me with anything else? And that focus on the product is what builds huge companies, and it's so contagious other people want to come join your team and help you.

But some of the ones that were counterintuitive would be like an Airbnb. Like, they want me to share a room in my house. But the 2008 mortgage crisis in New York helped Airbnb because in New York in 2008, there were thousands of people. If they didn't rent out a room in their house, they were gonna be foreclosed on. And that was the mushrooming of Airbnb. And then, lo and behold, they found out that every single person on earth wants to do this.

Yeah, it's sort of this move. It's a worldwide phenomenon. Dropbox would be another example. I already have a storage device. Why would I want to move to the cloud? What's that? Do you remember when you first met Drew Houston? Yes. What was it about him that you liked? What traits did he have? Well, shame on me, I didn't invest in Dropbox right away. So I was, you know, I—in that case, I saw a great entrepreneur, and I sometimes we do get over-opinionated about the idea, and that is always a mistake when we do. Dropbox and Airbnb, we love the founders—geez, that idea. The idea is not our job, in my opinion, you know. Our job is to invest in great, great founders.

I know this sounds like an insulting question, but it's really interesting— you've been doing this for 20 years, why are you still making this mistake? Nope. I mean, it's interesting, right? If there's—there must be like this—it's really powerful magnet, like blowing you off to the city. It's a very risky business, and since the beginning, you know, SV Angel kind of invented the portfolio approach to investing. I always intuitively thought there’s no way I'll ever make the right decision every time.

So I'd rather make the right decision about a certain marketplace and then go find the 20 best companies and hope one of those wins. And that strategy ends up, you know, it's a great strategy. When you started, you had this little niche marketplace called the Internet—Internet Software, right? It was, I'm not joking, back in 1994 when I started this was—much investing in 1994. Marc Andreessen had just graduated from the University of Illinois, had not started Netscape, but in 1994 I had finished doing three startups and had dabbled in angel investing and said I want to do this for the rest of my life.

I teamed up with Ben Rosen, who was then the chairman of Compaq, and we said—and we both had plenty of gray hair at the time—and we said, okay, let's go angel invest together. Okay, what are we going to invest in? Because we weren't going to invest in everything. And we said, let's invest. You said not hardware. Yeah, for sure not hardware. I've already done that, and for sure not packaged software because I had done that as well.

And we said, let's invest in this thing called the Internet because it's at zero and we can watch it grow, and therefore it'll be interesting and exciting. And 20 years later, that is all we're doing: internet software. So, I noticed the words you're using here. You haven't mentioned that thinking about money. I—I think that—that you mean making money? Because your investors, everybody thinks investors are like in it for the money, right?

Well, my view, I'm in it because I love meeting great founders, helping them, and watching them be successful. I get to meet people before they're famous. And there is nothing more satisfying than giving advice to a Mark Zuckerberg, a Ben Silverman, and a Larry Page in the first two years of their existence, and then watching them fly. Watching this rocket just—just watch the rocket ship take off and say, wow, I was part of that. I put the first gas in the gas tank of that company.

So I think money, fame, fortune, notoriety—that's all byproducts of working your ass off. You know, I noticed a similarity between the way you operate and what you look for in founders, right? The founders aren't in it for the money either; they're just trying to make this amazing product, and the company's success is a byproduct. Right? You just like are super into these founders, and SV Angel investing in all these companies is a byproduct, and that's why we all like each other.

Yeah, even though when they get famous, I don't see much of them, but we have—we are kindred spirits. Hmm, does it help you, you think, as an investor, to have been a founder yourself? For sure, for sure. Because I know how hard it is. So if I hadn’t founded a company myself, I wouldn’t feel like I had as much credibility. Why more? Does it help you pick people because you were literally looking for kindred spirits? Yes, yes, it does. Yes, it does. Because you say, hey, will this person work 24/7? Is this person a good communicator? Will they follow through?

So, here's a question. Um, if someone—if a founder was gonna fool other investors but not fool you because you had been a founder yourself and you could recognize kindred spirits, what would this founder be like? What are the kind of founders that would fool other investors but not fool you? What do you not fall for? Well, I'm gonna go back to the focus on the product I see. And so if they don't care a little too much about the product—correct, then that's a warning sign. And that trait—ten-year.

Okay, I've been doing this for 20 years. That trait didn't start pinging in my brain until like ten years ago, and then five years ago, it became alarm be. Could be because—and a lot of it, probably Ben Silbermann was probably the tipping point, where it's all he cared about. And then from pattern recognition, I said, wow, that's all Larry cared about; that's all Jack Dorsey cared about; and I said, Saul Steve Jobs cared about; and that's all—yeah, that’s—that's all these great people care about—it’s focus, focus on the product.

There's a guy at Pinterest, Tim Kendall. I hope he has a hundred of these shirts because he wears the same shirt every single day of the year. He's the head of product there, and it's a circle with the word focus. And even when they have outside visitors who are like super important, he will walk into the room with his focus t-shirt, and he's not taking it off. But boy does that count. Hmm, hmm. Okay, so you might think like you're trying to start a startup; he's trying to start a business; you should be business-like. Right? And the lesson here is really, you should focus almost too much on the actual product.

Yeah, because if you focus on the product, obviously the only way to measure success of the product is users, and you will keep tweaking that product until user growth starts to explode, and then you jump for joy and go for billions of them. So, you focus on the product, and the business follows. Correct? Okay, so what do young founders specifically get wrong when they start companies? If you see a young founder and you think, oh my god, that's such a noob mistake. These guys are—you know, these guys look promising, oh, but they're so young, they're doing X. Right? What do young founders do wrong?

I think, you know, it would be lying to yourself after you know you’ve prototyped the product, it's in the market place, it's not getting traction. It's not admitting that guess what? It's not working. And it's great if the founder says, hey, stop the train. This idea is not working. What do we need to do to make this idea work? Because success is binary. You are either successful or you’re not. Your product is getting traction or it's not. It's not getting traction. The sooner you admit that and start doing things about it, the better off everybody's gonna be.

So they're too prone to remain in denial. Correct? And when they get older, they've learned to realize these warning signs of denial. It's true in many domains, actually. So just being honest with yourself. What's funny is your team will recognize it and admit it before you, but of course they would never discuss it with you. So when you say, hey, guess what? You call everybody in and have a come-to-Jesus meeting and say, this is not working. Everyone in the room in their heads is going, oh my god, the founder knows. Awesome! This is awesome!

Now we're a team. Now we can go do something about it. And the founder thinks morale is gonna go down as a result of this meeting, when in fact morale explodes because the team says, Jesus, we're in trouble, but we all know we're in trouble, and we're all gonna figure it out together—not the founder by themselves trying to figure it out. You know what that reminds me of? It reminds me of you worry what happens when you fire somebody or you remain in denial about it for a long time. Yes, and you finally do it, and you fire them.

And you think morale is gonna go down, and actually everybody's delighted because they knew. I would say firings and layoffs, you know, if you're running low on money, you have to face the fact, and you have to lay people off. Well, when you lay people off, that is not a good thing for the people getting laid off, but for the people who are remaining in your company, they are saying, wow, my founder is here to survive and so we're not just gonna spend the money until we go out of business.

And when you lay people off, you tend to lay off the deadwood, you know? And when deadwood leaves a company, morale explodes because the remaining people say, wow, we're not wasting money on them anymore. I can work harder and take all those people's place. I just want to pause for a moment. Is there anybody back there? This clock here says 25. Does that mean we are all ready? Hello, Jessica, are we over? Is that what that 25 means? Okay, operate. Someone should be waving romantically. We just got so excited talking about this stuff. Alright, there's a lot to talk about. Is there anything else we should talk about? Because we're already over. Hopefully, you have gotten something out of this. I like talking to Ron.