Ron Conway at Startup School SV 2014
This transcript is annotated! Click on the highlights to read what others are saying. If you'd like to add your own insights, comments, or questions to a specific line, highlight the relevant text and click on the button that pops up.Ron Conway: He’s back! For a day or an hour.

Paul Graham: There are lights behind that thing. Ok so I interviewed Ron on this stage, we're on stage at Startup School 2012, the video is on YouTube. Ron told a lot of the good stories then so I’m not going to ask him about that stuff. 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 working for the man.

Ron Conway: Not that man.

Paul Graham: Not that man, the other man. He is like the investor. I tell YC start ups just this blanket advice, if Ron Conway wants to invest in you, just take his money. So that’s all you have to remember about Ron Conway. Um… a baby?

Ron Conway: YC is procreating.

Paul Graham: 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 the case that some people have it and some people don’t? Because these people are all interested in starting startups right. So I’m going to try and get this stuff out of your brain and blow it out on to the audience. That will be helpful to them.

Ron Conway: Without being sloppy. Umm well I have said before, entrepreneurs are born to be entrepreneurs. And once you are an entrepreneur you’re a serial entrepreneur and you're probably going to start companies for the rest of your life or if you're like Zuck or Larry Page 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.

Paul Graham: So which traits have to be inborn and which can be learned?

Ron Conway: 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.  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 70's, so I know from personal knowledge how hard it is and I started another couple of companies as well.

Paul Graham: And so you think the driven part has to be inborn?

Ron Conway: 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 where you're determined, you're tough, you have a huge work ethic, you're completely rifle focused, then there’s other things 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.
Paul Graham: So how can they tell? How can these people, you know it would save them a lot of trouble if you tell could tell them now whether they are going to succeed in starting a startup. How can they tell if they are driven enough?

Ron Conway: 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 are dating somebody or they are married, they warn their spouse that they are not first in line. That this company dream is first in line and that you have this vocation. 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 are willing to make that commitment then it 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 are.

Paul Graham: So you can use it.

Ron Conway: So you have to be a good communicator. You've got to be able to excite other people.

Paul Graham: For the management part, you can use a trick of leading by example.

Ron Conway: Yes.

Paul Graham: Right, you don’t have to use leadership techniques, you just say I’m going to go do this and everybody goes and does it with you.

Ron Conway: 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 them.

Paul Graham: They don’t have to worry about managing people yet though? That’s like a good problem to have right?

Ron Conway: Yeah.

Paul Graham: It means you have gotten to a certain point that you can afford to hire people that you then have to manage.

Ron Conway: Yeah the first thing you have to do is your idea has to be infectious enough that you have to find a cofounder. Most companies start with at least two people. They usually start with two people who know each other. So they are able to feed on each other's excitement and then go from there.

Paul Graham: So when you're deciding who to invest in, this is not just a way to get Ron’s moneys it's also a heuristic for figuring out what works because how many startups have you invested in now?
Ron Conway: Since this is my 20th year of angel investing, so it's an anniversary just like it’s the 10th StartupSschool. And in the 20 years we have invested in over 750 companies but investing in 750 companies each of which who has a founder’s team. We have talked to thousands of companies about potentially investing because for every company we invest in we look at 30.

Paul Graham: So what woah! Yeah 21,000 companies.

Ron Conway: Yes that’s why  SV Angel is up to 13 people.

Paul Graham: You realize you have looked at 21,000 companies?

Ron Conway: Yes, now I didn’t look at them all because SV Angel has 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's completely built out now and they do all the due diligence, I’m no longer a picker.

Paul Graham: How does the SV Angel team work?

Ron Conway: Well we're up to 13 people, if you look at me, you could call me the grandfather because David Lee and Brian Pokorny aka Coach, they are becoming the wise old men. I mean they have been around me now close to ten years each so they have the pattern recognition, they’re now solving all of the problems I used to solve five years ago. So everyone’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 Topher and Kevin are getting close to thirty and we’ve actually said when you're thirty you better make sure you have four or five people at SV Angel in their 20’s. Because people in their 20’s are the good pickers and then as you get wiser and older, you're then better advice givers to the founder.

Paul Graham: Interesting, interesting, so there’s, that’s interesting that in the venture business picking and giving advice are skills that peak at different ages.

Ron Conway: 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 twenty year olds because in 30 years I hope they are Ron Conway and they are being interviewed by Sam. Actually over the hill.

Paul Graham: You need investors that actually use instant messaging apps that make photos disappear and stuff like that right.

Ron Conway: Yeah Kevin Carter on our team was 24 at the time. He picked that company. He tapped my shoulder and he goes that’s important, go fly to LA, and spend time with him okay.

Paul Graham: And that worked out?

Ron Conway: That worked out.
Paul Graham: 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. Just assume if you’ve heard of some big famous startup, Ron is an investor and you’ll pretty much be right. I just assume it. So what about, what should people do, I was just talking about this, what people should do in college if they want to start a startup later, what do you think people should do before starting the startup, do you have opinions about that?

Ron Conway: Whether or not they are in college really for me does not matter. There are founders who didn’t go to college at all. There are founders who went to some of college and then dropped out and then there’s some that went all the way through college. Larry and Sergey went all the way through college and then dropped out of the Phd program at Stanford. So I don’t think it's about where you're at. I think its' about, when the idea comes into your mind that compelling idea, that aha moment, that says this is it, this is the 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 you're in school it doesn’t matter. You stop what you're doing and go pursue that idea.

Paul Graham: So what you want to do is you want to set yourself up so that you have these aha moments, these personal experiences.

Ron Conway: Correct.

Paul Graham: How do you do that?

Ron Conway: And you can almost be anywhere for that to happen. I mean for Chad Hurley and Steve Chen, they were at a dinner party and took a video and found out that there was no easy way to upload that video and just share it with guests. With Zuck, it was like, I don’t wanna go through the physical hard copy 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. So Shawn Fanning, his roommate wanted to share songs with other people in his dorm, so Shawn Fanning hacked together a music sharing app. So it's based around a need and an idea. And that creates the huge companies.

Paul Graham: In all the cases you mention the need was the founder’s own need.

Ron Conway: Absolutely. All the biggest companies are based on a founder who had a need, hacked it together, and then said other people probably want this and then they start to grow on their own.

Paul Graham: Notice what you said, the realization that other people might need it comes afterwards.

Ron Conway: Correct.

Paul Graham: So really it's not even suppose to be for other people in the beginning.

Ron Conway: Yeah a lot of it is serendipity. 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 YC’s mantra is how do you find users who also want this product. Unless you create a market, there’s no need for this product.

Paul Graham: When you look at startups and you're thinking of investing in them do you care a lot about the story of how they started working on the idea?

Ron Conway: I absolutely do, 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 going to be a huge huge company. But I have said it, 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.

Paul Graham: So do you also care a lot about the story of how the founding team met? Do you pay attention to that?

Ron Conway: Yes, it's very important to understand how, as I said before, most companies have a couple of founders and it's very important to know how those two founders met and 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, ding ding ding warning signal, those two founders probably aren’t going to get along together forever. And they are probably right now fighting about who's going to be the CEO. And 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.

Paul Graham: So how can these people, they're interested in starting startups, how can they find potential cofounders when they have someone they're thinking of potentially starting a company with, what sort of filters should they apply, how can they tell if this person will make a good cofounder.

Ron Conway: Well most cofounders, when I am thinking about this, most cofounders are collaborating and end up coming up with the idea together. If you look at Facebook, Pinterest, Google, there are two founders, 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 cofounder ends up being a friend of theirs or a colleague who says wow  I agree with you and I want to work on that now, wow I think that’s goofy and I don’t want any part of it, but the cofounder's usually somebody who shares like 99% of the excitement and inspiration of the person who came up with the idea. Chad Hurley and Steve Chen.

Paul Graham: So you don’t just want to work on interesting problems, you want to work on interesting problems with other people.

Ron Conway: Absolutely. It’s a collaborative process. You know how excited are you going to get or accomplish something if it's just you. I mean there are single founder companies out there but very few.

Paul Graham: Why, why do you think there are so few? Because I can tell you from looking at Y Combinator applications, we have a huge number of single founders applying  to YC, maybe half the applications are single founders.

Ron Conway: Well, I didn’t know that.

Paul Graham: Yeah well, no but like they’re disproportionately unlikely to get accepted.

Ron Conway: Yeah so there you go, you heard it here.

Paul Graham: It's true, it's true.

Ron Conway: You heard it here, if you apply to YC there should be two of you but…

Paul Graham: Not if that means like, putting something on craigslist saying I’m applying to YC, don’t do that.

Ron Conway: Obviously can’t be forced. So if you get this idea in your head, so think about Mark Zuckerberg or Ben Silverman, his idea when he started Pinterest was really obtuse. 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 as a kid, if you put those collections on the Internet and enough people put on their collections, people start discovering things they are interested in.

Paul Graham: It sounds so lame doesn’t it?

Ron Conway: History has proven that it's not lame.

Paul Graham: Yeah I know, but all those ideas sound so lame.

Ron Conway: At the 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 user on earth, he evangelized his product and talked to anyone he could find and said what do you think of this. 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 cofounder, you have somebody that is as excited as you are about this brand new neophyte idea.

Paul Graham: Alright, so if you have actually built this thing with another person, that’s a good sign that they would make a good cofounder because they have the same credulity as you. So how do people know when they're idea that they are so excited about is actually bad? If, what if, how can they tell if a little 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.

Ron Conway: Well, I mean you have to careful about that because a lot of ideas that seem like they are bad en up being huge. So I think it's about persistence and conviction about your idea.

Paul Graham: How can you tell as an investor? Because you see these companies in a stage where these ideas still seem lame.

Ron Conway: Okay, as an investor I cannot tell that. All SV Angel invests in is people. So we don’t even know, we cannot predict the success or failure and 40% of our investments fail. We think that failure rate's lower than most of the industry, but we can't tell, so we invest in the traits of the individual.

Paul Graham: Ok so lets talk about specific individuals. Ben Silverman, for example, what traits did he have that made you invest?

Ron Conway: Ok, for him it was his rifle focus on the product. Now keep in mind rifle focus on the product also applied to Larry, Zuck, Dropbox, Airbnb, it applies to every successful founder. They were rifle focused about the product to the point where they were being rude and a lot of them get accused of being arrogant because they are so focused on the product. Because other people, we 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 could make my product better, because guess what, I went from 10,000 users last month to 25,000 users in the next month and in the next month I can get it to 50,000 to 100,000 user, 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, 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 that if they didn’t rent out a room in their house, they were going to be foreclosed on and that was the mushrooming of Airbnb. And then low and behold they found out that every single person on Earth wants to do this.

Paul Graham: Yeah, it's sort of this movement.

Ron Conway: Yeah 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?

Paul Graham: Do you remember when you first met Drew Houston?

Ron Conway: Yes.

Paul Graham: What was it about him that you liked? What traits did he have?

Ron Conway: Well, shame on me, I didn’t invest in Dropbox right away so I was in that case, I saw a great entrepreneur but sometimes we do get over opinionated about the idea and that is always a mistake when we do. Dropbox and Airbnb, love the founders, geez that idea. The idea is not our job, in my opinion our job is to invest in great great founders.

Paul Graham: I know this sounds like an insulting question but it's really interesting, you have been doing this for twenty years, why are you still making this mistake? No but I mean it's interesting like, there must be like this really powerful magnet pulling you off to the side.

Ron Conway: It’s a very risky business and since the beginning, 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 market place and then go find the 20 best companies and hope that one of those wins. And that strategy ends up you know, it’s a great strategy.

Paul Graham: And when you started, you had this little niche market place called the internet.

Ron Conway: Internet software.

Paul Graham: Right, it was, I’m not joking, back in 1984 when he started, this was niche investing.

Ron Conway: In 1994 Mark Andreessen had just graduated from the University of Illinois, had not started Netscape. But in 1994, I had finished doing 3 startups and had dabbled in angel investing and said I wanna do this 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 ok lets go angel invest together. Ok what are we going to invest in, because we weren’t going to invest in everything and we said lets invest in-

Paul Graham: You said not hardware.

Ron Conway: For sure not hardware, I had already done that and for sure not packaged software because I had done that. 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 will be interesting and exciting and twenty years later that’s all were doing. Internet software.

Paul Graham: So I noticed the words you are using here, you haven’t mentioned anything about money.

Ron Conway: I think that, you mean making money?

Paul Graham: Yeah because you're investors and everyone thinks investors are in it for the money? Right?

Ron Conway: 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 BF. I get to meet these founders before they are famous and there is nothing more satisfying then giving advice to a Mark Zuckerberg or Ben Silverman or Larry Page in the first two years of their existence and then watching them fly.

Paul Graham: Watching this rocket just take off.

Ron Conway: Just watch the rocketship take off and say wow I was part of that. I put the first gas in the gas tank of that company. I think money, fame, fortune, notoriety, that’s all by products of working your ass off.

Paul Graham: You know, I noticed the similarity between the way you operate and what you look for in founders. The founders aren’t in it for money either, they are 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 and all the companies is a byproduct.

Ron Conway: Yeah 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 are kindred spirits.

Paul Graham: Does it help you, you think, as an investor to have been a founder yourself?

Ron Conway: 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.

Paul Graham: Why then does it help you pick people? Because you were literally looking for kindred sprits.

Ron Conway: Yes it does, yes it does because you can say hey will this person work 24/7, is this person a good communicator, will they follow through?

Paul Graham: So here’s the question, 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?

Ron Conway: I’m gonna go back to the focus on the product.

Paul Graham: I see. So if they don’t care a little too much about the product.

Ron Conway: Correct. Then that’s a warning sign and that trait, 10 years, okay I’ve been doing this for twenty years, that trait didn’t start pinging in my brain until like 10 years ago and then five years ago it became an alarm because, and a lot of it, probably Ben Silverman was probably the tipping point where that’s all he cared about. A then from pattern recognition, I said wow that’s all Larry cared about that’s all Jack Dorsey cared about, and-

Paul Graham: And that’s all Steve Jobs cared about.

Ron Conway: And that’s all, yeah, that's all these great people care about is focus, focus on the product. There’s a guy at Pinterest, Tim Kendall, I hope he has a 100 of these shirts because he wears the same shirt every single day in 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 and boy does that count.

Paul Graham: Okay, so you might think like, you try to start a startup, you try to start a business, you should be businesslike right? And the lesson here is really you should focus almost too much on the actual product.

Ron Conway: Yeah because if you focus on the product, obviously the only way to measure success in 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.

Paul Graham: So you focus on the product and the business follows.

Ron Conway: Correct.

Paul Graham: Okay, so what do young founders specifically get wrong when they start a company, if you see a young founder and you think “oh my God” that’s such a new mistake, these guys, you know, these guys look promising but oh they’re so young they’re doing x. What do young founders do wrong?

Ron Conway: I think, you know, it would be lying to yourself after you know you’ve prototyped the product, it's in the marketplace, 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 stop the train, this idea is not working, what do we need 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 not getting traction. The sooner you admit that and start doing things about it, the better off everybody’s gonna be.

Paul Graham: So they’re too prone to remain in denial.

Ron Conway: Correct.

Paul Graham: And when they get older they’ve learned to realize the warning signs of denial. That’s true in many domains actually.

Ron Conway: 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 guess what and you call everybody in and have a come to Jesus moment and say this is not working, everyone in the room in their heads is going omg the founder knows, this is awesome. Now we’re a team, now we can go do something about it. And the founder thinks morale is going to 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 going to figure it out together. Not the founder by themselves trying to figure it out

Paul Graham: You know what that reminds me of, it reminds me of when you fire somebody. You remain in denial about it for a long time and then you finally do it and you fire them and you think morale is going to go down, when in fact everyone’s delighted because they knew this person was terrible.

Ron Conway: I would say firing and layoffs. You know if you're running low on money, you have to face that 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 remaining in your company, they’re saying wow my founder is here to survive. So we're not just gonna spend the money till we go out of business and when you lay people off, you tend to lay off the dead wood. When dead wood leaves the company, morale explodes because the remaining people say wow we're not wasting money on them anymore so I can work harder and take all those people's place.