Godfather of Silicon Valley shares angel insights

Ron Conway, known as the Godfather of Silicon Valley and part of SV Angel, came to Campbell to talk some shop, angel investing.  Of the many companies he has invested in, some noteworthy ones are Google, Facebook, PayPal, Square, AskJeeves, Foursquare, Mint.com, and Napster.  He may know a thing or two about funding the next big thing.

Since 1994, Conway has been doing angel investing in solely internet software.  He is one of six people for SV Angel, which is on its third fund of $30M.  In 1999, 80% of the portfolio went out of business with him commenting, “Thank G*d we invested in Google”.

SV Angel investing priority is 1) idea, 2) people, then 3) market size.  They invest an average of $50K-$200K.  For $3-5M company valuations, they usually own 1-2% of the company and when there is liquidity (e.g., IPO, aquisition), they typically own 0.5% of the company.  About 1/3 of its portfolio fail, 1/3 are base hits and get 1-3 times money back, and top 1/3 are big hits and get 4-5 or “Google” times money back.

About 2.5 years ago, SV Angel picked a broad theme of real-time data with concentration in sectors such as social, mobile, big data, social commerce, social collaboration, and offline to online.  They will invest in 20 companies in each sector.

Getting SV Angel funding is as easy as sending a one-page executive summary via email.  However, the email is typically from someone they know or through a reference.  After receiving a deal via email, a weekly investment committee votes on whether they make a phone call.  After the phone call, they vote whether to have a face-to-face meeting.  By the time that they meet the company face-to-face, the companies are actually further along than the company thinks in getting funding because of the evaluation process.  I personally asked him when do they invest in just the idea without any prototype or traction, he answered, when they personally trust and know the entrepreneur’s track record already.  As an example, Conway thinks very highly of Sean Parker.

The stats on your chances to get SV Angel investment:

    • 25 deals per week from email
      • 5 new deals a day via email, which are usually from people they already know or through a reference
    • 10-15 deals per week get phone call meetings
      • 2-3 deals from emails a day DO NOT get a phone call meeting
    • 5 deals a week get face-to-face meetings
    • 1 gets invested typically out of 30

Not ready for funding yet, but want to know if you are a good entrepreneur investment for SV Angel?  Here are some traits that Conway seeks when evaluating entrepreneurs.  The term “flexible entrepreneur” was mentioned several times during his talk.  Can a person be a leader?  Form / recruit a team?  Ninety percent of the time, the founding team is a group of 3.  Good group dynamics is very important.

Lastly, if you are clueless about starting up and you want to do an accelerator program, Conways says “The Harvard of accelerators is Y-Combinator”.

From the ZURBsoapbox website:

Ron Conway has been called the “Godfather of Silicon Valley” as well as “the man who has placed more bets on Internet start-ups than anyone else in Silicon Valley.”

He has been making “angel” investments long before angel investing became cool. In fact Conway has been doing it for such a long time and so prolifically that he has revolutionized the angel business.

For the past 15 years Conway has invested in more than 500 companies among which are Google, Facebook, Napster, Digg and many many others. Conway’s first fund, Angel Investors I, raised and invested in 1998, generated a 7 times return. His second fund raised and invested during 1999 saw a 1.5 times return.