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He's start-ups' best friend

Ron Conway is not a household name. But this 'angel investor' has helped many Silicon Valley ventures take off. His support is considered the kiss of life for people with an idea searching for funds.

April 29, 2010|By Scott Kraft, Los Angeles Times

Reporting from Mountain View, Calif. — Evan Beard, a 23-year-old fresh out of Duke University, and his college classmate had created what they just knew was a great product – a cool new way for people to manage their mountains of email.

But they needed an angel, someone willing to gamble on a two-man venture with no balance sheet, no revenue and no profit.

They were praying that angel would be Ron Conway, a grandfather with a thick head of silver hair who, though barely known outside the tech world, is the most influential and best-connected angel investor in Silicon Valley.

When Conway said yes to the company, Etacts, a few days ago, three other investors quickly fell in line.

"Once Ron is in, everybody wants in. It's like a snowball effect," said Beard. "For us, it's game-changing."

In the Silicon Valley ecosystem, the most vital organism is the Internet start-up. Hundreds are born each year. Most die in infancy.

Since 1995, Conway has invested in 500 start-ups, including Google, PayPal and Twitter. He puts his money down before the large venture capital firms show serious interest, and his stake is relatively small, about $200,000 or less. But his investment gives a company instant credibility and an unrivaled network of contacts.

"He is phenomenal – by far the most helpful individual investor I've ever had," said Marc Andreessen, co-founder of Netscape and a board member of Facebook and EBay. "He's like a human network router. He just connects people all day long."

A few years ago, a Web-based voice technology start-up called Tellme Networks was burning through cash and about to lose a major potential customer, Verizon. The company wanted to appeal directly to Verizon's president, but no one knew him well enough to get a meeting.

"We were at wit's end, trying to figure out how to turn this dire situation around," recalled David Weiden, then Tellme's vice president of marketing.

Conway was one of Tellme's smallest investors, and Weiden had never met him. But Weiden sent an e-mail after 11 one night begging for help.

Conway replied within minutes: "AM ON IT."

"When I got up the next morning, he had delivered," Weiden said. Tellme got the meeting and made the deal, which eventually was worth more than $100 million. A few years later, Microsoft bought Tellme for $800 million.

As America pulls out of recession and Silicon Valley's innovation engines stir back to life, Conway's investment firm, SV Angel, has $10 million invested in 50 budding enterprises. He's adding investments at the rate of two or three a month, in companies with names like Scoopler, Topsy, Blippy and Hot Potato.

His current focus is "real-time data" companies that help people share what they're doing instantly – using text, photos and video. "This sector is going to be huge," he said.

Among companies Conway is betting on is Bump, which allows people to exchange information by touching their cellphones, and Daily Booth, a website where users document their lives in photo self-portraits that they share with friends.

"Angel investors make really scary, early-stage investments in companies that are in a Darwinian fight for existence," said Paul Saffo, a technology forecaster and professor in Stanford's engineering school. "They need nerves of steel."

In that world, Saffo said, Conway is in a class by himself. "If Ron Conway didn't exist, we'd have to invent him."

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Conway steered his black Mercedes down the 101 Freeway recently from his home in San Francisco to the quiet suburb of Mountain View, where the founders of two dozen Internet start-ups had gathered to hear him speak.

The venue was Y Combinators, a kind of "American Idol" for geeks that helps entrepreneurs turn promising ideas into businesses that will attract investors.

Paul Graham, one of the founders of Y Combinators, introduced Conway as "the top angel investor in the Valley. No one debates it. But he's very hard to convince, so if he does offer you money, I suggest you take it."

"Please!" Conway interjected, touching off laughter in the room.

Conway, 59 and stocky, wore his customary uniform: an open-collar dress shirt, rumpled khakis and black loafers. No one in his audience of entrepreneurs in frayed T-shirts and shaggy manes appeared to be over 30, and they hung on his every word.

"The first time I sat down for coffee with Mark Zuckerberg," Conway told the group, referring to the co-founder of Facebook, "he was in shorts and flip-flops. And I remember he said, ‘I'm going to have 300 million users.'

"We're looking for the next Google and the next Facebook, and believe me, I'm sure it's in this room," he said.

Conway doesn't use and rarely even tries the cutting-edge products he invests in. He scribbles appointments in a dime-store spiral notebook, and his Facebook and Twitter accounts lie dormant. He enjoys reading newspapers.

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