David Lee and Ron Conway Bust Entrepreneur Myths on Stage at Disrupt

But all my deal flow goes to SV Angel Ya, just special.

So, you guys have done something awesome, you've done a survey of how many start ups? Five hundred of them or something?

Yeah And there's just some great data that's come out of that, and we're gonna get to that in a minute, I have a couple of questions for you guys before we jump into that, if you don't mind?

Blast away.

The first thing is; there are rumors that you guys have another fund that you've raised. And do you have a comment on that?

I'm supposed to not comment, so no comment.

Okay. So I'm a investor in that fund, and I wanted to disclose that right up front, so whether not that fund exist according to you I am pretty sure that it does, I don't know if I actually made the investment but it is happening, so-

I have a new watch, by the way.

-So, sorry if that wasn't how you wanted that disclosed. But we need to get that out of the way out front. You guys invested with Yuri Millner from DST in all Y Combinator companies in the previous class How many companies was that, was it forty four in the class?

Forty four, yeah.

How many took the investment?

Forty four, well, forty three.

Who was the one that didn't?

One didn't, they already financing.

Was that liked a little?

That was liked a little.

It was liked a little. Because they were already taking financing from you or other people?

Truthfully, well they they taken financing from, from other investors I'll say.

In Jason Horowitz?

I'll just say other investors.

Okay.

In addition to us.

And are you to the new class, the sixty one companies I think, the biggest ever, are you going to invest in those as well?

Yep, that's the hope.

150,000 same thing. If you guys, and Yuri, same deal, like.

Yeah, we're going to do it together with Yuri.

OK. So it's like nine million dollars. Are you starting to get a little bit uncomfortable? What if they have 100 companies next time? You're all good, do you like the investment?

No, yeah, we're going to in the short term at least, or the foreseeable future we're going to stay committed to this, with the same idea we think that these are some of the best founders around certainly there are other founders that, you know great founders, that don't come out of YC. But we've known and worked with Paul and Jessica for awhile, so we want to stay committed to it.

And the screening process that Y Combinator has to pick the sixty one companies of this class and how ever many are in the next class. That screening process is so impeccable, we feel very comfortable with the quality of the companies that they end up with. Thousands apply.


Of the 44 from last time, how many those have you invested separately as well, additional rounds whatever.

Thirteen.

Thirteen of them. All right. OK.

So a lot of innovation is happening at Y Combinator.

So the data that you guys, we have some slides we're going to put up. Talk to me about what the survey was, I guess to start, as the intro to this.

Sure, so, I don't know if it's here we go, there it is. So this is what we did. So we asked about 500 or so founders that either Ron has invested in or SV angel has invested in. We asked them various questions, some of them pretty expected, age, sector, and some of them a little bit more obscure. Basically what we wanted to do is we wanted to figure out is there a way from the data where you can pattern success, and for now we created two definitions of success.

The first definition is, did the company have did the company have an actual exit of around 25 million? r do they have the potential to have that type of exit? The second definition is sort of the black swans or the home runs. Who has had actual exits or who do we think has the potential to be that type of company.

So this is 500 companies over what, a decade?

Probably like 10 to 15 year period, yeah.

And how many responded?

About three hundred, so far.

Okay, so the data set is three hundred start-ups over a ten year period.

Yeah. And we're still collecting the data.

Okay.

Which says a lot about our founders, 'cause I bet that only fifty would reply and we have three hundred already. We love founders.

So what do you got?

So, for here we wanted to look at the three sort of common myths of founders. The first is, are co-founders better than a single founder? The second is whether age matters. And the third is whether or not repeat founders do better than first-time founders.

But you asked lots of questions beyond these, right?


Yes.

Were these the three that had statistically relevant, interesting results, or?

Yes, and also we because these are the three that often come up in terms of sort of conventional wisdom, that, you know, a younger founder is better or multiple founders are better, repeat founders are better, so forth. So we wanted to tackle these three first.

What about female versus male founders? That's, I think, an interesting thing that Yeah, I meantalks about.

Honestly, it's for better or for worse. The data was so overwhelmingly male, probably 95% male. We have that data.

You guys just don't invest in female founders, then, is what you're saying?

Well we're gonna go increase that and then bring the data next year.

Yeah.

OK, alright.

Now that we know it's not acceptable Have you ever invested in a female founder?

Oh, yeah. Yes.

Any of them?

Some in New York, some in New York. And Jen Beckman, others, so, yeah.

OK. So what do?

So the first one that I'll jump in, the first slide that we we'll jump into is co-founder versus single founders. So, this one is probably the most predictable, and so what it says here is that.

Sole founders don't do well compared to?

Basically yeah, or, co-founders do better. So, in the 25 million dollar exits, 84% were co-founders, in the 500 million dollar exits, 89% were co-founders.

Had more than one founder?

Yes, yes.

And, so Ron I think has a lot of good history here in terms of his experience with co-founders.

Yes, just some examples to bring up, a sole founder, for sure, has a tougher time. Two come to my mind. One is a company called Zoomer that had a lot of attention four years ago, founded by Christopher Tate. He was a sole founder and I think he had a hard time. t's also a hard space. You look at Andre from Chat Roulette, he is a sole founder and Chat Roulette has not really found it's way yet.

Do you consider Facebook a sole founder? Oh, Facebook, definitely, multiple cofounders.

Which company is this in the 500 million plus? There's at least one company for the 11%, what are those companies with a sole founder?

For sure Google is in there, look at Larry and Serge.

No, but, for the sole founders 500 million dollar exit.

Oh, I'm sorry.

Oh I mean, I would have to look at the data for that.

You had an exit of 500 million dollars or more and you have to look at the data?

A lot of this is our opinion as well, so this is somewhat subjective.

Oh, because sometimes these aren't actual exits, they're what you predict.

Exactly. So this is subjective. t's when we looked at it as a group, we said hey, we think this has.

OK. I know Paul Gran also feels very strongly there should be two founders, right?

Yes, at least.

And we think this data shows that companies with multiple co-founders definitely more successful, and the other thing that's interesting to look at, is, do they complement each other? And if you look at Larry and Sergei at Google, they definitely complemented each other, both of them very technical.

All of these companies it's interesting, all of the founders of the super successful companies all the founders tend to be technical, but one or two of them also have a business sense and that was the case with the with Larry and Sergei at Google. If you look at a company that wasn't successful but could have been if people behaved themselves, Napster today could be a multi-billion dollar market cap company.

I have always said people's egos got in the way. But if you look at Sean Parker and Shawn Fanning That goes for the whole entire music industry, right with Napster?

Yes. There was a...

Well, with those two, one had more a business sense, and one had more of a product sense, Sean Fanning on the product side, Sean Parker on the business side.

Zynga, I assume, is a single-founder company, right?

Zynga is definitely in the single founder. He, Mark Pincus, would be in the 11 percent.

You had a, I thought data, it looks like you're not including it, but didn't you look at whether you had technical versus nontechnical founders?

Yes.

And wasn't the data sort of surprising in that nontechnical founders tended to do pretty well?

Yeah, I was, we were, because we always say there's a conventional wisdom that you always have to have one coder and at least in the 25 million dollars bucket. I think it was decent percentage that do not have a technical personnel 35% to 40%.

Let 's go to the next one.

Well, I have a little anecdote on Facebook. Facebook had, it ends up probably five or six co-founders, but I didn't know that in the early days of Facebook. And in 2006, Facebook had a party for celebrating two million users so if you can imagine that 2 million users on Facebook and in 2006, that was something to party about.

nd at this party was all of Facebook, 40 people, and there were a few faces I didn't recognize which seemed a little strange to me because some people flew in for the event. And I went up to these people and I said, who are you? I'm a co-founder of Facebook. That's why I flew in for the party." And then I said it to another guy, and he said he was a co-founder, he flew in for the party.

And then I knew the other co-founders who were working on site at Facebook, and at this party, when I got up to five co-founders of Facebook...

You started calling bullshit, right?

I started to say this is bullshit. Now this is at a party in kind of a night club environment, you know, a little dark. But I chased around and found Mark Zuckerberg and I said, "Mark, come over here." I had assembled the five, because I was going to call one of them out.

I said, "Mark, all five of them say they're co-founders. Who's the bullshitter?" And he said, "Ron, nobody's bullshitting." I said, "But it was founded in your dorm room!" You know..."How'd you get five people in the dorm room?" Because...

Yeah, but it was in front of them though, right?

It was with them! The five were there!

I mean, the movie...clearly Zuckerberg was the founder, right? I think that's a historical...

Right.

...accurate historical document so...

Right, right.L lright? You want to be a co-founder? You're absolutely a co-founder.

Yep.

I just can't pay you.

But they actually fit into a suite.

Yeah.

I didn't know Harvard had suites.

Age. I love this one.

Age. So it turns out that.

Old people suck and start ups.

Yeah. Well, I can say that because I'm 41, so, for the $25 million exits, it 's hard to glean any pattern. It's about, let's say, you know, roughly 50/50. But for the larger exits, it looks like age matters. Just from this data, sort of being younger, sort of helps for some of the bigger exits.

You've told me that entrepreneurs sort of look like professional athletes in the terms of like their peak age, and things like that. I don't know if you meant it exactly one to one, but you seem to like entrepreneurs who are around 25 the best, is that right?

I mean, it depends on the sector, so I think for consumer Internet, we talked about it, it's sort of like football, having a lot of energy, being single minded, working harder, being smarter can really make a difference for other sectors.

Is that the main thing though, you can sort of talk them into working 24 hours a day because they don't have families yet? Or, do their brains more.

I mean, just when you're younger, you tend to have less distractions, right?

Right.

You can just single-mindedly work on one thing without affecting other parts of your life. Whereas other sectors, I think it's actually, it's a benefit to have some gray hair, because your Rolodex is deeper.

What anecdotes do you have about this Ron?

I think the entrepreneurs who are a little older when they start, are a little more conservative about if I can get an exit that's safe, I'm going to take that, and I think the younger entrepreneurs are willing to slow brew their company and take more chances and.

Can you give an example?

Facebook would be the best example of this decade of a company that was slow brewed with very, very patient co-founders.

And he had plenty of buy out offers over the years?

Exactly.

Yeah.

Which.

And he had his board telling him to take them I woud assume, right?

In some cases, I think he did.

Yep.

But in this case, those buy out offers gave him confidence that this must be a great idea. We can build a huge company here. Groupon, younger in the cycle, but Andrew Mason is another very patient entrepreneur.

How old, was he 30?

Andrew was 28 when he started the company which was.

So he's an old guy according to you though?

Well he's at the cusp. He 's getting close to getting gray.

Getting too old to fund?

Twitter is another one who isat the cusp at founding. You know, at the founding of Twitter, Jack Dorsey, 30 years old, Ev probably a little bit older, but we put Jack in the young category. And once again Twitter is on a slow brew, and also gonna do very, very well.

Let's look at the last slide, this is the most stunning. Repeat founders versus first time founders. And this doesn't mean their first venture was successful right?

Right.

It's just means that they had been an entrepreneur before and now they're on the next one that you're funding?

Exactly.

I mean this is pretty staggering.

Yeah.

That 90% of the big exits are not first time entrepreneurs.

Right, and even for the smaller exits, there's.

It's two thirds.

There's a disparity yeah.

So does this mean that you guys just don't like funding first time investors, well entrepreneurs? Y Combinator obviously almost always first timers I mean it's so hard to say, because when we looked at the data, some of the data is, you know, a lot of these founders, they started a business in their dorm room. They started a business when, so it's not a business as sort of Silicon Valley thinks of a business where they got VC funding.

Yep.

But they did start a business. They made money. They either sold it, or they paid their way through college.

I want to know.

But it still is.

What the 10% company is. I bet that's the same company on the previous slide that's the single founder. It's the single founder who was a first time entrepreneur.

Right here by the way.

What Company? You said you didn't know. Is that Facebook? Do you consider Facebook, well you don't consider it a single founder, so.

Yeah, definitely not a single founder, and it's Zuck's first company.

You know, Shawn Fanning is an interesting example because you invested in him sort of the whole way through.

Since he was 18.

And how old.

He's John start up number 5, and I bet you he will do 9 or 10.

How old is he now, about 30?

Shawn's 31.

Do you like Shawn at 31 or do you like Shawn at 18 better as an investor?

I like Sean at 31 better, because he has more experience, and he's learned from that experience, but when he was 18 he was still a very wise person. At the time, he was wise about what was in the mind of music lovers and the product that they wanted to see. He was a product visionary. Ten plus years he has picked up a lot of business skills that allow him to make even better decisions.

But he's still a product visionary who has picked up on business.

David, you agree? You like old Shawn versus young Shawn?

Yeah, I mean I didn't know young Shawn, but I think old Shawn still is This is his life, what he's doing in terms of technology, in terms of working with consumer media. And so that you would invest in that type of person any time.

Once an entrepreneur, always an entrepreneur.

Any other interesting anecdotes here?

Well, when you think of the repeat entrepreneur companies, think about Evan Williams with Blogger, which was successful, sold to Google. Then Odio - not successful. Then Twitter - gonna be very, very successful.

Yep.

Think about... go way back to a company called Link Exchange, founded by Alfred Lin and Tony Hsieh. And they came back. Their second company, also hugely successful, but it took ten years. That was on a very slow brew: Zappos. Huge, huge success. Look at Marc Andreessen. Everyone thinks that Opsware was his first company.

No, Netscape was his very first company that Mark founded, then off to Opsware, so there's two in a row. Dennis Crowley, at Foursquare started with Dodge Ball and now Foursquare, two successes in a row. Chris Pull, a New York entrepreneur, who we met at Chipriani a year ago, and I said, would you like a Bellini?

And then I looked at him twice and said, you probably not old enough to drink. His company 4Chan.

You actually call that a company?

Pardon me?

4Chan is actually a company, instead of a force of evil?

Well I'm bringing that up as an anomaly as a success or not a success? is new company Canvas will definitely be a significant success. But the more experience that the entrepreneurs have, I think the better the better that they're...

But they need to get that experience before they get 25. So you need to start a few companies when you're 18. Doesn't matter if you succeed or fail, just get it under your belt and hit 20 sort of the peak years, get money from you and then you're gonna have a huge exit. If you don't do it by 30, you're done, you might as well just go do something else, right?

And SV Angel is-

That's what the data is telling us.

-And SV Angel is filing that patent.

That's kind of sad, isn 't it ? I mean, I'm forty one. I mean, I'm way too old to start another company, right, and have any hope for success?

Well, the odds are against you, but there's still the outliers.

Yeah. Raise your hand if you're over thirty. Now raise your hand if you're under thirty. Most of the people in this room are over 30 and you just alienated every single one of them.

No, no, no. It looked to me like 50/50.

Yeah, yeah.

This is very early data mind you. So, yeah.

You're going to massage the data a little bit?

The thing I like about investing in an entrepreneur when they are seventeen or eighteen. This entrepreneur we invested in, Zoomer, he was seventeen and at the doc signing, his parents had to be there because he couldn't legally sign the docs.

It just seems something wrong with that.

But I like investing in entrepreneurs who are super young because you literally get to watch their entire progression.

Yeah.

And just being an observer of that is a privilege. Watching Mark Zuckerberg from 18 years old to 28 years old. It's fascinating to watch the maturity that they go through.

Yeah.

To go build a huge, successful company on their own. You know, using their entrepreneurs instincts.

Well thank you very much, both of you, for your time.

Thank you.

And sharing this date with us.

My pleasure.

You can, I believe that we have, or will post this entire presentation, it's only four or five slides, but, on Tech Crunch. Is it up now? It is, so you can download it there as well if you want to take a look at it. Thanks guys.

Thanks again.

OK, thank you. Next up, we got