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Legendary Silicon Valley angel investor Ron Conway is raising a new fund for his investment firm SV Angel, according to an SEC filing.So far, he’s raised $12 million out of $40 million planned. He should have no problem raising the remaining $28 million. Conway is a legend in the Valley, deeply connected to every corner of the technology industry, thanks to his prolific funding of startups.
Conway was making “angel” investments long before angel investing was cool. He has been doing it for so long, and so prolifically, that he has revolutionised the angel business: A look at his investments since 2005 reveals his SV Angel fund alone has put money into at least 228 companies.
Conway’s prolific method of investing may strike outsiders as odd, but it’s clearly working for him and his companies and a whole generation of Valley entrepreneurs. It has made him money, and landed him right at the nexus of Silicon Valley’s power players. It has also made him one of the most powerful–and feared–players in the Valley.
Conway is so powerful and so feared, in fact, that almost no one we spoke to about him was willing to go on the record. Most people we spoke to were scared that Conway would retaliate against them — and ruin them. One person observed that Conway isn’t called “The Godfather” for nothing.
“The Godfather of Silicon Valley”
Ron Conway’s angel investing has been portrayed, at times by himself, as an act of near charity. He says he’s doing it for the entrepreneurs, not to make money.
Last year, when a group of angel investors were said to be colluding to keep valuations low, Conway rebuked the other angels in an impassioned email where he wrote, “I invest because I love helping entrepreneurs and watching them learn and succeed.”
He also said of his fellow angel investors, “In my opinion your motives are driven by self serving factors around ego satisfaction and ‘making a buck’. My motives and values are very different.”
But, for all of his rah-rah, feel-good talk, Conway is a bare-knuckled bruiser who will bully, and intimidate, fellow investors and his own entrepreneurs if they cross him, or do something he doesn’t like.
BusinessWeek recently reported that a former Twitter employee who refused to sell his shares in Twitter to Conway’s Twitter fund felt threatened by Conway. While that employee and Conway have since cleared up their issues, the former Twitter employee wasn’t the only person who’s felt threatened for doing something Conway didn’t like.
After covering the Twitter story, we heard from multiple entrepreneurs and investors about Conway. Much of what we heard was complimentary: There’s a reason he’s a legend, and people clamor to get investments from him. But alongside the glowing reviews was an undercurrent of fear. Some people think he has too much power. And some people say he abuses it.
What emerged was a portrait of an intimidating man who has more power in Silicon Valley than many outsiders know and many insiders feel comfortable with. What also emerged is that, as with many powerful people, Conway’s influence comes from a combination of positive forces and negative ones. Many people in the Valley want Conway’s help. Many people are also so scared of him that they won’t risk crossing him.
As one source put it, “When people call Ron, ‘The Godfather of Silicon Valley,’ they don’t know how true that is.”
What follows is a profile of Conway based on speaking with numerous high level, veteran Valley players. Conway declined to comment for this story.
Ex-Twitter Employee: Conway Threatened To Ruin Me
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Former Twitter employee Alex Payne was leaving the company, and ready to start at his next venture, BankSimple. To give himself a cash cushion, he decided to sell some of his shares in Twitter.The stock is red hot on the private markets, with valuations racing towards $10 billion.
But Twitter itself hates the private secondary markets.
Twitter doesn’t want its shares getting into the hands of too many investors. If Twitter ever jumps over the 500 shareholder limit, then it will have to start disclosing its financials. Having hundreds of shareholders is also an administrative pain in the neck. And Twitter also thinks some of the private funds buying Twitter shares are shady.
To protect itself, Twitter has established four “right of first refusal” funds which are run by people it trusts. The four funds can have many people invested in them, but for the purpose of the SEC, the funds only count as four Twitter investors — thus protecting Twitter from tripping the 500 shareholder ruling and giving Twitter fewer direct shareholders to deal with.
In addition to his angel investing, Ron Conway runs one of those Twitter investment funds. It’s called RC Chirp.
Obtaining shares of Twitter isn’t easy. Some Twitter employees want to cash out, but not all of them. Therefore, when someone’s looking to sell, fighting for the shares can become highly competitive.
When ex-Twitter employee Alex Payne decided to sell his shares, he didn’t go through the approved Twitter channels. He opted for Second Market, where he thought he could get a good price.
Payne had already filled out the paperwork and committed to selling shares to private-market investors when he was hit with an email from Conway.
According to people who have seen the email, it said Payne should sell to a “vetted and approved” Twitter fund. Also, Payne should think about “his long term relationship with Twitter and the tech community.”
This last line could be read as friendly advice. Or it could be ominous.
Payne read it as the latter, and told friends Ron was threatening to “ruin” him.
Payne was worried about destroying his relationship with Conway, but there was nothing he could do since he had a signed deal with Second Market.
After BusinessWeek reported that Conway was threatening people, Conway reached out to Payne and apologized.
When we spoke with Payne, he downplayed the conflict, and said it was all “a misunderstanding between Twitter corporate and Ron.”
Payne said Conway was trying to communicate a message that he was getting from Twitter’s executives. If Twitter was better at talking with its former employees, Payne said, then maybe this could have been averted.
So, in this case, maybe Conway was simply misunderstood. But with another high flying entrepreneur, there was no misunderstanding about what Conway said.
Path Turns Down An Offer From Google, Conway Goes Ballistic
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Dave Morin, the founder of a photo-sharing startup called Path that Ron Conway invested in, stood up to Conway — and he was burned because of it.Morin, already a millionaire on paper thanks to a stake in Facebook, had a chance to become even wealthier. Google was ready to buy his fledgling mobile photo startup, Path, for an astounding $100 million.
The deal would have given his early investors a great return, and it would have made his cofounders wealthy.
But Morin didn’t want to sell. He wanted to build his company, on his terms.
Conway, on the other hand, wanted to make a quick score. He also wanted to take care of Path’s cofounders, Shawn Fanning and Dustin Mierau. Unlike Morin, they don’t have Facebook stock to live off. Mireau, in particular, isn’t rich at all.
When Morin made it clear he wouldn’t sell, Conway went ballistic. He was in “full on rage mode,” personally threatening Morin, promising to ruin him, according to someone familiar with the situation.
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Beyond merely threatening Morin behind closed doors, we’re told Conway tried to humiliate Morin by sending details of the Path offer to Michael Arrington at TechCrunch. Arrington declined to comment when asked about the story.Prior to this episode, Morin is said to have considered Conway his “biggest mentor.” But now the relationship is destroyed. Morin and Conway no longer talk.
When asked about what happened, Morin just says, “Our early investors have been completely supportive of us and are excited about our direction.”
Mierau, for his part, says, “From my point of view, building products I’m passionate about is all that matters at this point in my career,” adding, “So please believe me when I say that I truly couldn’t ask for anything more.”
We pressed Mierau, asking him if he didn’t have at least a twinge of regret about not getting a fat payday from Google and having security. He says, “Nope! I love what I do and thus feel quite secure.”
Threatening to ruin people isn’t the only way Ron Conway throws his weight around in the Valley. He also uses his tight relationship with TechCrunch mogul Michael Arrington.
Get Money From Ron Conway, Get A Post On TechCrunch
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A couple of years ago, when Arrington was chasing after his dream of building an early web surfing tablet called the CrunchPad, Conway told a group of people at a cocktail party that he was thinking about investing in the company. He said it was his way of making sure Arrington was good to him, according to someone at the party.
Of course, Conway doesn’t have to invest in Arrington’s startups to strengthen his relationship with Arrington. To Arrington’s credit, Arrington freely admits that the two are as close as can be: “He’s a very important person in my world,” Arrington tells us. “As is Mark Zuckerberg, Marc Andreessen. There is no business relationship. I stay as close to him as he’ll allow me to stay because I want to get that information.”
Everyone in the tech industry knows about the relationship between Arrington and Conway. One industry observer who hasn’t dealt with Conway told us, “If you get 10 grand from Ron Conway, you get a TechCrunch post and that gets you more money because VCs read TechCrunch.”
There’s nothing wrong with being friends with a source, especially one as well-connected as Conway. But, for some entrepreneurs it’s a constant reminder of Conway’s influence on the tech scene.
The scariest phone call of one entrepreneur’s life
Conway’s investment strategy is often derisively referred to as “spray and pray.” He pumps small amounts of money into hundreds of startups and hopes to hit some winners along the way.
It’s a cute way to describe a strategy of investing, but it belies how serious Conway is about investing his money.
He’s a strategic investor attacking pockets of the tech industry. He puts money into companies that have been recommended by trusted sources, and he rejects 24 out of 25 opportunities he sees.
We heard about one startup founder whose company tanked, vaporizing his investment from Conway.
Considering that Conway invests in hundreds of startups and that startups fail all the time, it’s no big deal to lose a sliver of his cash, right?
After the company went bust, the entrepreneur got a phone call from Conway which he later told people was “the scariest of my life.” Conway was berating him, the entrepreneur told people, saying things like, “you fucking fuck, I’ll squash you like an ant.” Basically, Conway did everything short of saying, “I’ll make you a capstone in the corner of a building.”
We had already heard Conway referred to as a bully, but this person says the behaviour was worse than verbal bullying.
He said the verbal beating from Ron was “violent.”
Another entrepreneur who has been on the receiving end of a Conway thumping called Conway “scary,” and warned us that our story would lead to retribution and told us to be careful. Many people we reached out to refused to speak with us about this topic because of fears of retaliation from Conway.
One person wrote us to say, “Entrepreneurs need to be warned about this guy. He’s a wolf in sheep’s clothing. Despite his carefully polished public image, behind closed doors, Ron Conway is hardly an angel,” and, “He gets away with it because his victims are too afraid to oppose him or speak out. He’s too powerful. They know that if they don’t give in, he’ll get his network of friends in every part of the industry to blacklist them and ruin their careers.”
Why everyone takes Conway’s moneyYet for every one of these scary stories about Conway, there are five more positive stories about what’s done for startups and founders.
One person we spoke with told us about a startup that was going to be liquidated by its VC backers. Conway stepped in, defended the entrepreneur and told the VCs “to fuck themselves” in the words of our source. Conway saved the company.
And this wasn’t a rare occurrence. It happens regularly.
Jason Calacanis, an angel investor and entrepreneur, told us, “Ron Conway is an amazing force for good in the startup ecosystem and I’ve got nothing but respect for what he’s done.”
Another investor who has been critical of Conway in the past said, “I like Ron, I think he’s done a lot of great stuff for entrepreneurs.”
One of Ron’s rivals told us in one breath, “he’s a fucking arsehole,” but quickly added, “where he gets away with it is he helps the entrepreneurs like crazy.” This person added, “He’s an odd bird. He works his arse off.”
And while Conway is invested in hundreds of companies, his money is still seen as something of a Goodhousekeeping Seal of approval. Get Conway’s money, and the Valley trusts you. Don’t get Conway’s money, and something looks weird. (What does Ron Conway know that you don’t?)
An Offer You Can’t Refuse
One entrepreneur who got on Conway’s bad side after accepting his money tells us, “There are many entrepreneurs and even other investors in the Valley who have had ‘offers they can’t refuse’ from Ron. If they don’t agree, Ron severely threatens and intimidates them until they comply.”
Being a bruiser in the tech world isn’t anything new, or even special, really. Mark Zuckerberg, Bill Gates, Steve Jobs and countless others played hardball to get to the top.
True power is always a combination of carrots and sticks — favours and fear. Conway can deliver both, so it’s no surprise he’s one of the most powerful people in the Valley.