Ron which is by far the number 1 question What made

you guys decide to invest in a founder or a company.

Either of you.

>> Start. >> No, no, no, no.

>> You first.

>> Well we have a slide on that.

We have, we have an app for that.

>> Mark can start while we try to get your slide up.

>> Okay.

>> We're running out of AV guys, so.

>> So say the question again.

>> What makes you decide to invest in

a founder or a company?

>> So what makes us invest in a company is

based on a whole bunch of characteristics.

I've been doing this since 1994,

right before Mark got out of the University of Illinois.

So, SV Angel and

it's entities have invested in over 700 companies.

So, to invest in 700 companies that means we've

physically talked to thousands of entrepreneurs.

And there's a whole bunch of things that

just go through my head when I meet an entrepreneur.

And I'm just going to talk about what some of

those are.

And literally while you're talking to me in

the first minute I'm saying, is this person a leader?

You know, is this person rifled, focused and

obsessed by the product.

I'm hoping cuz usually the first question I ask is what

inspired you to invent this product.

I'm hoping that it's based on a personal problem that,

that founder had and

this product is the solution to that personal problem.

Then I'm looking for communication skills.

Because if you're gonna be a leader and hire a team,.

Assuming your product is successful you've gotta be

a really good communicator and you,

you have to be a born leader.

Now some of that you might have to learn those

traits of leadership but you better take charge and

be able to be a leader.

I'll switch back to slide but let's let Mark.

>> Yeah, I, I agree with all that,

I guess, and there's a lot of detail to

this question that we could talk about.

And we maybe even a little bit different than Ron,

and, well we are different than Ron,

that we actually invested across stages.

So we invested the seed stage, the interest stage,

the growth stage.

And then we invest in a variety of

different business models, consumer enterprise, and

a bunch of variations.

So, there are kind of fine grained answers, you know,

that we could get into,

if there are specific questions.

Two general concepts that I would share.

So one is the venture capital business is

a 100% a game of outliers.

It's extreme exceptions.

Right? So the conventional

statistics are,

you know, on the order,of 4,000 venture fundable.

Companies a year that wanna raise venture capital about,

you know, about 200 of those will get funded by

what's considered a top tier VC.

About 15 of those will someday get to $100 million

in revenue and those 15 from that year will generate

something on the order of 97% of all the returns.

For the entire category of

venture capital in that year.

And so venture capital is such an extreme feat for

family business.

You're either in one of the fifteen or your not.

Or you're in one of the two hundred or your not.

And so the big thing that your looking for

no matter you know which sort of

particular kind of criteria we talk about.

They all have the characteristic of

you're looking for the extreme outlier.

The other thing I'd highlight that we

think about a lot internally is we have this

concept invest in strength versus lack of weakness.

And at first that sounds obvious but

it's actually fairly subtle which is sort of the default

way to do venture capital is to kinda check boxes, right?

So you know, really good founder, really good idea,

you know really good, you know, products, really good

initial customers, check check check check.

Okay, if this is reasonable, I'll put money in it.

What you find with those, those sorta checkbox deals.

So they get, they get done all the time.

What you find is they don't have something that

really makes them really remarkable and special.

Right? They don't have

an extreme strength that makes them an outlier.

On the other side of that the companies that have

the really extreme strengths often have serious flaws.

And so one of the cautionary lessons of venture capital

is, if you don't invest on the basis of serious flaws.

You don't invest in most of the big winners, and

we can go through example after

example after example of that.

But that would have ruled out almost all

the big winners over time.

And so, at least what we aspire to do is to invest in

the one, the startups that have a really, really

extreme strength, along an important dimension.

And they'd be willing to

tolerate some other,you know, set of weaknesses.

>> Ron, we got your slide up.

>> Okay, I don't want to over dwell on the slide.

But when you first meet an investor,

you've got to be able to say in one

compelling sentence that you should practice like crazy.

What your product does,

so that the investor that your talking to,

immediately can picture the product in their own mind.

Probably 25% of the entrepreneurs I

talk to today still after the first sentence,

I don't know what they do.

And as I get older and less patient, I say.

Back up, I don't even know what you do yet.

But, so try and get that perfect.

And then I wanna skip to the second column.

You have to be decisive.

The only way to make progress is make decisions.

Procrastination is the devil in startups.

So no matter what you do,

you gotta keep that ship moving.

If it's decisions to hire, decisions to fire.

You've gotta make those quickly.

All about building a great team.

Once you have a great product, then it's all about

execution and building a great team.

>> Parker, could you talk about your seed ground and

how that went, and

what you wish you had done differently as a foundry,

raising money?

>> Sure, so actually I think

that my seed ground most of the stuff with my current

company felt like, from a fundraising perspective felt

like it came together relatively quickly.

But actually one of the experiences I had,

I started a company before this, that I was at for

about six years and my cofounder and

I pitched almost every VC firm in Silicon Valley,

we literally went to like 60 different firms and

they all told us no.

And we were constantly trying to figure out.

You know, how do we, how should we adjust our pitch?

And how should we do our slides differently.

And how do we Tweet the story, and

that sort of thing.

And at one point there was this sort of

key insight that someone gave me when I was pitching.

Actually someone at Coastal Ventures.

And this VC said guys.

You know, he was looking for

some very particular kind of analysis that we

didn't have on hand.

And he was like, guys, you don't get it.

He was like, you know,

if you guys were the Twitter guys,

you guys could come in and you could just be,

like, and, like, put whatever up here.

And, like, we would invest in you.

But, like you guys aren't the Twitter guys so

you need to make this really easy and

have like all this stuff ready for us and

all this kind of stuff.

And I took like the exactly opposite lesson of what,

he, I think, wanted me to take away from that, with.

Which was like, jeez, like I should really just

figure out a way to be the Twitter guys.

>> I'm, like, that's, that's the way to do this.

And so, actually like one of

the reasons I started my current company.

Or one of the things I found very attractive about

Zenefits, is as I was thinking about it.

It seemed like a business.

I was so frustrated from this experience of

having tried, you know, for

like two years to raise money from VC's.

And then sort of decided like to hell with it.

You can't count on there being

capital available to you.

And so this,

the business that I started seemed like one that like,

like actually just maybe I could do it without raising

money at all.

Like there might be a path to kind of, you know,

there was enough cash flow,

it seemed compelling enough that I could like, do that.

And it turns out that those are exactly the kinds of

businesses that investors love to invest in.

And it made it incredibly easy.

So I actually think like, I mean, Sam's very kind and

said I was an expert fundraiser.

The reality is I don't actually even think I'm

very good at fundraising.

It's probably something, I'm like less good at then,

you know, sort of other parts of my jobs.

But I think if you can build a business that's, you know,

where everything's like moving in

the right direction.

If you can be like the Twitter guys,

like nothing else matters and if you can't like,

you know, be the Twitter guys it's very hard for

anything else to make a difference.

For things to kind of come together for you.

>> Why did that VC say be like the Twitter guys when

the fail wail dominated the site for two years.

>> Cause it worked.

>> Yeah. >> The other point I want to

make is, bootstrap as long as you possibly can.

I met with one of the best founders in tech.

Who's starting a new company and

I said to her when when are you going to raise money?

I might not.

And I go that is awesome.

You know never forget the bootstrap.

>> So I was actually going to close on this but

i'm just going to accelerate it cause Parker I think just

gave you the most important thing you'll ever hear.

Which is also what I was going to say.

Which is, so, the number one piece of advice that

I've ever read and

that I tell people on these kinds of topics is always.

It's from the comedian Steve Martin, who I think is

an absolute genius, wrote a great book on his startup

career which obviously was very successful.

The book is called, Born Standing Up, and he,

literally, it's a short little book and

it describes how he became Steve Martin.

And the part of the book is, he says, you know,

what is the key to success,

he says the key to success is be so

good they can't ignore you.

Right, and so in a sense, like all this,

we're gonna have this entire conversation though, which

I'm sure we'll keep having about how to raise money,

but in a sense it's all kind of beside the point.

Because if you do what Parker's done and

you build a business that is going to be a gigantic

success then investors are throwing money at you.

And if you come in, you know, with a theory and

a plan and no data and you're just one of,

you know, the next thousand.

It's gonna be far, far harder to raise money.

The other, so that's the positive way to put it,

is kind of be so good they can't ignore you.