Ron Conway, Founder, SV Angel (Part 3)

34:25Yeah. And once I got the thumbs up from Bob, I loved everybody in the office. But I don't, so Larry and Sergey are super busy. They're enhancing the algorithm every day. Plus, they're starting the company. Plus, they're in a funding cycle. So I did not want to leave the office without a point person to work with. I said, okay, you guys are busy. Who do I work with and who's going to help you divvy up these allocations once everything happens? And they say, oh, that's Salar. Salar, he's the head of operations. So I immediately know Salar is going to be my pal. Right. Whether he likes it or not.

35:19Whether he likes it or not. And Salar was not in the meeting. There was like five, six people in the office. So they were starting to hire people. And so I said, so where does Salar sit? I want to meet him before I leave. So they take me to Salar's desk. And I am looking at a kid who is no older than 12 years old. I know he's older than 12. Salar still, still looks young. I mean, it's a gift. Yeah, I was going to say. So, hey, Salar, I'm Ron. And so I said, I'm going to be working with you. So I told him a little bit about SV Angel, ingratiated myself. And then I said, even though I had to curry favor with him, I had to ask, Salar, do your parents know that you're here?

36:20because you belong either in a high school campus or a college campus. I can't figure out what. And he laughs and he goes, I'm a biology, pre-biology PhD at Stanford. Oh, wow. And I said, and you're moonlighting over here. Let me ask you again, do your parents know you're here? And he goes, no. He goes, you're not going to tell them, are you? No, no, no, I'm not going to tell them. It's great. It's just our secret. Classic. But because I knew that they had the algorithm, I said, guess what? You're really smart. Yeah. Mom and dad aren't happy, but this company is going to go places because the search market is so cluttered and Larry and Sergey have figured it out.

37:15Did you get a demo that day in the office? Oh, yeah, yeah. Yeah, Bob Bozeman was getting the demo. Okay, so it wasn't just a discussion. It was like, let us show you exactly. Okay. Bob was at a computer with an engineer trying to get to the innards of the algorithm only a short amount of time. Yeah. But we just wanted some technical assurances. Because once we knew we were going to put in all the chips, we put in all the chips. I worked full-time on the Google financing until it happened. Now, thank God it happened a month later. Didn't take forever. But it was really, really intense. So, Ron, tell us the story.

38:01Yeah, I get out of the office and I call up Mike Moritz and Mike Moritz is traveling somewhere. Because I said, I'll get somebody here by, it was a Thursday that we met. You'll see Mike Moritz by Friday afternoon, one day later. And they go, that works. That proves that you really do know Mike Moritz. Because if you don't really know him, we'll move on to the next person. We got to get our Yahoo OEM deal. So I call up Sequoia. He's not there. He's traveling. So we sent Doug Leone in for the meeting and said, this is not Mike Moritz, but it's another general partner at the firm. And Mike will see you like the following Monday.

38:48As soon as he's back, he's traveling. He was in New York or somewhere where he literally physically couldn't show up. There was enough buzz about Google that when I called, Mike and Doug were both interested and said, hey, if you checked out the algorithm and it works, we know none of this other stuff works, we want to get in there. At what point did they find out that Kleiner was already in? Well, once they had the meeting with Mike, then we broke the news that Kleiner was in. And that is what took the deal three more weeks to happen, is both of them basically refusing to work with the other one.

39:38And then this is how I got really close to Ram Sriram. So Ram Shriram, one of the seed investors, his job was to close Kleiner Perkins, which was easier because they were kind of already sold. But Ram and I were working on – because I knew Kleiner really well myself. We were both working on them. Hey, let Sequoia in and vice versa. And it was about a month later, we were sitting in Foster City in a Starbucks when, I forget what tactic I used, but we were escalating our tactics as time went on. Whatever tactic I used worked. And Kleiner and Sequoia agreed on this Saturday morning when I was in a Starbucks in Foster City that they would invest together.

40:35Wow. I called Larry and Sergey. I said the deal's done. But it took three weeks of haggling. That's amazing. I could drive you to the Starbucks today, to the parking place we were sitting in, when I told Gail, this is history. It was just like the receipt from the Empire Taproom. This was part of the history of this company, is we got these two VCs who didn't want to work together to invest$12 million each, Stone, a little over 10 % of the company each,$70 million pre-valuation. $70 million valuation in those days was huge for a company with zero revenue. And back then, when you asked Larry and Sergey, how are you going to get revenue?

41:28They said, go to the end of the deck. There's nothing there. We have no idea how we're going to get revenue. That's another thing I liked. It wasn't arrogant, it was truthful. Overture had not been founded yet. Overture was the first company, was a Bill Gross company down in LA that had a concept on how to monetize search through ads, was Overture. And Salar, whose parents by then knew he was at Google, he watched Overture and other developments in the business. And Salar is the one credited for being the genius who figured out how to monetize ads. And it's this thing called AdWords. That was the genius of Salar, who started as the operations guy - Biology PhD for the win.

42:29Yeah, yeah, in the front of the office. So the KP and Sequoia deal went through, and you don't remember what tactic you used that finally got them to acquiesce? I don't. It was something. I'll have to interview Larry or Sergey. Or Ram Sriram. Ram Sriram. Okay, so that closes. And do they get their deals, their white label deals or OEM deals with Yahoo and AOL? Yes, AOL was pretty quick. Okay. Yahoo took a little bit longer, but yes, Yahoo happened. Yeah. And I had been telling Larry and Sergey that SV Angel's allocation was nowhere near KP and Sequoia. And in the Yahoo round, they were nice enough to come to SV Angel and say, in this round with just Yahoo, SV Angel gets to invest whatever they want.

43:27That's so nice. Aww. And we trued up our ownership in the company because we had been working so hard. You know, we introduced them to Cindy McCaffrey, the very first VP of marketing of Google. What she did for that company is just unbelievable. We helped Omid Kordastani a lot, starting the business side of the company. You know, we got in and got our hands dirty right away the way we always do. But Larry and Sergey really appreciated it. And a year later said, you know, invest whatever you want in this round. But they didn't offer that to Sequoia or Kleiner? I don't think so. Just curious. Wow.

44:18So then what happened next with Google? They just kept hitting the markers. Solar came up with the AdWords strategy, and then they started monetizing. But in early 2000, the VC money from KP and Sequoia, the$24 million, was starting to dwindle, so to speak. and Sheryl Sandberg was hired by Eric Schmidt and his first job, Eric Schmidt was then the CEO. Do you remember anything about that, about the VCs installing Eric Schmidt and how Larry and Sergey felt? Well - That you can talk about? Everyone was able to agree on Eric Schmidt. Okay. There was an agreement in the term sheet that a CEO would be hired and that did take a while.

45:24And that led to some frustrations. But eventually everyone agreed on Eric Schmidt and Eric Schmidt became the CEO. He walks in and says, hey, it looks like we're running out of money. he had just hired Sheryl Sandberg and he tells Sheryl call Ron Conway since he knows all these funders really well and tell him get ready to tee up we're going to need a round of funding now this is when the prospects for Google are better than ever so I'm delighted that Sheryl emailed me She emailed me on, I'm looking at it, November 26th of 2001. Wow. So the round was in 1999. So sure enough, two to three years later, they've not run out of money, but they have a quarter tank left, let's say.

46:26And so I'm looking at an email where I list every funder. and I told her, because we felt so good about the company, we are happy to syndicate this round. We want to be the biggest investor in the round. And here's who all the investors will be. And I worked intensely for like 10 days. At the same time, AdWords is starting to kick in and the cash register starts ding, ding, ding. And Cheryl calls me and says, wow, we think we're going to do just fine without any funding. And so that funding never, ever happened. That's an amazing call to make, right? Wow. We just started to generate revenue and we don't need to raise any more money.

47:16But the revenue in this case, because the search engine was already huge, you just bolt on the ad engine and you know an explosion happens yeah mead kordastani you know was the the head guy at the cash register by then tim armstrong was was in there too building the sales operations oh okay were you disappointed when she said of course i was thanks but i was heartbroken yeah i was heartbroken it's good news and bad news Happy for the company and just went on our merry way. Oh, my gosh. So this was, you said 2001? Yeah. Okay. But sure enough, the ad engine kicked in. Yeah. Pretty quickly. And by then, they had moved out of 165 University.

48:10But think about who else was in there. That's where PayPal was born at that address. the Adam Osborne personal computer. He was the first kind of laptop, portable, the Adam Osborne computer. And the crazy one is Andy Rubin started Danger, which is an operating system for the phone, which in those days was a whole new concept. Andy also started a company called Android that Google acquired. Yes. And just think of if those walls could talk. Gosh, no kidding. So Andy Rubin starts at 165 University and ends up at the Googleplex. And the first time I went and met Andy, he said, I know all about you.

49:09I was in Altos OEM 15 years ago. He used to sell Altos computers. No way. Yeah, early in his career. Oh, my gosh. The theme here, small world. Very, very small world. So did Google move to Mountain View after they left 165 University? Yes. They moved to, not to the Googleplex, but they had this interim campus down where Intuit is today. and right next to what became the Googleplex. So what was it like as an investor and you're observing them? Were Larry and Sergey, did they mature before your very eyes as business people? What I remember vividly was the rigor in hiring. It's all about the people in every company.

50:06and Larry and Sergey were very judicious about how we're going to hire, what's the process going to be. The company got really huge and they were still interviewing every new hire because they knew they were the keepers of the culture. Yeah. And that's what I remember the most vividly. and if you have a judicious hiring process look what you look at what they ended up with they ended up with one of the most spectacular companies on earth because they were so judicious about hiring yeah and if they didn't if if they you know if they couldn't hire fast enough that's just fine you know one of the first people they hired who were still really good friends with george herrick um he's now knows more about ai than anybody because he was starting to do ai research just a few years into his his uh his life at at google then we have paul buhite yeah who is now at y combinator he is the godfather of gmail yeah but larry and sergey handpicked these people.

51:26Cindy McCaffrey, I introed. So we introed some of them, which we're very, very proud about. But then they moved to Mountain View. And I remember the first time in Mountain View, there was just a two-story building, a couple of them connected together with a creek in the middle. You know, very Silicon Valley-ish. And before I would go to meet with Larry or Sergey, or if it was Cindy, there was an unwritten rule that anyone who had anything to do with the company had to go see the wall. And the wall was a huge blank wall with a piece of paper that was probably five feet tall and 20 feet wide. And it was hand added every day, the number of searches.

52:32Oh, wow. So when you talk about founders who aren't metric driven, and every employee, every team member walked by that wall 10 times a day. And every day they would watch to see how the number went up. And the folklore at the time is Larry, and I'm sure it was not folklore, would audit the searches for unsuccessful searches and go, by then they had enough people, but then go assign engineers, let's keep fixing the algorithm for these questions that weren't answered properly. So the company really had their eye on the ball. So when they moved from office to office, I said, where's, to me, it looked like a huge piece of what you, old-fashioned freezer paper, you know, that huge, huge paper.

53:34I would say, where's the, where's the freezer paper chart going? And people, well, we don't know where it's going. I said that by then that chart wasn't used anymore. You know, the company was huge. I said that chart is, I think, the most valuable piece of intellectual property in the company. It was everyone paying attention to that chart that got you here. And God bless her, Susan Wojcicki. I was in a meeting asking, most of the people didn't even know what I was talking about. Susan knew what I was talking about. And she goes, I agree with you. I said, I implore you to find it. And she goes, we will.

54:20and she was that kind of a person. The next time I visit the campus, she goes to, Ron, come over here. I go into a lobby and she goes, look up. And she looked the other way. Look up. I look up and there's the chart. And framed beautifully. And she goes, that'll go with us wherever we go now. I go, that chart, it tells the story. So is it still there now? I'm sure it is. That building they're still in, I'm sure the chart is still. It's never moved. Yeah. Ron, I got to ask you, relating to Google, you have to tell the story about the Warren Buffett party. Yes, yes, yes. Because I know we're coming up on time a little bit.

55:04Well, this is after we invested. And for our annual meeting at SV Angel, we had a party afterwards. and Warren Buffett was kind of the guest of honor. It was May of 2000, and May of 2000 was when the crash was upon us. SV Angel was already thinking, we were already very nervous about the crash. But Warren Buffett was sure of the crash. So our guest speaker gets up and basically says, you are all going out of business. But there's enough alcohol and hubris that nobody cared. But Warren, God bless him, gave his speech. Then we had a charity auction with Dana Carvey as the auctioneer. and Mark Andreessen, first time he raised his paddle, because Netscape had gone public and bid a significant amount.

56:23It was a party that nobody will ever forget because Warren Buffett stood at the door and shook every hand. Really? Why was he doing this? Well, he was the head of NetJets. Okay. And NetJets at the time was trying to promote themselves in Silicon Valley. And I said, I'm not going to promote NetJets, but I'll certainly host Warren Buffett. And a lot of stuff happened that night. Larry and Sergey met Warren. And by meeting Warren and then learning more about Warren, decided when Google goes public, we're going to write a letter the way Warren Buffett writes an annual letter. So when Google decided to go public, Larry and Sergey wrote a letter inspired by Warren Buffett, who they met at this party.

57:22The other person that Larry and Sergey met at the party was this person called Sean Fanning. So Napster had been founded. and by this time the disruption of Napster uh um Sean Fanning was on the cover of Business Week Newsweek Life Magazine at the time Fortune Magazine these magazines they all find out who's going to be on the cover so they don't ever put the same person on the cover all five of those magazines decided that the disruption of Napster was so much that they would break protocol and put Fanning on the same cover the same week. He was like 19 or 20. He was 19 years old. And he was also at the party.

58:19And we're into the party and Larry and Sergey come up to me and say, Will you introduce us to Sean? I love that. We are never going to be famous. We just have little Google. Sean Fanning is famous and we want to meet him. And I said, you will meet Sean, but you have to understand. Remember, we knew this algorithm was going places. I said, but I have to correct you. You are the ones who will be famous. Just believe me. Believe what I'm telling you. Sean Fanning will not be famous because he's arguing with the record labels and we probably will be beat. The RIAA was already having 16-year-olds arrested in their houses.

59:15I said, I think you have an enduring business. Sean has all hell to pay and lawsuits, etc. So I walked Sean over and introduced Larry and Sergey. And Sean had already heard about Google and loved it. And they all fanboyed out. They all had great respect for what each other were accomplishing. Yeah. But I was right. I love this story. I love thinking about Larry and Sergey being like, we'll never be that famous. They were very sincere. Yeah. They came to, you know, SV Angel had lots of events for founders. And even as Google started to become pretty big, Larry and Sergey would still come and stand behind the Google table and help founders with questions.

1:00:08We had all different themes, but they always came to every event. They knew the importance of networking with other founders and giving back to the community. I remember one where I just said, there's no way they're going to show up. I mean, Google was, it's really getting famous. And they walked in with nobody else. Wow. That's so cool. Ron Zub, Brian Chesky or whoever. Yes, exactly. Well, it turns out that reputation for arrogance, completely wrong. Yes. That's a very anti-arrogant thing to do. Yeah. Yeah. I think sometimes confidence in what you're doing can sometimes be misinterpreted by others as arrogance.

1:00:54I remember Google had sort of a very unique, crazy IPO. Can you tell us some of the stories that you remember from Google's IPO? Because it's such a big deal. Yes, yes. The Google IPO was a big deal, August 19th of 2004.

1:01:14Larry and Sergey wanted it to be an auction format, a Dutch auction format that Bill Hambrick had kind of mastered. So in that sense, it was a little controversial. Yeah. But I want to tell a few sidelight stories. So Google wants to go public. They have filed for the IPO, Paul Buhite, now at YC, finished writing Gmail. And during the IPO quiet period, Gmail was released with a lot of excitement. And look at Gmail today. I mean, back then, Gmail ho-hum because you had Yahoo Mail, Microsoft Mail. Oh, Google's got mail, ho-hum. Gmail has now assumed all of those, just like they did in the search market.

1:02:13So, but the works got gummed up because a legislator in Sacramento decides that Gmail is going to violate privacy and wants to outlaw, literally outlaw Gmail. Her name was Assemblymember Figueroa. And Sergey writes me a note in April. They went public in August. Ron, you bring people together and inspire people. And you have been so helpful. Actually, it occurs to me, maybe you might be able to help us with a problem we have in Sacramento. Well, Arnold Schwarzenegger was our governor. Arnold Schwarzenegger was an investor in SV Angel. No way. So we said, boy, maybe Arnold could be helpful here.

1:03:21Because the governor at the end of legislation, if it's passed, thank God this did not pass. But governors have the power to veto. Yeah. And so we knew the court of last resort, which we didn't need, was a veto. And maybe there was some discussion with that, about that or not. But based on the bill itself, the merits didn't even pass the legislature, thankfully. But that was a real downdraft to the IPO. Yeah. And so we brought in Assemblyperson Jackie Speier to go lead the opposition to the Gmail bill. And Larry and Sergey are futurists. And the day Jackie Speier came in for the visit, Sergey said, hey, before the visit starts, I want to show you my whiteboard.

1:04:23And he was just being nice and cordial. But on the whiteboard was Sergei's plan on how someday Google would get us to Mars. He's starting this, and Jackie turns around. And Jackie had said to me, hey, I've heard these guys are space cadets. And I said, no, they're not space cadets. She no sooner walks in, and Sergei is telling a space cadet story. So I immediately, and she was either going to love it or hate it. And it was like confirming everything she had been thinking. I said, Sergey, Sergey, look at me, look at me. And so he looks at me and I go, we have to start right now. Tapping his watch.

1:05:13And Sergey got it and said, you know, we need to start the meeting right now. Boom. We start the meeting. The meeting was good. Jackie was helpful. and the bill never made it to the governor's desk. Another story, by then the fever pitch about the Google IPO was palpable. New York Times front page story almost every day leading into the IPO. Somebody leaks our investor list to the New York Times, which includes some of our friends, some of whom are celebrities, one of which is Shaquille O 'Neal. At the same time this is happening, the Lakers are going to the playoffs. Shaq makes the mistake of picking up the paper and reading that he is an investor in Google.

1:06:08Oh, no. He didn't really realize that he was an investor in Google, but he was because his manager, Len Armato, invested in our fund. And therefore, he owned a little piece of Google. He thought Leonard was just the best ever, and maybe he had a big piece of Google. Oh, my. And he was saying, oh, wow, maybe I can retire. his ownership in SV Angel was not enough to retire but he had convinced himself that he owned enough of Google that he maybe didn't even need to show up for the playoffs he gets in his car the only reason I know the story is he gets in his car after Leonard said no you don't own a big piece of this you have to go to practice you have to go to the playoffs this will be a nice a nice little piece of change after they go public and after the if they go public because it's always an if you know period yeah um and his way of mulling things over was getting in the bentley and driving around la the reason i found out about it is leonard says you know he's leonard's his manager who was a good friend of ours he he's been in the car for a while now we're really really worried it's like he's a missing person now i go what do you want me to do we want you to call him and explain all this to him oh no ron that's hilarious and once i took the assignment i said okay i'll i'll try explain that he's a limited partner with a larger group of people yeah who all might make uh a little bit a little bit of money but he didn't pick up my call thankfully oh okay and he did go to the playoffs and they won well it's so weird that he didn't want to be in the playoffs like he was like oh i can retire i'm out i mean like didn't he want to play he must have been tired that i guess he was tired that's a very funny story that is funny after the ipo uh google wanted to you know add more board members and very interested in celebrity potential board members.

1:08:31I helped with that. Gladly, none of it materialized. I'm surprised that they wanted celebrities on their board. There was a point in time where they thought that might be useful, but it passed quickly. Maybe there was a marketing justification for it or something. I bet it was marketing. Well, the reason Shaq was an investor is we, very early on in the internet, we knew that media and the internet would converge. And Len Armato, who was Shaq's manager, he saw this very early as well. And Leonard also introduced us to Governor Schwarzenegger. Leonard had a good LA Rolodex, a media Rolodex. And so lots of media and a few celebrities invested because of Leonard.

1:09:28But that also is what perked us up about Napster. Napster is a great example of disruption of media.

1:09:40So media and the Internet was something that we always had our antenna up. And along comes YouTube. And Sequoia had already invested in YouTube. but I knew that video on the internet was a key trend and we were going to be involved in YouTube no matter what. Now, I was the Sequoia Limited partner anyway, so I was already an investor in YouTube, but we wanted to be at the center of video on the internet. We made many investments in that area, but already the winner was YouTube. So I forget how I got to them, but I went up and would meet with Chad and Steve when we had no economic interest, but we wanted to help them.

1:10:35Yeah, because you knew they'd be big. And at the Blue Angels, before Google acquired them, That's the October Blue Angels event. Some Googlers did not show up like David Drummond and others did. And I go, I just feel like something's up. And one of the Googlers whispers, we're buying YouTube this weekend. And I said, that is the smartest thing you could ever do. YouTube was already plagued by lawsuits. It was kind of Napster all over again. And I knew Chad and Steve enough that I didn't know the deal was coming down beforehand. But because of the Napster experience, they knew that I knew that they had to sell it to a big company.

1:11:34We'll talk about Napster and Bertelsmann when we talk about Napster. But the YouTubers did it right because they said Google has enough lawyers to see through the copyright issues and help us build a big company. And Chad and Steve moved into the company. Google promised they would not change the name. They still have not changed the name. And Chad and Steve helped build YouTube in a company that could hold off and keep them from being driven out of business in the courts. Napster was driven out of business in the courts. And God bless Chad and Steve, who were still very close to. They saw that and they said, we could try and see this through, but we won't be able to build a big company.

1:12:27And the company came first. But that was a big deal because if I remember correctly, Google paid a billion dollars. Yeah. And that was huge at the time. Unheard of. So big. Unheard of, but oh, that is worth today. I know. But at the time, Google paid up, so to speak. Yeah. Yeah, yeah, yeah. But boy, have they earned that back. The other thing after they went public, we would help bring in speakers for Zeitgeist, which was an annual conference. And we brought in Snoop Dogg one year. My common bond with Snoop was gun safety after the Sandy Hook tragedy. But he was so passionate about it. I said, why don't you come and talk to Google at Google Zeitgeist about it?

1:13:20because this is the kinds of issues that we want to discuss at Zeitgeist. And he came and gave an amazing talk. But I went backstage to greet him, and he had cleaned himself up so much I didn't know who he was. Really? He walks up behind me and he said, I'm looking for Snoop. And he goes, I'm right here, you idiot. I go, wow, you clean up good. He had a suit and new hair. I mean, he took – and this is right after Google's public, and people are really taking Google seriously. And Snoop came and was great. Sean Penn came one year. Right now, I'm working closely with Google on artificial intelligence.

1:14:11They were one of the first members of our AI ad hoc work group. Oh.

1:14:19And Demis of DeepMind is a very good friend. The point I'm making here is our relationships at Google have never ended. I was shocked that Joan Braddye just left. She was one of the people that Omid hired who had been, up until she left, the longest tenured person still at Google. Wow. Wow. So the company continues to create history, and we love being involved even to this day. It's historic. I know. It is historic. Iconic. I loved all those stories. I hate to end on a sad note, but it is sad. Susan Wojcicki, who really is the one who really built YouTube. Larry and Sergey, you know, handpicked basically a co-founder to run this precious asset called YouTube.

1:15:23And she ran it until she got ill and she passed away last year. And we're going to make sure people don't forget about Susan. No. I'll just put it that way. Yeah. We need to find early detection for lung cancer and you'll be hearing from us. Good. That's great. Yeah. Well, thank you, Ron. This is a wide ranging. Thank you for this time. Historical lesson on Google. I learned a whole bunch of things. It's our cut at it. The SV Angel cut at Google. and I can't wait to we'll come back the next time I think maybe Napster's on tap yeah Napster that should be a good one all the companies that Sean Fanning and Sean Parker have started yeah you know when we invest with founders at SV Angel we invest for life yeah so Sean Fanning Sean Parker we have a lot to talk about because we've invested in every one of their endeavors I love it I can't wait this is going to be a great episode thank you So thank you for coming on, Ron.

1:16:31Thank you, Ron. It's a pleasure. Bye. Bye.