Angel Investor Ron Conway Speaks (About His Wise-Up-Silicon-Valley Missive)
by Kara Swisher
Posted on October 14, 2008 at 7:45 AM PT
Of course, the stock market had to come roaring back and it had to be extra sunny on the very day I was scheduled to have lunch with well-known Silicon Valley investor Ron Conway to talk about the worrisome state of the digital sector.
After all, it was Conway (pictured here), as well as Sequoia Capital, who sent out a stink bomb of an email last week to his start-ups to deliver a simple message: The Web 2.0 party is over.
Said Conway to his entrepreneurial troops as the market was crashing down and smacking tech companies hard in the process:
“Unfortunately history DOES repeat itself but I hope we can learn from history and prevent the turmoil from occurring again. The message is simple. Raising capital will be much more difficult now … the name of the game in this environment in some respects is survival–survival until conditions change.”
Survival!?! What ho? This from the man who is one of the more upbeat of Web investors! Who is one of the backers of Digg, Facebook, Twitter, Ning, Seesmic and 125 other Web 2.0 companies?
Ironically, our lunch yesterday was little more than a year after I had had another lunch with Conway, where I also made a video, and during which we had a lively discussion about a range of topics, including the venture business (better than ever!), innovation (better than better than ever!), monetizing video content on the Web (best of all!) and more.
Yesterday, the news was not so happy, of course, although Conway did try to explain in more detail exactly what he meant in his most recent email, which echoed one he had also sent out when the last Internet bubble was popping a half-dozen years ago.
And that is: You better have a year’s worth of cash and a revenue model or you’re toast.
Other than that, Mrs. Lincoln, he’s bullish!
Here’s the video (and below it, the one from June 2007, when things looked a little sunnier for Conway and Web 2.0):
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Comments
i disagree with ron, this is the best time to invest in startups since values are better and the ideas must be stronger than a “web 2.0″ reflecting logo
but small vc like ron are beholden to the larger vc firms who will now stiff his portfolio valuations and his preferred shares
Posted by Sam Harrison at October 14th, 2008 at 12:23 pmRon’s message to his portfolio companies is on point. He’s reminding entrepreneurs of a core business principle: cash is king. Reduce spending where you can, raise money if you can, prove the business model and figure out a path to profitability. It’s sound advice in good, bad or uncertain economies.
He’s not saying don’t invest, in fact it sounded like he is going to expand beyond video and search technologies where he’s been focused the last few years. He’ll be able to command lower valuations just like VCs – it’s the entrepreneurs / founders who will take the valuation hit for the most part.
Posted by Ed Zschau at October 14th, 2008 at 1:38 pmSam:
Good point to running into the breech now!
Posted by Kara Swisher at October 15th, 2008 at 2:07 amEd:
I think you are dead-on on valuations.
Posted by Kara Swisher at October 15th, 2008 at 2:08 amto be honest, u.s. venture capital has been lame for 8 years now, sine the ipo market has dried up for most companies
on top of that, there has been a lack of real risk taking by venture firms across the board
most/many just follow the trends and hope for a quick payday
it’s why the u.s. will fall behind china and india in innovation
because u.s. venture partners lack the cajones to take risks — risks that they are supposed to be taking according to their limited partner agreements (the capital they invest, it’s from pension funds and endowments)
you’d think at some point the limited partners who invest would make the venture firms actually work for the capital and fees
the venture industry is broken and has a lack of real leadership at any of the firms
Posted by Sam Harrison at October 30th, 2008 at 12:40 pm