Ron Conway

Transcription

[Music] I want to start, Ron, with the following. As [inaudible] said, you have invested in almost 500 companies. Now, if you take the 15-year span that you have been investing, that's about one company every six days. So, the question I have is, how do you organize yourself to be able to invest in so many companies? And, in general, what's your strategy for investing? So, like the introduction said, the best decision I ever made from a macro point of view was back in 1994 when I teamed up with Ben Rosen and we had this crazy thought. We were both as gray-haired as I am today in 1994 and we said, "Let's only invest in this thing we call the Internet." So one of the reasons that I attribute my success to is that I have stayed only focused on the Internet, I haven't got distracted with health care or green tech or anything else. Now, since 1994, the Internet has completely exploded and we could almost be criticized for not focusing on some sector of the Internet, which in fact we do have a sector focus, but we take a portfolio approach where we try and invest in the top 10 companies in each of these sectors and hope that one of those 10 becomes the company that blossoms, because you don't know that the day you invest. The venture capital community tends to invest in one company per sector and hope that that company is going to win. And that's a more rifle- focused approach where my approach is more portfolio. [Informal Talk] The other part of it is this is one company every six or seven days, so how do you organize yourself to just be able to process that many deals? [Informal Talk] Well, actually it's been a lot more than that. But if you go back to 1994, it was me and Ben Rosen for a couple of years, and when we got to investing in one company a month, I said, "Oho, we can't process the deal flow and especially, we don' t have the time to do the due diligence on the deal flow." So, that's when we formed Angel Investors, LP in 1998 which was a $25-million fund. And then, remember this is the height of the Internet, so people were investing very rapidly in Internet-only funds. So we did a fund the very next year which is kind of unusual, 1999, we raised a $175- million fund. Now, in that fund, from 1998 to, let's say, 2003, we had a staff at our peak of 13 people and we charged a 3% management fee. We kept the GP salary at 300 k each. But a 3% management fee gave us enough money to hire a lot of people to manage that huge portfolio. Of the 500 companies I have invested in, 225 of them were at this peak of the Internet, '98/'99. So, at that time, we had a huge staff. When the bubble burst, we actually very quickly reacted when the stock market crashed in May of 2000, and I told all of our staff "we are not investing anymore, this is going to be awful, everyone go, find another job." And we basically triaged that 225 company portfolio waiting for Google to go public, AskJeeves had already gone public in that portfolio which gave it some return, but Google was the monster return. And Venture Investing and Angel Investing is a its business in my opinion, but I have lots of facts to prove it, because in the '98/'99 funds - and I am back to not answering your question, I am sorry, but I am thinking of interesting stuff - 78% of those 225 companies went out of business. That is how traumatic the bubble bursting in ' 98, 1999, how traumatic that was, because most of the people in this room don't remember that. But you were me, I never believed the market would come back the way it has and Google really helped bring it back. We are fortunate enough to be investors in Google and that basically paid for those funds. And we ultimately sold those funds, the balance of that portfolio after Google went public. So now, we are in 2003/2004, I started Angel Investing on my own again. Now, at that time period, I was all alone. And then, I couldn't keep up with the due diligence because startups started to percolate. From 2000 to 2003/'04, there wasn't a lot of startup activity. There was no money for it, there was no appetite for it, I mean this valley was very dry at that point. But I started investing again in 2003, and when the deal flow got active enough, I teamed up with a fund called Baseline which helped me process the deal flow up till two years ago when we got really excited about real- time data. And we got so excited about that, we spun off of Baseline and we started SV Angel. SV Angel today - so Baseline had about four people, SV Angel has five people. So my whole theory about investing is if you have great deal flow and you get great deal flow by helping entrepreneurs, getting a good reputation and then they come back and then they recommend you, that's how you get good deal flow but that's easier said than done, but once you get the great deal flow, you have to process it and do due diligence on it. And that's what you need four or five people for. We could see five new deals a day all from people and e-mail addresses that we know and we only invest in one out of 30 that we see. [Informal Talk] That's 29 turndowns for every one that we invest in, and these are people that we know. So, that's the hard part of the business but that's a lot of work doing the due diligence, because you want to invest in the winners. So, Ron, let's go back to Google and talk about interesting an example. That's certainly an interesting example. And can you tell us a little bit about, when you got involved with them and, more generally, what stage do you like to become involved in companies, and sort of how did that work with Google? So, we like to invest at a very seed stage, one, two or three cofounders usually at that point, the three people are all cofounders of the company, and that's when we like to invest and that's the vast majority of our investments. Google definitely was in that bucket. Google started in 1997, probably '98, now that I think about it. I found out about the company at Vivek Ranadive's holiday party in December of '98 and I ran into David Cheriton, who is a professor at Stanford and David was an investor in the Angel Funds. And the Angel Funds had all investors in them who were unique to the Internet. It was Internet entrepreneurs or Stanford Professors. And at that party - and it was funny, it was a black tie party and I had never seen David Cheriton in a black tie, I don't think I have seen him once since. Now, if you know David Cheriton, he is not prone to black tie. And I said, "Hey, there has got to be something going on at Stanford. I want to know what it is and give me the name of a company that I can go home with." And he said, "Oh, there is a really interesting one called BackRub." And that was the name of Google in the very, very beginning, it was BackRub. And I said, "Well, what does it do?" And he said, "Well, it's quality search based on page rank and relevance, and page rank as determined by popularity by users." And that summer before, we had just taken Askjeeves public. So even though I am not an engineer, I knew the search space pretty well. And I said, "My God, I want to meet that company tomorrow." And he said, "Oh no, they are not ready to see any funders yet because they have already gotten the money from Andy Bechtolsheim and Ram Shriram, Jeff Bezos, and David Cheriton. There were four people that did that original Angel round. So they had enough money but I badgered him and literally, three months later, he said, " Okay, they are ready to meet you." So we went in and met Google on University Avenue and it was probably no more than six people. And I brought one of my partners who was technical - I always hook up with somebody who is really technical - and we decided ahead of time, because of our knowledge of AskJeeves, and because of what we heard about the search engine, we felt like this was something big. So I said, "I will keep them busy talking and after the demo, we will ask them, can you just keep playing with it." So I talked to Larry and Sergey, Bob Bozeman, kept playing with the search. And halfway through the interview, he just nodded to me, like go for it, this thing is awesome. And so, I said to Larry and Sergey, "Hey, we want to invest like right now." And they said, "Well, we are going to get the big VCs first, but maybe you can help us close the VCs." And Sequoia was one of the VCs, they wanted to invest because of Sequoia's partnership with Yahoo and Larry and Sergey were smart enough to say, "We are going to need distribution for this search engine. We are going to want to deal with Yahoo. Let's go, get the VC who invested in Yahoo to invest in Google." And so, they basically said, "You help us close Sequoia and you will get an allocation." And so, that's how we got an allocation in Google. So you used the term "badgering". Here's a cute story. So, getting the VC round done was not easy because it was KP for AOL and Sequoia, they wanted two VCs. VCs don't like doing deals together, especially at the height of the Internet. And so, Sequoia and KP didn't want to work together. And we kept saying, "Hey, if you don't work together, maybe we will just do an Angel round." And Larry and Sergey, I could tell, were getting really serious about this. So we called KP and Sequoia one day and we said, "Guys, neither one of you are going to get this because Larry and Sergey are saying, if these guys don't hurry up and work together, we will just do a big Angel round." And they asked me "Can you raise $10 million in an Angel round?" And I said, "For this, you bet I can." And Sequoia and KP called me in a Starbucks Coffee Shop in Foster City in 1999. I said, "Great," and they agreed to work together which I meant I was going to get lower allocation, but better for the company because getting Google and Sequoia behind you early is the best thing you could do. So, we were super happy for Larry and Sergey. But I hung up the phone and I said to my wife, "This was a historic phone call." And she laughed and she goes, "All of your calls are historic." And I said, "No, no, no, I want you to really remember this one because this is going to be a huge company." And she does remember to this day that I said "this one is going to be huge." And we kept telling our LPs for years - we could talk about Google all day, we should probably stop - but what a hot technology Google had. And in the early days of Google, investors didn't get it. They said, "Isn't it just like the rest of them?" And we said, "No, go use it. It's actually relevant, it delivers relevant answers. And therefore, it's going to be a huge company. Now, we don't know how, but it will be" and sure enough. [Informal Talk] And so, you said you always get somebody to help you, but take it back, how do you even know who to get and have you ever felt disadvantaged because of the lack of a technical background? Well, I haven't felt disadvantaged because of not being technical myself because every step of the way because I know I am not an engineer and I am not a PhD. I have always made sure for every fund that we had a very technical person that we can turn to who can actually do a code review if they have to. Usually, they can get what they need just by talking to the entrepreneur. So, a non-technical person could definitely succeed. Most of our founder teams, if they have four people, the fourth person is usually the businessperson, they have marketing person. And so, if you are not technical in a founding team, you can be that person. One of the things you do, as you get involved with the teams above and beyond just investing, so when you do that, you are helping to organize a technical company. Do you ever run into problems there? Well, no, because we have done our due diligence through our technology person that we have at the time. In terms of your advice to them. Well, in terms of our advice to them, our MO as we get involved at inflection points during the company's history. And by inflection points, I mean we help them get a great Angle syndicate once we decide to invest. We lead them completely through the VC round, helping them pick the VCs, back channeling to the VCs, getting the valuation right, getting the VC round done. And then when traction happens, then companies need lots of distribution. We help companies get their distribution. So, if you need to deal with Google, Yahoo, IAC, AOL, we will go, get that to happen with the management of those companies. We will also help on recruiting, we will help with management turmoil. Every company has management turmoil at some point in their history. But when those inflection point events aren't happening, we are not there. So we are like the "doctor on call". We don't take board seats. We only get involved when the entrepreneur needs our help. So, what I mean, the longwinded answer is we don't get involved in product strategy, we don't get involved in engineering decisions. When we invested in the entrepreneur, we assume he or she knows the product and the engineering and the code base, because we don't get involved in that and we don't want to be involved in that because a lot of our companies end up morphing into each other's spaces. Today, we are in Gowalla and Foursquare, for example. We are in Blippy, and Swipley. So we don't get into product strategy, we don't want to. So, we just want to help with those rifle shot company defining events. And it's funny, when our companies get to liquidity and they call up and we are congratulating each other, so many of them likely say, "It's so weird. You are only involved in our company four times for like a week each but now, when I look back at what we did, those are the four things that made us big. You just swooped in, helped us and got out," because we got to go hop the other company. [Informal Talk] So, you just think about the Angel community. Are you at one end of the spectrum and what's the other end of the spectrum in terms of the way in which you interact with companies? Well, if you take the Angel investing category, because it is becoming a category, there are people who invest just as an individual Angel themselves and they usually do one to five investments a year. I personally think that's a hard way to do it and I think you need to build a portfolio of companies, so somewhere in that portfolio is the winner. And then, there is Angel groups like ours. SV Angel is a $20- million fund. The managing general partner is David Lee. I don't want to be a fiduciary. So David Lee, an ex-Googler, lawyer and engineer, is the managing partner of SV Angel. And our investor base is all Internet entrepreneurs themselves, just like the Angel Funds were. So, it's the founders of many of the great companies in Silicon Valley and they contribute to a lot of the deal flow. So, SV Angel is kind of a friends and family fund. And then, you have this new group called Super Angels or Micro VCs, and these are people who have institutional money behind them and they act much more like a fiduciary. And I don't like the term "Super Angel". Super Angel because they go and raise money from the same people that Sequoia and KP and everyone else raise their money from. I think Super Angels are just small VCs, the bucket of money they have is smaller, but they are actually competing with Sand Hill Road as far as I am concerned, and it's just how big the bucket of money is that you have. What I think you need to look at is which one of the partners in these firms is going to add value to your company because raising money today is - nothing is easy. Starting a company is not easy. That's why I have been quoted and it's true that I think anyone who has the guts to start a company should get funded because it is not easy, it's a ton of work. But getting funded, hopefully, if you have got a great idea, you get multiple people wanting to invest and then it's about picking the partner in the fund that you are getting money from who you think is going to add value, who has the biggest Rolodex, who has the best business sense, who is going to help you when there is management turmoil with great advice. That's what you need to look for. It's the individual, not the fund or who invested in that fund. So you have a $20-million fund and you call yourself an " angel". How do you differ from a small VC? Well, we don't take any money from institutional investors who then have other investors that they answer to. So, Super Angels are also what I would call "super fiduciaries". They have institutional money that also has investors watching them. There is three pairs of eyes watching your money, and I personally think that takes your eye off the ball. All I want to do is help entrepreneurs. I don't want to be a fiduciary. So, with SV Angel, it's a very unique relationship, but I have the best of both worlds. But that doesn't occur very often. [Informal Talk] So let's just spend one more minute on the Angel community because it's changed a lot in the last 15 years. You described sort of what it is now. How do you see this moving? And one of the things that seems to have happened is that some of the VCs have pulled out of the early-stage funding which is where you are and do you see this continue like this or do you expect that to change over the next 5 to 10 years? Well, I think it's ever evolving. What I like about it is there is more people investing which says more companies get started which means there is more innovation in Silicon Valley or elsewhere in the United States. And I really do believe that Silicon Valley must live up to its legacy and be the most innovative place on earth, and that's part of the reason I do this. The fact that there is more funding sources, say, there is going to be more great companies and more great ideas funded who say "we will dominate in technology." A lot of the VCs though, most of the VCs that I know on Sand Hill Road wants to invest at the seed stage and do invest at the seed stage, and it's a misnomer that they don't. KP and Sequoia make and benchmark these firms when they have conviction about an entrepreneur. They will invest 150 and then go to the next level. The problem with that is if they don't invest in the series A or B round, there is a stigma on "oh, well, why didn't Sequoia invest in the next round?" It actually makes it harder for the entrepreneur to raise money because everyone says, "Well, why isn't Sequoia investing?" And that's why you don't see a lot of entrepreneurs doing that. But as far as the Super Angels, I mean the number of Super Angels and Micro VCs out there, in the last couple of years, it's been doubling or tripling every year, and I view that as a good thing for the ecosystem. [Informal Talk] By the way, I am assuming from what you just said that you don't invest in second or third rounds, is that true? We typically do not. So you avoid the (overlapping 27:04) why did you not invest? Yeah, we avoid that. And in our case, when you are investing as an Angel, you usually don't get asked anyway. But two exceptions would be I invested in follow on rounds of AdMob and Twitter. It think there are vivid examples of companies that were far enough along that a shrink would say, "Are you crazy not to take your pro rata in those types of companies? " But in general, we don't because I would rather spend all of my money investing in three entrepreneurs starting a new co. That's what I enjoy. Just writing another check for AdMob and Twitter, yes, it puts money in the bank, the reason I do it is it puts money in the bank so I can go invest in more startups, but that act itself is not as exciting as investing in a brand new raw startup. [Informal Talk] When in the evolution of an idea or an opportunity do you think an entrepreneur ought to approach an Angel? How far along do they need to be and what advice would you give them on that? Well, my advice is to bootstrap as long as you possibly can, and there are a lot of companies where the entrepreneur bootstraps are all the way to profitability. Let's use Michael Arrington as an example, TechCrunch, everyone must note Michael Arrington at TechCrunch. He is a bootstrap entrepreneur. He started TechCrunch and never ever took a nickel and sold it to AOL a month ago for a lot of money, I mean he is a wealthy person now. That is the best scenario. Now, how did he do that? He got quick traction and he monetized it quickly enough and he was able to hire enough people and always make a profit. So, how does that translate here? Try and bootstrap as long as you possibly can, and try and get some traction that you can show investors, so that you do get multiple investors bidding on your company and you can get a higher evaluation so you don't get diluted as much. So, the best case - and Michael Arrington is the exception, not the role. Most companies do have to go out and get funded. But if you get funded where you have written the initial program and you can show some traction, i.e. there is X thousands of users, that's much easier than getting funded with here is an executive summary, and you need a good executive summary regardless, here is a great executive summary but the code is half done, we are going to go beta in six months but we have five people and we can't bootstrap it anymore. That company is not going to get a optimal evaluation. So, the long you can bootstrap, get the program finished, release it, don't procrastinate. Google, the father of released products to beta and iterate and iterate, I am a huge believer in that now. We still have very prestigious companies who don't do that. They want to wait till it's perfect and then release it, and I happen to disagree with that. And that's why companies are becoming more successful as Google is the one who took the stigma off of releasing beta software. But get the product out there, get traction and then raise money. That's the optimal crossover. And when you have done that, gone as far as you can, then would you suggest to try to find an Angel or try to go to VC community? What are the conditions under which you would go to an Angel versus VC? It's all about the amount of traction you have. So, there is no doubt in my mind that if you can get funded by KP, Sequoia, Accel, Benchmark, Greylock right out of the gate, that is a better thing for your company. But those VCs are going to want to see more proof points, they are going to want to see a business model of some sort, although they didn't on Google but the product was so spectacular, it overcame that, and they are going to want to see user traction and huge growth. So if you go from - Facebook had a tiny amount of angel financing, so maybe if you just forget that that happened that Peter Thiel put in a little bit of money with a few others. Facebook, Accel came in and bid against the Washington Post six years ago and they had skyrocketing growth. And that allowed them to go directly to the VC community and get an $80-million valuation. It was like unheard of. But they had proof points and everyone knew that you could advertise to that audience. So if you can't leapfrog to the VC, for sure, you should go and find the highest quality value-added angel who is going to open up their Rolodex to finish rounding out the angel syndicate, because we invest like 100k-200k, most companies raise a million to start or half a million. So no matter what, you need a syndicate of angels, not just one angel. And so, the lead angel better go get other great angels to invest because that sets the pedigree for your company from day one onward. So if you can get four high pedigree angels to invest, you are already a hot company. But they are not going to invest unless you have got some market traction, product is up and running and you have got some amount of growth. The life blood of Silicon Valley is growth. How we pick our market segments? Anything that grows at 2000% a year, that's the market I want to be in as long as it's in the Internet. We don't have to do any market research. It's all about growth. We love growth. It's the life blood of the Valley. So, if you show any investor growth, they are going to give you money. [Informal Talk] [Audience] Are you still investing exclusively in Internet companies or you are looking at branching out in the near future to other industries? We are exclusively Internet and we are sector focused right now on what we call "real time" which is a lot of companies, believe me. It's anything where users are spontaneously contributing content of the web. So, any QA sites, any content sites, the flash sale space, these are all real-time companies, especially Twitter, it would be the flagship company of real-time data. But I can tell if you have an Internet-based company, sometimes they deviate from that particular segment. We will still look but probably 75% of our investments are - 100% of our investments are in the Internet, 75% are in the strategy around real-time data, and that's because of the growth. [Audience] What are a couple of investments that you overlooked and were very successful and what could have the entrepreneurs said to convince you to invest? The most famous is Salesforce.com. Marc Benioff reminds me every time he sees me. It was right in 1999 when we believe the market was going to crater and it did crater and we couldn't agree on the valuation. So, the only thing he could have said was, "Okay, I let you invest cheaper." And at the time, he had plenty of investors and so he didn't let us do that. [Audience] We are starting from zero and we want to be [inaudible] about 20 years, what are the kinds of the things that we need to get right? Well, for sure, I would go, get an operating job in a company. I co-founded Altos Computer, that that was a 10- year stint. Then, I went and acquired a company in the software space that was a five-year stint. But I did not like being an operator, but it gave me very valuable experience. I don't tell an entrepreneur anything that I haven't done myself. I would also say, "You need to fire that person." And they will say, "Wow, that's pretty harsh." "Well no, no, I have fired hundreds of people in my career. It's not easy but you have got to be decisive." So I would get an operating job. And then, once you get a big enough bucket of money, start angel investing but angel invest with a syndicate that you enjoy working with. And I would find if you are technical, find someone who is a good marketer, so that your little fund is well rounded. Social media is a huge space today, and David Lee and I are the old farts of angel investors. We have three people who are 25 or younger and we couldn't do effective due diligence today on most of the social media companies without that team. So, whatever segment you are going after, make sure you have the right people that help you do the due diligence. Great deal flow, great due diligence equals a good portfolio. And I laugh at these 25-year-olds that we have, one of them is my son, because in five years, they will be stale. We will have to go - if social media is still a very huge high growth sector and I think it probably will be, in five years, we will have to go, find a 20 year old and tell us what this is. I mean everyone probably knows, I don't use these services but I understand the dynamic of the services and I am getting all that data from 25-year-olds. [Informal Talk] So, any other personal attributes that you think young man out there who wants to be in your shoes should -- Well, I would be decisive. When you are an angel investor, you don't trust your gut. We invest in the entrepreneur first and the idea second, and the idea second by a long shot. It's all about the chemistry we are going to have with that entrepreneur because the ideas are on morph a lot. So, you would need to become a good judge of people, so to speak, and that's I have been doing after investing in 500 companies and talking to 10 per investment, that's 5,000 - I have talked to way over 5,000 entrepreneurs. So, within 10 minutes, I have a real feel of I think that's going to be a great entrepreneur and we are investing and I don't care what the idea is. That's the point you - if you want to be like me, that's the point you want to get to. It's intuitive about the people. [Informal Talk] You said the deal flow is the key thing to get. So, take yourself back to, was it, 1997 when you started your first angel fund, how did you begin to get deal flow? Well, from '94 to '97/'98, Ben Rosen, who was then the chairman of Compaq and I had done about 40 or 50 investments together, and AskJeeves was one of them. And we actually sat in the board meetings and turn them into business development sessions, it's the only time when we participate, because we said, "Hey, this is a great idea but unless we go, get distribution deals with EZ publishers, we are not going anywhere" and we went to sign those. So, we got this great reputation established where all the AskJeeves team, when their friends would say, "Hey, I am going to start a company," they would go, "Hey, that Rosen and Conway were really helpful, you ought to go talk to them." And then when we raised our funds in '98/'99, we went to Marc Andreessen, Jeff [inaudible], the founders of Yahoo, eBay, those were the investors in those '98/'99 funds. They had just become wealthy and I said, "Why don't you invest in the next generation of the Internet? You are busy at your jobs, but you are going to get lots of deal flow, Marc Andreessen, and you are busy building Netscape. Refer that deal flow to us, we will make sure, even if we don't invest, we try and get them funded elsewhere." So we really like helping the ecosystem. When we turn somebody down, many times we will say, "Hey, go try that angel because we think they will be excited about your company and your sector." [Audience] How do you feel about ideas or companies that could be easily replicated by large companies and maybe targeting to be bought out like when people come to you and say well, and you say I hear a lot like well, what's stopping Google from doing this in a second or something like that? Well, so company is in a cluttered space, it depends how cluttered the space is. I think wellness today and photos, there is two spaces that when somebody says that to me, I say, "My God, I can reside 50 companies in that space." Now, we still listen to it, but we think those are pretty cluttered. So we want to hear more about it. But we will probably most likely turn them down. So, a better example would be I think I have five companies in the space but it's an interesting space, but there is no intellectual property barrier to entry. Then I will look to the entrepreneur "How fast can you execute? How fast can you make a decision? How fast can you hire a team?" And we will tell the entrepreneur "Do you know you are in an execution play? This space is cluttered, there is these five people. Tell us how you can execute those other four companies." And there is an entrepreneur who says, "Here is my angle." And I say, "Wow, you will probably execute best, therefore you win because these are huge spaces." Facebook had a plenty of competition but they executed. So you look for the one that will execute. The group texting space right now today is hot as hell. There is four companies going after it. We have made a bet and it is an execution play. So, there are very vivid examples of very exciting spaces that fit your example perfectly, and it's all about executing. Now, I have got a cluttered space that has a very large company in it, let's say a Google, well Google could enter [Informal Talk] So what kinds of questions do you ask to your entrepreneur in that case? It depends what segment that they are going after, I mean we would get really deep about - if you are going after Google or Facebook, I am hoping there is some intellectual property advantage. If it's just an execution play going after Google or Facebook, we probably won't invest. But if they have intellectual property that's very unique, then we will take a look and invest. We invested several years ago in a company called Blekko that just got launched today. It's in every news media outlet and it's a search company but I think it's going after a segment of search and it has very deep intellectual property. And that's what we think that advantage is. [Audience] How long do you typically advise your companies, what type of runways do you typically advise them to take [inaudible] series A and do you see your model changing as the early stage sort of series A venture industry trends? [Informal Talk] The companies usually raise a half a million to a million in the angel round. That should get them - there ahs got to be something to show, so hopefully, thousands and thousands of users and maybe some monetization. And depending on where your traction is, if you have lots of traction, you can raise money a little slower. If you don't have a lot of traction, four or five months before you are out of money, you better start raising that next round or open the angel round at the last valuation. [Informal Talk] [Audience] Hi Ron, I am Alan too. Question for you is, what are some of the more promising monetization models that you have seen? [Informal Talk] Here is a space that we didn't get into. We are in a few startups that are in it now. But the flash sales/flash marketing space, these are phenomenal monetization schemes, I mean schemes and a positive vent. Gilt Groupe and Groupon are fascinating companies led by defining entrepreneurs [Informal Talk]. I was offered to invest in Gilt Groupe and didn't, and that is a phenomenal company with a phenomenal monetization model. Twitter is going to end up with promoted tweets. I think that's going to be a phenomenal monetization model. Facebook with traditional ads is a phenomenal monetization model. But if you look at the flash sale space, all kinds of different tweaks of the monetization are taking place in that space and it's really early days. We haven't seen half of the creativity on how they are going to monetize. [Audience] Hi. Can you tell us about what you see on the hot trends at the moment and what do you see the hot spaces we should look into especially? Well, I just talked about flash marketing. Mobile overall is monstrous, I mean computing is moving from the computer to the mobile device in every way, shape or form. Gaming is massive growth. Anything that's location based is massive growth and location based with commerce in it, which is where Foursquare for sure is going to go. And then there is a brand new space that we are looking at right now. I heard it first at Stanford, O2O, Online to Offline. I have two examples. There is a company called shopkick which you walk into a store that has an LBS device that knows you are in the store and as you are walking down the aisles, it delivers information about what's in that aisle and coupons and specials that allow for instant monetization. And that's a KP Greylock-backed company and we are lucky enough to be investors as well. And then, a company called Milo which gathers inventory of all the local stores around here, big and small, so you would go to Milo because once you decide what you are going to buy, you just want to know what's there when you go to the store, you don't want to drive there for nothing. You see that they have inventory, you reserve it, you drive over and you pick it up. That's just two examples of what I would call Online to Offline. This could be another multibillion-dollar web opportunity. [Audience] So, given that a lot of us have business backgrounds and we are thinking about lots of different ideas, do you think we should be concerned about the idea or the team? I would be much more concerned about finding the right co- founders and then getting the right co-founders to agree to the company, the market, the strategy. It's all about the team. Now, that's just my bias. Don Valentine at Sequoia spoke here somewhere at Stanford a month ago, I am dying to hear it, in this room, in this chair. [Informal Talk] Don Valentine was the VC who invested in Altos Computer, the company that I co-founded that went public in 1982, and he is a rock star. He invests in a panel. A week ago, [inaudible] startup school. I said, "Yes, I disagree with Don Valentine." Don says, "The size of the market determines how excited he gets." So, I don't just want to mislead anybody here. This is the criteria I use. There are other angels, many other angels out there where it's all about the idea and the team, but let's hope we can work with the team. And then, you have got Don Valentine which is it's all about the market size that they are going after. [Informal Talk] [Audience] Hi. I was just wondering, we hear a lot about the big successes and we know there are a lot of companies that never make it. And I am just wondering how many companies end up in your portfolio in the middle of the road where they may have trouble attracting VC funds but they have cash flows enough to sustain themselves? And if there is a critical mass there, when do you decide to engage or disengage if you have companies portfolio that are humming along but they are never going to be the next Google [inaudible] so many hours in a day? We never disengage. We have become less active because the company doesn't need our help. But 40% of the companies we invest in today will go out of business. So, that's why I am saying anyone who has the guts to start a company, I hope they all get funded, because entrepreneur should know 40% of you are going to fail, you return no money. Now, that's a lot better - because I am an optimist - that's a lot better than when the bubble burst and 78% failure rate. But the companies in the middle where there are not hits, that's what M&A is for, 80% of our liquidity events will be via M& A. There is nothing wrong with M&A. Ask Omar Hamoui who sold AdMob to Google for $700 million or the Zappos founders, $2 billion to Amazon, and YouTube $1.6 billion to Google. There is nothing wrong with M&A. So, those companies should be very proud of themselves, especially if they have positive cash flow and say, "Hey, we are not going to go public but let's merge into another company. Let's even merge into a private company if we have to and reinvent ourselves." But M&A is the vast majority of liquidity events for startups and going into it, you should absolutely realize that and not be embarrassed about it. It's awesome. Going public is not easy. [Informal Talk]