Posted by: pkab | 13 May 2008

Inside the SV Investing World of Ron Conway: Maps, Trends, & Clusters


By: Dean Krikorian

Alerted by a Venture Beat post, I decided to investigate the Silicon Valley investing world of super-angel Ron Conway. The results are various map types (Relational Investment, Investor, Company); Trends (Back-of-the-envelope statistics using the Map Options/Node Content features of LinkSViewer 1.2); and basic network analysis.

Relational Map and Analysis

First, I examined the Relational Investment Map of Ron Conway. I searched for Ron Conway as an investor and then displayed his Relational Investment network map (the second tab from the left on LinkSViewer 1.2. (Click on each map to goto LinkSViewer’s free version, sign-up required for live map manipulation).

Ron Conway Relational Investment Map - Click on image for free view in a new window

8 Individual Investors (Company Links):

  • Mike Maples and Donald Hutchison (Vizu, Obvious)
  • Josh Kopelman (Obvious, Wikia)
  • Michael Tanne (Wikia, edgeio)
  • Jeff Clavier (Kaboodle, Rapleaf, edgeio)
  • Kanwal Rekhi and Rajeev Motwani (Kaboodle, Simply Hired)
  • 7 VC Firm Investors (Company Links):

  • Draper Richards & Venture Frogs (Open Table, Topica)
  • Benchmark Capital (Open Table, oDesk)
  • First Round Capital (Authernative, Mint Software)
  • Garage Technology Ventures (Kaboodle, Simply Hired)
  • Angel Investors (Open Table, Ask.com)
  • Band of Angels (Topica, Ask.com)
  • Conway’s investing network in the Silicon Valley resembles a snowflake which has ties to other investors, but is limited as to the number of co-investors. This implies that his investments are not dominated by other key investors (VCs or individuals). Also interesting is the lack of connectivity between other investors with regards to his portfolio companies. All but 1 of his active companies are private (save Ask.com) and 4 of these companies (Buzz Logic, PBWiki, Become.com, and Loyalty Lab) have no co-investor relationships. Conway’s investing world focuses on private companies with relatively sparse connections.

    Investor Map, Trends, and Analysis

    Next, I further investigated some of the above trends using common companies as links in the network (an investor only one-mode network). I also turned on the # of Investments in LinkSViewer’s Map Options button to indicate the total number of investments for each investor (Active + Inactive companies). This indicates that Conway has 19 investments in the valley (17 of which are active) in the below map.

    Ron Conway Investor Map - Click on image for free view in a new window

    Investor Trends:

  • 13 investors have more than 1 common investment
  • Only 1 investor has more than 2 common investments (bold link = Strong Tie to Jeff Clavier = 3 common investments)
  • Investor Clusters:

  • Draper Richards-Venture Frogs
  • Kenwal Rekhi-Garage-Rajeev Motwani
  • Mike Maples-Donald Hutchison
  • VC Investors have 63.9 total investments on average
  • Individual Investors have 4.9 total investments on average
  • There are 13 co-investors in this network, but all save 1 (Jeff Clavier) have at most two investments in common with Conway. It can be seen that the snowflake in the previous map transformed to a spoke-like structure where the hub of the network is Ron Conway. This indicates that as an individual investor, he defines his own investing network.The clusters that form in the above investor map of highlight few co-investing relations in the network. Draper Richards and Venture Frogs both invested in OpenTable and Topica; Garage, Motwani, and Rekhi all invested in Simply Hired and Kaboodle; and Maples and Hutchison both invested in Vizu and Obvious. While these clusters exist, they clearly do not define the network.

    The nature of these investors deserves mention. The VCs are relatively large firms, but not giant (e.g., Sequoia) – if you factor out Angel Investors (Conway’s previous firm), then the average VC portfolio size decreases from 63.9 to 53.5. Also, these VCs tend to specialize in early-stage companies. The individuals have relatively small portfolios (4.9 total), compared to Conway (19 total). For instance, Rajeev Motwani and Donald Hutchison have only two SV investments and are co-investors with Conway on both. In general, Conway seems to co-invest more with individuals than VC firms, but there are still few repeat individual investors considering the size of his portfolio.

    Company Map, Trends, and Analysis

    Here I examined the common investors as links in the network (a company-only one mode network or dual-mode network of the previous map). I also turned on the # of Investors and Capital Information in LinkSViewer’s Map Options button to indicate the total number of investors, rounds, and total capital for each company. Note how only Conway’s companies that are connected by common investors are included in this map, resulting in 12 companies in the below map.

    Ron Conway Company Map - Click on image for free view in a new window

    Strong Ties (Common Investors):

  • Kaboodle-Simply Hired (3)
  • Obvious-Vizu (2)
  • OpenTable-Topica (2)
  • Company Clusters:

  • Topica-Ask.com-OpenTable
  • Simply Hired-Kaboodle; Kaboodle-RapLeaf-edgeio; edgeio-Wikia; Wikia-Obvious; Obvious-Vizu
  • Mint Software-Authernative
  • Strong Ties (Common Investors):The strong ties in the map indicate that there are 3 common investors in Kaboodle and Simply Hired (Rekhi, Garage, Motwani) and 2 common investors in Obvious and Vizu (Maples, Hutchison) & OpenTable and Topica (Draper Richards, Venture Frogs). This highlights a dual relationship in one-mode maps: here Investor = link; Company = node (it was vice-versa in the previous Investor Map). This pragmatically indicates that Kaboodle and Simply Hired have the most in common from an investing standpoint – some important alliances may form here or in the case of Obvious/Vizu and OpenTable/Topica.

    The clusters formed in the above map illustrate interesting company relations in the network. Most important is the network chain of Vizu-Obvious-Wikia-edgeio-RapLeaf/Kaboodle-SimplyHired. Here we have a network path of length 6, illustrating how investors are connected by companies in Conway’s investing network. This shows a pattern of how other investors are connected to one another without Conway. Of course they are all directly connected via Conway, but there is an alternative (albeit lengthy) path of which to form alliances between companies. From a network perspective, Conway provides value by shortening the path from Vizu to Simply Hired.

    Company Trends:

  • Linked companies have 10.7 investors on average (versus 8.4 for all active companies)
  • Linked companies have 1.6 rounds of capital on average (versus 1.9 for all active companies)
  • Linked companies have $13.7M capital on average (versus $12.1M for all active companies)
  • Linked companies have $8.6M capital/round on average (versus $6.2M/round for all active companies)
  • Average capital characteristics of these companies provide insight in Conway’s portfolio network. I differentiated the 12 linked companies from Conway’s active total of 16 to illustrate the point that linked companies perform better, on average. Specifically, linked companies have: more investors (10.7 vs. 8.4 overall); less rounds of capital (1.6 vs. 1.9 overall); more capital ($13.7M vs. $12.1M overall – I factored out Ask.com and Obvious); and thus have more capital per round ($8.6M/round vs. $6.2M/round overall). These numbers indicate that linked companies in Conway’s portfolio have a better chance of raising more capital at earlier rounds of financing. Extrapolated, this trend suggests that the most effective strategy for raising capital is to look for relational ties between investors. Link and ye shall be rewarded!

    Source: CapitalBLOG


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