TechCrunch Disrupt SF 2014 - Day 3
David Lee Photograph by Steve Jennings — Getty Images

What’s really behind the SV Angel shakeup?

May 20, 2015

"This is David's fund."

That was legendary Silicon Valley investor Ron Conway in 2012, explaining how he had fully turned over the reins of his venture capital firm, SV Angel, to David Lee, a former Google executive who had helped Conway launch SV Angel five years earlier.

Conway wasn't joking. According to SEC documents, Lee has held a 75% or greater ownership stake in SV Angel since March 2010. No other individuals are listed as direct owners, indirect owners or executives.

Yesterday, however, SV Angel announced Lee's resignation in a terse memo to investors, saying that "David has made a personal decision to spend more time with his wife, children, and extended family in Los Angeles." It added that his resignation was "effective immediately," with Ron Conway and his son Topher taking over as SV Angel's co-managing partners. Lee soon confirmed the departure via both Facebook and Twitter.

To be clear, I have no specific evidence to counter the official explanation. And I can certainly appreciate the difficulty of running one of the Bay Area's most active seed-stage investment groups when your family is located more than 350 miles to the south. Moreover, Lee is one of the few VCs who seems to garner universal admiration from peers and entrepreneurs.

But something just feels wrong here.

For starters, why is Lee's resignation immediate? It is extremely rare for a sole managing partner to resign in the first place, and virtually unheard of without some sort of transition period.

Perhaps we should have seen this coming on April 15, when Ron Conway's name appeared on a federal filing for an SV Angel-backed special purpose vehicle called Palma Investments II (Lee had been the only person listed on Palma Investments I, raised one year earlier). But limited partners do not seem to have been informed of a pending change before yesterday's letter. Nor is there any mention in the letter about Lee maintaining certain portfolio company responsibilities for a period of time, which is typical of such splits (however rare), nor did it include any statement from Lee himself.

Venture capitalists familiar with Lee also were taken aback. "I don't know anyone who had heard about this," says one Los Angeles-area investor. "And I saw [Lee] recently. We're all just surprised by it and the tone of the letter."

It also is unclear what Lee's departure means for the existing SV Angel funds themselves. Ron Conway, via a spokesman, declined to comment on whether or not Lee's departure triggered a so-called keyman clause that would require investors to vote on the funds' ability to make new investments. Such provisions are usually included, although often require multiple senior departures (SV Angel does have investing partners outside of Lee and the Conways). Lee also isn't commenting.

"Everyone is toeing the party line," says one longtime Silicon Valley investor. "I'm sure the commute had to be tough but, if that's the only reason he left, why do it like this?"

I don't know yet. But I'm fairly sure there's something that the party line leaves out.

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