TMG Partners Press Archive
May 11, 2012
Ron Conway is coming on stronger than ever in San Francisco politics.
After arranging big independent spending for Mayor Ed Lee's election, the famous early-stage technology investor has organized hundreds of the city's burgeoning tech companies into a potentially powerful new industry association, and he has personally thrown himself into a campaign to change the city's payroll tax — a perennially thorny issue that has defied previous reform efforts.
Along the way, Conway has become a lightning rod for "progressive" political opponents who say Mayor Lee has been co-opted into looking after Conway's economic interests.
He has also ruffled feathers among old-line business figures who could end up paying significantly more if the payroll tax is replaced. The payroll tax issue is expected to come to a head in coming weeks, as June is the deadline for putting a measure on the November ballot.
Conway is a hard-driving, enormously successful investor and philanthropist who is known as an outspoken champion for entrepreneurs.
He is not known for his subtlety.
When Conway was honored last month by the Commonwealth Club as a "Distinguished Citizen," he told the audience that "whether or not it's appropriate," he wanted to revisit comments he made in 2010 before the Bay Area Council, a business group, in which he said "we must take our city back" from "progressives."
"I said, 'We are going to take our city back.' And guess what, Ed Lee got elected mayor, and we have taken our city back," Conway said.
Conway told the audience that Lee's support for the growth of the technology industry in San Francisco promises good times ahead.
"The tech community in San Francisco is outpacing job growth way above the national average," Conway said. "There's nothing but optimism for the City of San Francisco right now, and it's only going to get better."
Political animal evolves
Conway, until January a registered Republican and now a "Decline to State" voter, has long been politically active, giving hundreds of thousands of dollars over the years to candidates in both major parties and to a wide variety of political causes, including some high-profile and controversial measures in San Francisco. He has also donated millions of dollars and helped raise millions more for charitable causes, notably UCSF Medical Center.
But his recent involvement in civic affairs has risen to new heights.
Conway says he had an awakening in April 2011 when the San Francisco Board of Supervisors and Lee approved an exemption from the city's 1.5 percent payroll tax on new hires for Twitter Inc. and other companies that move into the Mid-Market and Tenderloin neighborhoods. Twitter promised to create more than 2,000 jobs in coming years.
In addition, the supervisors and Lee subsequently approved another six-year exemption from the payroll tax on employee stock options once they're exercised.
"Twitter and the private stock option tax is what woke me up that Ed Lee was someone who can get something accomplished," Conway said. "Having a stock option tax for private companies is an invitation for technology companies and jobs to leave the city. That had to get solved. And it got solved."
Born and raised in San Francisco, Conway left the city for college in the late 1960s, then worked at Fairchild Semiconductor and co-founded Altos Computer Systems in San Jose before turning to investing in startups, including Google, Facebook and Twitter. After raising a family in Atherton, Conway in 2004 moved back to San Francisco.
"When I came back eight years ago, there were a lot of problems that are very, very solvable. And with full employment, a lot of the problems get solved," he said.
Building the team
Last fall, Conway hired Aaron McLear, a Sacramento public relations consultant, to help run an independent expenditure campaign on behalf of Ed Lee.
McLear, a former press secretary for Gov. Arnold Schwarzenegger and the National Republican Party and Ohio communications director for the 2004 Bush-Cheney presidential campaign, met Conway a year ago through David Crane, a wealthy financier and former adviser to Gov. Schwarzenegger who attracted attention for advocating public pension reforms.
McLear and his partner, Josh Ginsberg, both Republican insiders, brought on Brian Brokaw, a Democratic strategist, for the independent expenditure campaign supporting Lee, which ultimately raised more than $600,000, including big donations from Conway, Salesforce.com CEO Marc Benioff and billionaire Sean Parker, who was Facebook's founding president.
On election night, Conway and former San Francisco Mayor Willie Brown hosted a victory party at the Palace Hotel for Lee, and Conway soon met with the mayor-elect to figure out how to keep the momentum going.
One result was San Francisco Citizens for Technology and Innovation (sf.citi), a nonprofit organization incorporated on Jan. 5, of which Conway is chairman and which was launched in a ceremony with Mayor Lee.
The registered agent for the organization is Steven Lucas at Nielsen Merksamer Parrinello Gross & Leoni LLP, a well-known law and lobbying firm that has long had a reputation for being closely allied with Republican and business interests.
Sf.citi's director of external affairs, meanwhile, is Jeremy Wallenberg, former deputy manager for Lee's mayoral campaign and a Democratic party insider.
Sf.citi now has 223 companies listed as members on its website. Conway said the number was actually closer to 250 — representing 90 percent of the city's 30,000 tech jobs — and he expects it to hit 275 within weeks. All pay dues and agree to post jobs on a city website and provide sf.citi with staffing information.
What role sf.citi will play in civic affairs remains to be seen. Conway said sf.citi has been working with Zynga Inc. on job training, and with Code for America to create an incubator for startups focused on civic issues. The group's stated purpose is to improve conditions for the city's technology sector and to improve civic life, largely by creating local jobs.
"The by-product of job creation is the solving of economic woes. The organic way to solve all the inner-city issues is by creating jobs," Conway said.
Conway, meanwhile, has continued to make waves personally, as he has appeared around town at Lee's side.
There was a dust-up recently when city Treasurer Tax Collector Jos é Cisneros decided to clarify that short-term rentals of residences through online services are subject to the city's 14 percent transient occupancy tax, which is more than 50 years old.
The matter directly impacts the tech company Airbnb Inc., in which Conway is invested, and his firm SV Angel rallied people to attend a hearing on the matter and voice their opposition to the tax.
Mayor Lee's office urged Cisneros to delay issuing an opinion to give time for a policy review by a new "sharing economy" task force appointed by Lee that includes the heads of numerous city agencies. The group is supposed to consider businesses facilitating "sharing" of houses, cars, parking spaces, bicycles, scooters, workspaces, tools and more.
Supervisor David Chiu says he expects to introduce legislation on residence renting in the near future. The issue could open up a can of worms, however, as some say short-term renting of residential properties is prohibited under current city code without a special permit because it is a commercial activity.
Cisneros declined to delay an interpretation, saying city law was already clear. Conway's involvement drew the ire of city Democratic Party Chairman Aaron Peskin, a former president of the Board of Supervisors and a stalwart "progressive," who said Cisneros was unfairly pressured.
Peskin at the time questioned why the city should change city law to help the bottom line of a "Republican billionaire" who contributed a lot of money to Ed Lee.
Conway declined to discuss Peskin's comments, but pointed out he is no longer a Republican.
Conway's Republican ties — sometimes toxic to candidates in liberal San Francisco — had come up pointedly during the mayoral campaign. City Attorney Dennis Herrera's mayoral campaign aired a television advertisement entitled "Not For Us," which included an image of Republican elephant pins on suit lapels, while a narrator said: "Ed Lee is getting it done for his friends and his contributors, not for us."
Ironically, Conway had previously supported Herrera and his political interests both with direct financial support and his connections.
This week, Peskin changed tack, saying the issue of Conway's past political affiliation is not relevant. What is important, he said, are Conway's motivations.
"He came along a couple of years ago and decided he wanted to be somebody in San Francisco and he's throwing his money and his weight around," Peskin said. "For Ron Conway, it's all about Ron Conway and his personal investments and his personal bottom line."
Lee, in an interview said the notion that he is carrying Conway's water is wrong, although he is trying to make the city more business friendly.
"To be quite candid, I haven't had enough time with Ron Conway. He is so busy with his business," Lee said.
Lee praised Conway for his many philanthropic activities, ranging from helping kids from disadvantaged backgrounds get to college to aiding disabled veterans.
"I look at Ron Conway as the next Charles Schwab," Lee said. "He has time and time again evidenced great values. I don't look at Ron as someone who is doing it just for his own personal gain."
Alex Tourk, a political consultant who in the past has worked on the staffs of state Democrats as well as in the administrations of mayors Willie Brown and Gavin Newsom, also believes Conway's not in it for himself. Sf.citi has hired Tourk's firm Ground Floor Public Affairs to set up sf.citi's operations infrastructure.
Tourk said he met Conway in 2004 while working for then-Mayor Gavin Newsom on what became Project Homeless Connect, which organizes events aimed at connecting homeless people with services. Conway had approached Newsom about helping retire his campaign debt, but he wanted to do more than just write Newsom a check, and he was directed to speak with Tourk.
After hearing Tourk's plans, Conway on the spot gave a "generous" donation to the effort and offered to be on Project Homeless Connect's board of directors, where he served for seven years, Tourk said.
"Needless to say, that was the start of a very strong working relationship that has led to a close friendship," Tourk said.
Project Homeless Connect went on to be greatly praised and was replicated in more than 200 cities nationwide.
"He's deeply committed to helping improve the city," Tourk said. "Clearly with his background he has an aggressive mentality. He expects results, and he's trying to work with the mayor and the city to change governance and better utilize technology toward efficiency and results."
Conway currently is focusing that intensity on the city's payroll tax issue.
The Mayor's Office recently convened a closed-door meeting at City Hall with more than 50 business leaders. There was grumbling privately later from businesses, which may have to pay more taxes depending on what is adopted, that Conway was confrontational.
The San Francisco Chamber of Commerce has suggested leaving the payroll tax in place and making it progressive so bigger companies pay more.
Lee said that on both the sharing economy issues and the payroll tax, which he called "job punishing," he will push interest groups to come up with a compromise just as he did with the public pension reform measure that voters approved last November.
Peskin, who says Conway turns off most established business and civic leaders, says Conway lacks political finesse, and many believe he will "flame out."
"He's a short-term phenomenon," Peskin said. "He's going to be a flash in the pan because he's a bull in a china shop."
Conway, however, has made a fortune founding and backing companies that disrupted the status quo.
Sounding diplomatic, he said the key is for everyone to communicate and compromise, and that Mayor Lee is the guy to bring everyone to the table.
"We all agree there needs to be payroll tax reform," Conway said. "So far, all the different factions are talking to each other actively and collaborating.
"We'll come up with solution. It's all about communication."