A New Cadre of Facebook Angels? Don’t Count on It
When Facebook goes public as expected this spring, a casual observer might assume that Facebook alums will begin investing in startups.
It’s an easy conclusion to draw. Big liquidity events tend to produce angel investors, and a number of former Facebook employees have already become active investors. One of them -Chamath Palihapitiya, a former VP at Facebook – left last June to launch his own venture fund, and Josh Elman, a former Facebook program manager, joined Greylock Partners as a principal last fall.
Academic Vivek Wadhwa has suggested the Facebook Effect might even counter a slowdown in venture-backed deals. “We won’t have fewer startups just because VCs are not investing,” he told the San Jose Mercury News last weekend, pointing to the “hundreds of millionaires who can fund thousands of startups” that will soon spring from Facebook’s clutches.
But some former Facebook employees say their fellow gazillionaires may have a very different mindset than the beneficiaries of Google’s IPO, who’ve been actively backing startups since Google went public in 2004.
“A lot of us joined Facebook because we were attracted to the kind of people who like to build companies,” says Facebook’s former director of monetization Tim Kendall, who left Facebook in late 2010, after nearly five years at the company. After a year of advising and backing startups, Kendall tells me that he’s ready to “go back and join an early-stage company.” Says Kendall, “[Facebook employees] want to be in the trenches; we don’t want to be on the sidelines, writing checks.”
Indeed, a number of Kendall’s former co-workers have already leveraged their close relationship with Facebook to found high-profile startups. One of these is two-year-old Asana, a work productivity application company founded by Facebook cofounder Dustin Moskovitz and early Facebook employee Justin Rosenstein. Another is Quora, the question-and-answer site founded by former Facebookers Charlie Cheever and Adam D’Angelo. And Path — the mobile social network that recently came under fire for copying its users’ address book information without notifying them — was cofounded by Dave Morin, who spent four years at Facebook as a senior platform manager.
If anything threatens to upend Kendall’s theory, it might be the sheer size of the windfall that former employees like him stand to receive. Eric Jackson, a former VP of marketing at PayPal who has gone on to cofound the investing platform CapLinked, points out that PayPal’s alums have been famously productive – founding YouTube, Slide, Yelp, LinkedIn, and SpaceX, among other companies – partly because PayPal’s exit – a $1.5 billion sale to eBay – wasn’t as life-altering for most of them as Facebook’s anticipated $100 billion IPO is likely to be.
Jackson also points out that a company like Facebook is much bigger and less entrepreneurial now than PayPal was when it was acquired. A “much larger team” may feature a “different type of person than those who were joining PayPal early on,” he says.
It’s a fair point, says one early Facebook employee, who asked to remain anonymous. “Between late 2007 (when Microsoft invested in Facebook) and the middle of 2008 (after Sheryl Sandberg joined as Facebook’s COO), there was an inflection point, after which it seemed less likely that entrepreneurial folks would have joined,” he notes.
Certainly, alums of Google, which had a $24.5 billion IPO valuation, haven’t spawned many startups, notwithstanding serial entrepreneurs Dennis Crowley and Evan Williams, who have sold companies to Google (Dodgeball and Blogger), left Google, and then formed new breakout companies (Foursquare and Twitter).
For his part, Kendall insists that Facebook is simply too different culturally to draw analogies. “Google has a very strict GPA requirement and has always attracted pedigreed rule followers,” says Kendall. By contrast, Facebook was founded by college dropouts and brought aboard people like Sean Parker and Morin, who graduated from the University of Colorado and “is not really a rule follower.” Says Kendall: “I think that’s why the set of folks from Google who’ve funded companies is large, while the set who’ve started their own thing is really limited.”
Some current and former Facebook employees “will invest, because they’ll have money, and they’ll do it,” says Kendall. “But my suspicion is that most people will ultimately go back to build stuff. I can think of dozens of people who don’t really need to work, who could already be off hanging out angel investing. And they’re still at Facebook.”
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