VCJ Cover Story: The Networking Effect

Most everyone knows the story of the “PayPal Mafia.”

The term refers to how a network of founders and early employees of the online payment services company—people such as Peter Thiel, Max Levchin, Ken Howery, Luke Nosek, Roelof Botha, Elon Musk, Chad Hurley, Steve Chen, Jawed Karim and Reid Hoffman, among others—leveraged their connections to launch numerous startups and join the ranks of venture capitalists.

Working with people you already know and investing in former colleagues is nothing new. But at Venture Capital Journal, we wondered who’s creating the next so-called mafia.

Senior Reporter Joanna Glasner eventually focused on three companies that have had successful exits in recent years—VMware, Tesla Motors and AdMob—that seem to share many qualities of successful alumni networks. Most noteworthy is VMware, which includes Pete Sonsini (pictured), partner at New Enterprise Associates and a former director of strategic alliances at VMware.

Over the past four years, Sonsini and others investors have put more than $340 million into at least 13 companies with a former VMware executive or high-level employee as a founder or key hire, according to Thomson Reuters (publisher of VCJ). Several firms have also recruited alums as partners, principals and entrepreneurs-in-residence, hoping to profit from the next wave of data center disruption.

While none of them has yet produced a follow-on exit to rival YouTube or LinkedIn (two companies with deep PayPal ties), scores of startups with a VMware, AdMob or Tesla connection are attracting serious attention from venture capitalists.

Subscribers of VCJ can click here for the full story, which came out today in the August 2011 issue.

Not a VCJ subscriber? Click here for a free trial.

And if you want to talk more about what other companies are building deep relationships with startups and VCs, send an email to Alastair Goldfisher at alastair.goldfisher@thomsonreuters.com.

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