One of the most powerful men in Silicon Valley isn’t someone who appears frequently in the tech press. He isn’t a venture capitalist or an entrepreneur. He doesn’t tweet or live in California. (And no, he isn’t Russian.)
He’s 39-year-old Henry Ellenbogen, manager of the oldest small cap mutual fund in the country, T. Rowe Price’s New Horizons Fund. And according to sources, his involvement with a startup, more than anyone else right now, sends Wall Street the message that a company is most certainly coming public. It also signals that T. Rowe — which collectively manages around half a trillion dollars – will likely keep backing it once it does.
ODesk, a Redwood City, Calif., Internet company that connects users with freelance workers from around the world, is the most recent subject of Ellenbogen’s attention. The profitable nine-year-old company wasn’t looking for funding, but after repeated overtures by Ellenbogen, its management decided it was “well worth the price of getting Henry into the deal and on our cap table,” says one source close to the deal. Last week, Odesk closed a $15 million round, led by the mutual fund.
The investment is a departure from some of the much bigger-named private companies that New Horizons has backed, including the social games company Zynga; China’s largest online video service, YouKu; the ratings and review service Angie’s List; the business software provider Workday; and the daily deals site LivingSocial.
Yet T. Rowe’s involvement alone may well make Odesk (which hasn’t yet filed to go public) into a more familiar brand — and a more attractive target for future investors.
“I don’t think calling [Ellenbogen’s] investment a ‘Good Housekeeping’ seal of approval is an overstatement,” says one serial entrepreneur who asked not to be named. Ellenbogen and his team of roughly 30 analysts are “quite smart,” says Bill Gurley, whose firm, Benchmark Capital, has invested alongside New Horizons in both Odesk and in Twitter, which New Horizons first backed in 2009.
“A lot of companies planning to go public want to get Henry involved, because it helps set up their IPO,” adds a venture capitalist who asked to speak anonymously. “Henry is basically a leading indicator” that a company has major-league potential.
Ellenbogen is certainly working wonders with his own fund. The value of New Horizons, which now manages $9 billion in assets, is up an impressive 40 percent since March 2010, when Ellenbogen officially took over for his famous predecessor, John Laporte, who steered it the 22 years prior. (Twitter was the second-biggest contributor to the fund’s increased value in the second half of last year, according to Bloomberg.)
Other startups that Ellenbogen has backed in the months leading up to their IPOs haven’t made as much of an impact. For example, his fund reportedly bought preferred shares of Zynga for $14 apiece last February. But Zynga’s shares went out at $11 in December; today, they’re trading at $13. (Last Friday, in an amended prospectus, Zynga said shareholders plan to sell some 49 million shares in a secondary offering; T. Rowe Price was not included in the filing.)
If Ellenbogen makes some mistakes in the private market, he can likely afford them. Fully 98 percent of New Horizons’ capital is invested in public companies. And at a Fortune conference last summer, Ellenbogen said that percentage “will always” remain the same, even while he thinks the market is “very hungry for a new breed of [still private] companies that are tackling new problems or basically doing [things] in different ways.”
In the meantime, Ellenbogen remains a focus of great interest in Silicon Valley, attention that’s likely familiar, given that as a college senior, Ellenbogen was already managing a $1 million budget and supervising a staff of 17 as the administrative assistant to a Florida Congressman. Indeed, a 1993 New York Times article praised Ellenborgen – who eventually nabbed three degrees from Harvard and became a fund manager for T. Rowe Price at age 32 — as the “Boy Wonder of Capitol Hill.”
He’s still a force of nature, say those who know him, or who hope to win him over despite tough odds. “We probably see every high-quality late-stage deal that’s funded in technology, and we pass on well more than 9 out of 10” of them, said Ellenbogen last summer at the Fortune conference.
Says the venture capitalist who asked to speak anonymously: “They like to do things on the down low. With Henry, it’s very much, ‘Don’t call us. We’ll call you.’”