Facebook launches a new generation of investors – This time at the helm of a woman

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UNITED STATES (VOP TODAY NEWS) — Former Facebook employees are investing in non-obvious startups that need help the most. Inspiring their movement. #MeToo

Foundation for the vulnerable

When the #MeToo movement reached Silicon Valley in the summer of 2017, Facebook’s former top manager Alison Rosenthal wanted to change something – maybe leaving Silicon Valley for the sake of politics or public service.

Then the former professional cyclist recalled the lesson of her coach: “In the race, remember your strengths, and in training – the weak.” Rosenthal was impressed with working groups like All Raise, who sought to promote more women entrepreneurs and IT investors. But it seemed to her that the “non-obvious” founders of startups still remained aloof. “Many firms are gradually introducing change, and I support it,” she says. “I wanted to do something different and with a lot of pressure.”

The result was Leadout Capital, a $ 27 million fund that invests in the pre-sowing and sowing stage in start-ups whose founders come from socially vulnerable groups or care about the needs of such groups. Leadout Capital has already made five investments with the participation of 42-year-old Rosenthal as a managing partner and a group of former Facebook employees as investors. The fund’s investors include Melinda Gates and one of the leaders of TPG Capital, John Winkelried. Leadout Capital’s key adviser is Megan Smith, a former top manager at Google.

As technology companies like Airbnb, Slack and Uber go public or approach this, many of their employees start their own businesses and attract millions to invest in other companies.

The hype around these companies and the revenues they bring can overshadow yesterday’s star IT startups, such as Facebook, which went public in 2012. Facebook’s alumni investors from among the first top managers are Sean Parker (the first president of Facebook, who later became a partner of the venture capital firm Founders Fund) and Matt Kohler (partner in venture capital firm Benchmark and director of Uber).

The new wave included new fund managers, such as Rosenthal at Leadout Capital and women from F7 Ventures, launched last year. Many of them are not like a typical venture investor – white men still dominate in this industry. And since they promise to help startups under the leadership of women and businesses, whose founders come from vulnerable social groups, their portfolios also look different.

“Systems are hard to change,” says Rosenthal. “We must all contribute, on the periphery or from within, to bring about change.”

Business as a sport

A native of Connecticut and a student at the history department of Brown University, Rosenthal began her career as an analyst at Goldman Sachs in 1998 and followed her colleagues to the west to take part in the emerging dotcom boom in 2001, working for investment firm General Atlantic. Her career path changed when, as an MBA student at Stanford, she noticed that one of her apartment mates, an engineer, was sitting on a site called The Facebook. Rosenthal got hooked when she listened to a speech by Matt Kohler, one of those who were then responsible on Facebook for the grocery component. In 2006, Rosenthal was among the first one hundred Facebook employees. For the next five years, she ran Facebook mobile apps and was one of those who created the share button.

To keep fit, Rosenthal began cycling with fellow students in business school. Working on Facebook, she trained during out-of-time calls from clients in Southeast Asia and Europe, and then participated and won in an increasingly high level competition. For two years, until 2010, she was a member of the Professional Women’s Cycling Team TIBCO. Approximately then Rosenthal met his wife, a professional athlete of international level, who played for the US team.

Excellence in sports, especially in one that requires stamina, implies “special hardness of character,” says Rosenthal. It requires impeccable technology. When Rosenthal joined Greylock venture capital firm in 2011 as a resident entrepreneur and began to personally invest in startups, her approach was simple: to find entrepreneurs with the same traits. But she still wanted to lead: in 2014, she moved to one of the Greylock portfolio companies, Wealthfront, where she managed strategic partnerships for two years.

Then came the summer of 2017, and Rosenthal decided where she would achieve the greatest change. During her work at Greylock, Reid Hoffman became her friend and mentor. Billionaire and co-founder of LinkedIn imbued with the desire of Rosenthal to find the founders of projects from the least represented groups, who in turn created companies for these groups. Rosenthal invited Bennett Surajat, a former Indonesian colleague, to join her as a general partner. They named Leadout Capital after tactics, when cyclists create an air tunnel for their chosen winner, so that he can reach the finish line at top speed.

Ambitious and modest support

Until now, most of the Leadout investments have been for companies led by women and non-white people. But unlike funds like Female Founders Fund, Leadout Capital does not require companies to fully comply with these two criteria and take other factors such as origin and education as “unobvious”. To find entrepreneurs who would meet the requirements, Rosenthal enlisted the support of two scholars and authors from the University of Pennsylvania: Angela Duckworth, author of the popular book on character, and Adam Grant. They identified four key traits of entrepreneurs that can succeed: modesty, ambition, generosity and, of course, hardness of character.

Of Leadout Capital’s first five investments, four businesses were run by women, three of which were Hispanic. Startups that Leadout invested in were very diverse – from pet trackers (Pawscout) and government supplies (CoProcure) to books recommendations (Booksloth) and aerial photography (Swiftera). But the fifth company, the Monolist mail aggregator, is run by three men who worked with Rosenthal and Surajat at the Wealthfront. In the absence of formal rules, only Rosenthal and Surajat decide whether such investments will become an exception or a rule.

To date, Rosenthal has managed to attract Melinda Gates, the anchor contributor to All Raise and the leading investor of funds managed by women, and Winkelried from TPG, who has invested his own money. Investors include former colleagues and acquaintances of Rosenthal on Facebook. These include the former financial manager of the company Sipora Herman, one of the first engineers Jeff Rothschild and former head of relations with partners Dan Rose. “In this country and in this world, so much money and talent is being wasted. There are outstanding people with brilliant ideas that “do not look as it should be,” says Megan Smith. “The financing goes to them on a residual basis, and this is unfair.”

New Wave Venture Capitalists

For a company of the size of Facebook (today its market capitalization is more than $ 500 billion compared to $ 104 billion at the time of the 2012 IPO) its impact on the venture capital industry is not too noticeable. Those Facebook “graduates” who started investing before the 2012 IPO (Chamath Palihapitiya of Social Capital, co-founder of Slow Ventures, Dave Maureen and Matt Kohler) either partially retired or left the venture capital industry.

Over time, a new generation of start-up investors appeared – Kevin Colleran and Sam Lessin from Slow and former infrastructure director Jonathan Heiliger from Vertex US. But while Google and Twitter’s network of investors — and now Airbnb and Uber — were growing, Facebook’s network of investors is not easy to see.

This is partly due to the timing. When Google’s top managers were looking for where to build a career further, they were able to fill the gap left by investors after the 2008 financial crisis — a time of hunger that gave rise to some of the industry’s most profitable projects, such as Twitter and Uber. Facebook was still a private company then. Some of his employees had funds for personal investment, but they preferred not to advertise such investments. “Facebook was raised in the spirit of” Our work speaks for itself, “says Joshua Ran, the general partner of the startup studio Oceans and the seventh Facebook employee hired in New York.

The lack of hype around Facebook’s investor network may be due to the fact that the current “unicorns” are doing everything faster and louder. Their companies are increasingly not based on university campuses, but in San Francisco, where they are surrounded by other start-ups and where they find employees who intend to grow quickly — and perhaps quickly leave. And when their capitalization reaches tens of billions of dollars even before entering the stock exchange and employees can sell their shares in the secondary market, top managers have less motivation to wait for an IPO.

Andrew Chen, the general partner of Andreessen Horowitz, until last year was in charge of attracting new customers to Uber. He says he can count at least a dozen former colleagues who, over the past year, have gone to venture capital firms as investors or resident entrepreneurs. Similar transitions happened in “unicorns” like Airbnb and Slack, from where product managers have already left to become venture capitalists. At least one fund created by the former Airbnb employee, Wave Capital, has been in the spotlight in recent months when he announced that he would invest in the company former Airbnb employees who became entrepreneurs (the fund has already given up its words; by coincidence, one of the co-founders , Sarah Adler, used to work on Facebook).

Meanwhile, former Facebook employees quietly create a second wave of venture capitalists who will determine which start-ups will succeed in the future – and they are not at all like Mark Zuckerberg and his Harvard classmates. Among them are investors of Hispanic origin, like Salei Cuervo, co-founder of the startup studio and foundation Combine in 2016, and Mike Vernal, who last year joined venture firm Sequoia as a partner. Among them are women: Facebook’s first female engineer, Ruchi Sangui, who founded the IT community of South Park Commons in 2015, and in April last year announced the creation of a corresponding fund, and Rosenthal in Leadout.

Rosenthal is not the only one who says that #MeToo’s lessons and All Raise’s efforts inspired her to be more focused as fund manager. At F7 Ventures, sales director Kelly Graziadei joined the venture capital firm as a resident entrepreneur after leaving Facebook and set out to personally deal with statistics such as the low proportion of venture capital that goes into funds managed by women each year (1.5% in 2018) Graziadei is currently working with six other women who have taken or are holding positions in Facebook’s top management. F7 has already independently invested in five companies and plans to issue about 20 checks for about $ 50,000 to startups each year, in which at least half of the managers are women. “My advice is: if you are interested, start doing it, – says Graziadei. “I was so uploaded to Facebook that only later I saw a huge world beyond it.”

Unobvious investment

Pawscout CEO Andrea Chavez was skeptical about venture capital before meeting with Rosenthal at Leadout Capital. The only one of five brothers and sisters of Mexican-American origin who managed to get to Harvard from a poor family in New Mexico, she received a law degree and graduated from Stanford Computer Science and then founded two start-ups and worked as a top manager . But when she began to attract funding for Pawscout, which produces smart collars for pets with an online connection, she was constantly denied.

With hundreds of thousands of users and thousands of units of products sold, Pawscout seemed too large for first investments and too small for later stages. However, its product — devices for pet owners — was easily neglected. “Investors did not understand where to take us,” says Chavez. But when Chavez met Rosenthal, they began to enthusiastically discuss how Rosenthal’s Facebook experience would help develop the popular social application Pawscout, where pet owners can share photos and tips. Leadout Capital became the first venture capital firm to invest $ 1 million in a startup.

“This seems like the perfect combination. They concentrate on non-obvious people, and being unobvious at the same time is both fascinating and embarrassing, says Chavez. “I am delighted that there are companies like them that support people like us who may not notice.”

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