Success tends to breed success. In the tech sector, this phrase is doubly true. Building and scaling a successful company requires grit, determination, teamwork and a pinch of luck. The perseverance that gets you to the top also tends to provide wisdom, best practices and a powerful network to boot. Referred to as mafias, top-tier companies often produce groups of alumni capable of building the next big thing.
You are likely familiar with modern day examples of startup mafias. But this pattern is built into the very DNA of Silicon Valley. In 1957, a group of employees dubbed the “traitorous eight” left Shockley Semiconductor to start a competitor, Fairchild Semiconductor. Two of those eight – Gordon Moore and Bob Noyce – left to start Intel a decade later.
Network effects and feedback loops serve as the power center for technological innovation. More recently this has bled over into the investing community.
To illustrate these effects in the world of venture capital, it’s necessary to examine the original form. Where better to start than the quintessential alumni group of the past two decades? The Paypal Mafia. To be frank, there are several books on the subject, so we don’t need to recapitulate the entire story. But even the shorthand version boggles the mind. Let’s review some of the key players and where they ended up:
Unless you’re living on Mars (which is unlikely considering this is the man attempting to put us there), you are familiar with Elon Musk of Tesla and SpaceX fame (among other things!)
Peter Thiel went on to start Founders Fund and Palantir – minting himself a billionaire several times over
LinkedIn, the social network where you likely found this article, was co-founded by Reid Hoffman, who also founded his own venture fund, Greylock Partners
Keith Rabois went on to co-found payments company Square with Jack Dorsey
Before he became an All-In Podcast bestie, David Sacks built and sold B2B social communications tool Yammer to Microsoft
The list goes on: Yelp, YouTube, Kiva, 500 Startups, Slide all have the Paypal fingerprint!
Here’s the fascinating part. These serial founders went on to build multiple household names with combined values at a significant multiple of their original company (PYPL: ~$100B Market Cap). This pattern repeats itself when you explore the dominant players in “Big Tech” – Google, Stripe, and Facebook alumni appear to have the midas touch with great ideas, investors at the ready and a network to get their product off the ground. The barriers to entry for startups have diminished drastically, but those with entrepreneurial experience and like-minded networks always have the upper hand.
In that same vein, access to private markets has evolved quickly. Avenues into alternative investments have become the norm, but equal opportunity doesn’t necessitate equal outcomes. So what’s the secret sauce to entering the angel game and achieving success? No surprises here: the Alumni Syndicate.
Akin to groups of successful alumni banding together to build 2nd and 3rd companies together, current and ex-operators at some of the world’s best startups are beginning to invest together. It’s the same playbook – build together, generate trust, cultivate expertise – but instead of starting something new, these groups christen the next generation of startups in their industry.
This route has become particularly common in the US, but as with all tech trends, it is making its way across the Atlantic and taking hold in top European tech hubs. Let’s take a look at a well-documented example from overseas.
If you’re unfamiliar with Lenny Rachitsky, you won’t be for long. He built what has become a must-read resource, aptly titled “Lenny’s Newsletter.” It’s dedicated to product management lessons and best practices. This makes sense: he was a Product Manager at AirBnb, one of the top-tier scale-ups in the US. It turns out that content creation was only part of his evolution.
Lenny helped create an angel syndicate for Airbnb alumni eager to invest in the up-and-coming startups within their field. This speaks to two major trends in the early-stage investing world:
Build an audience and you can command deal flow and opportunity. Join a community and you can bring knowledge, expertise and, of course, funding to the table. The power of community rivals notable early-stage investors that usually get first look.
We empower alumni syndicates to invest in the next generation of relentless entrepreneurs. We build for alumni communities looking to pool their resources, knowledge, and capital. We know they bring tremendous value to the table for early-stage startups in their field. At Roundtable, our heroes are the angel operators.
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Roundtable EuVECA Manager Lux S.à.r.l. is registered with the Commission de Surveillance du Secteur Financier (CSSF) under number A3650 as manager of collective investment undertakings that wish to use the designation‘EuVECA’ as per article 14 of EU Regulation n° 345/2013 of the EU Parliament and of the Council of 17 April 2023 on European venture capital funds.
Roundtable EuVECA Manager Lux S.à.r.l. is also registered as manager of alternative investment funds under article 3 (3) of the Act of 12 July 2013 on alternative investment funds managers.