Surprise: Rich Guys from Google Want to Become Investors

Posted on December 28, 2007
Filed Under VC Insanity |

The New York Times has published an article that discusses the increasing number of Google employees who are leaving Google and deciding to become investors. Some are becoming angels, some are joining VC firms and others are raising their own funds.

TechCrunch has proclaimed “Here Comes The Google Mafia” in reference to the PayPal Mafia that has carved out a niche in Silicon Valley (I hear they control all of the racketeering east of Sand Hill Road). While the legion of Google investors have not yet organized in the same way that the PayPal Mafia has, that could be changing. Former Googler Aydin Senkut, who left Google in 2005 and has been an angel ever since, stated “We are planning to bring all the ex-Googlers who are starting companies and investing in companies together to tighten up the network.”

The fact that Google employees are deciding to cash in their chips and to make an effort to turn small fortunes into large fortunes by investing in companies that they hope can become the next Googles is not surprising. It’s to be expected. Unfortunately, I don’t think that Google investors are going to have greater success than most investors, who on average, are lucky to see “acceptable” returns.

Here’s why:

I wish Google investors the best of luck. There are very few angels and VC firms that have proven an ability to pick winners on a consistent basis. For all intents and purposes, most investor-backed startups fail and it’s a few big winners that provide the ability to earn a decent return. Frankly, I’d argue that being a full-time investor might look sexy, but it’s actually not. In the end, I’m not expecting Googlers to have any more luck than the average investor.

At the end of his post, Erick Schonfeld asks “So if there existed a Google Mafia venture fund and a Paypal Mafia venture fund (which would include Facebook, where Thiel sits on the board), which one would you rather invest in?” My answer: neither. That’s not just because I think putting money into a VC fund is about as intelligent as letting my 16 year-old son drive daddy’s new Lamborghini Murcielago. It’s also because the vast majority of the deals both groups are making look less-than-appealing. Googler-turned-investor Chris Sacca is correct when he states that “there is a world of opportunity” but most of the opportunity to make large fortunes is not in Silicon Valley technology startups. And when it does come to the best technology investments, I don’t think they’re to be found amongst the old boys network in Silicon Valley.

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3 Responses to “Surprise: Rich Guys from Google Want to Become Investors”

  1. Antje Wilsch on December 28th, 2007 8:14 pm

    Google didn’t change its focus that much from day1 (argument about the business brilliance of adding AdWords/PPC aside). They mostly stayed focused on one item. Paypal was all over the place. I remember talking to some of the early employees (none there now) who were so frustrated by the constant changing of their business model and losing people at each juncture, and feeling more that it was luck that someone was astute enough to recognize the potential market in what the consumers were asking for. Being nimble and malleable and responding to customers needs, maybe a little luck, and Paypal is what it is today, but never intended to be that. Google, with the sole exception of “luck”, has little else in common.

  2. Stanley Miller on December 30th, 2007 4:21 pm

    “Behind every star in the sky is another star. But they are a long way apart.” -Tom Robbins, Half Asleep in Frog Pajamas

  3. Michael Youngblood on January 29th, 2008 4:51 am

    I’m seeking an investor for the L.A. market for Wrestlekings3 Productions. I have been very busy at hand with the company and would like to branch out to the west coast with in the next month or so. I have a consummate roster of sports/entertainers who the public relates with at every event. We are forming a fan base in the Carolina area as well as Georgia,Florida, that has had a profitable out come at our events. From my experience the L.A. Market would be much more of a draw with the community due to its larger venues and media outlets.

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