By Spencer E. Ante and Kimberly Weisul
Feb. 26 (Bloomberg) -- During the holidays last year, Aydin Senkut and Elad Gil gathered 50 of their friends at a health- food restaurant in Palo Alto, California. Over turkey burgers and tofu wraps, they talked about technology trends and how to get rich. Or, more precisely, how to get richer.
Senkut, Gil and their dining circle are alumni of Google Inc. Since going public six years ago, Mountain View, California-based Google has generated more than $170 billion for its employees and investors. Many of the millionaires the company has produced are active angel investors, attempting to add another zero to their bank accounts and another company to their list of accomplishments, Bloomberg BusinessWeek reports in the March 8 issue. “I feel like we have such a strong network, it’s almost like we’ve recreated Google outside of the Google walls,” says Andrea Zurek, a 39-year-old backer of 26 startups and, until 2007, regional sales manager at Google.
More than 40 ex-Googlers have invested in about 200 fledgling companies since 2005, according to the research firm YouNoodle Inc. and reporting by Bloomberg BusinessWeek. At least a half-dozen current Google executives, including Chief Executive Officer Eric Schmidt and co-founders Larry Page and Sergey Brin, are also financing young companies. YouNoodle defines people as Google angels if they’re investing their own money, investing out of a firm that uses only their money, or investing out of a firm in which a majority of partners are ex- Googlers.
‘Very Risky Deals’
Numerous angel-watchers say the Google group has more in common than just pedigree. The alumni are getting into “very risky deals that can be extremely rewarding,” says Jeff Clavier, a venture capitalist who founded Palo Alto-based SoftTech VC in 2004. “They have been very active as a group over the past two to three years.”
Companies backed by Googlers include Twitter Inc., Tesla Motors Inc., and gamemaker Tapulous Inc. “As Google matures, its alums are continuing to have a huge impact on Silicon Valley and the tech industry,” says Ron Conway, one of the Valley’s most active angel investors, who has backed 190 companies, including Google, Facebook Inc. and Twitter.
One reason for the Google angels’ success, say entrepreneurs, is that they have more to offer startups than just money. Bart Decrem, a 42-year-old Stanford University law grad, says he turned to the Google network when he was starting Palo Alto-based Tapulous in 2008. The company’s Tap Tap Revenge game requires players to tap on-screen balls to the beat of a song -- not exactly a sure thing of an idea.
Tap Tap
Decrem says he thought the game might become a substantial business by selling it on Apple Inc.’s iPhone. He says he raised $500,000 from a dozen angels, including Senkut and Zurek, who advised on strategy, connected the company with new partners in Asia, and helped it explore platforms for mobile phones that use Google’s Android software. Today, Tap Tap games have been downloaded more than 25 million times and Tapulous is profitable, says Decrem, without providing specifics about the company’s finances.
Google’s angels dabble in a wide variety of businesses. Zurek says she has money in a premium vodka maker and a South Korean frozen yogurt emporium. Yet the angels tend to concentrate their cash in what they know -- search technology, mobile computing and the consumer Internet. Twitter, backed by former Google executive Chris Sacca, is pioneering a new field of real-time communications. The online personal-finance service Mint.com, with money from Senkut, was bought by Intuit Inc. last year for $170 million. Search provider Powerset, backed by Senkut, was acquired by Microsoft Corp. in 2008, and its technology became a part of the Bing search engine, according to a post on a Microsoft blog.
Lamborghini
Senkut, a 40-year-old native of Turkey, has made investments of between $25,000 and $150,000 in 65 startups, by YouNoodle’s reckoning. Senkut joined the company in 1999 as a product manager. He left in 2005 and promptly took his mother to Paris for her 60th birthday -- and treated himself to a Lamborghini.
With that out of his system, he set about becoming a full- time angel. Eleven of the companies he has invested in have been acquired by Google, AT&T Inc. and Microsoft, according to his Web site.
Senkut also organizes two regular networking events for fellow alums, one for angels and entrepreneurs, and another for all ex-employees, at spots such as the Calafia Café in Palo Alto, owned by Google’s first in-house chef.
Senkut is raising money for his firm, Felicis Ventures LLC, according to two angel investors, and declined to comment on his investments for this story. (Securities laws prevent the public solicitation of funds.) In an interview last October, after he had sold seven of his companies, Senkut said his investments had produced double-digit annualized returns and that he was being pitched new business ideas several times a day.
If Senkut is the established star among the Google angels, Chris Sacca is the up-and-comer. The 34-year-old Georgetown University law grad joined Google in 2003 and left in 2007. Of the 31 startups he says he’s backed, his biggest hit is Twitter, in which he invested $50,000 just as it was getting started in 2007. Sean Garrett, a Twitter spokesman, declined to comment on the company’s finances.
Working out of a 3,000-square-foot home in Truckee, California, a ski town near Lake Tahoe, Sacca hikes and snowshoes most mornings before breakfast and commutes to San Francisco for three days every two weeks. It’s an unconventional way to supervise investments -- Sacca has an unconventional approach to investing, period.
‘No-Brainer’
One Friday night in December 2008, he posted a message on Twitter asking if any startups were working late.
“We tweeted back, ‘We’re FanBridge and we work hard every Friday night,’” says Spencer Richardson, its 25-year-old co- founder. New York-based FanBridge makes software that helps musicians manage marketing and relationships with their fans.
A few weeks later, Sacca flew to New York and met with the company’s founders. “They had day jobs and built this site that had 20 million users, adding 100,000 users a day,” says Sacca. “It was a no-brainer.”
Sacca invested $50,000 and pulled in several hundred thousand dollars from other angels. Last year, FanBridge’s founders say they considered offering their products to authors, comedians and other artists; Sacca advised them to stay focused on the music industry. Today, FanBridge is profitable and used by 55 million music fans, according to the company. “The feedback from him was, ‘Start by being the best at something, then branch out,’” says Richardson.
Breakout Companies
The Google angels may have several more breakout companies developing in their portfolios. Sacca has invested in San Francisco-based Lookout, a developer of security software for mobile phones. According to YouNoodle, several ex-Googlers and current Vice President Marissa Mayer are behind San Francisco- based Square Inc., which aims to displace credit-card swiping machines with a cheaper payment system that works through smartphones. And current Google engineer Joshua Schachter helped finance Foursquare, a New York-based mobile-phone service that lets friends share tips on local hotspots and is being used more than a million times a week, according to YouNoodle.
“There is an ecosystem for capital in the Valley, and Google is a part of it,” says Schachter.
Paul Graham, who co-founded the Mountain View-based startup incubator Y Combinator, says the tech industry has just begun to appreciate that Google’s wealthy ex-employees may have not just a single innovative second act, but potentially hundreds of them. “When people write the history of Silicon Valley 20 years from now,” says Graham, “the true impact of Google could come more from all the things that Google people go on to do after they leave Google.”
To contact the reporters on this story: Spencer E. Ante in New York at sante1@bloomberg.net; Kimberly Weisul in New York at Kweisul@bloomberg.net
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