The Rise of Silicon Valley’s completely new Mafias

SAN FRANCISCO — Riley Newman, a former head of data science at Airbnb, set out in mid-2017 to raise a venture capital fund that will would likely invest in a multitude of tech trends.

yet he quickly realized that will potential investors were not interested in that will kind of fund. Instead, all they wanted to hear about were his former Airbnb colleagues in addition to whether they might start their own companies.

“the item was, ‘Yeah, all that will stuff can be fine, yet Airbnb, right?’” Mr. Newman, 36, said. “Airbnb was where we had a competitive edge on the market.”

So Mr. Newman in addition to his partners at Wave Capital adjusted their pitch: They said they were creating a fund to invest specifically in Airbnb employees who were planning to leave the company to become entrepreneurs. the item worked. He in addition to his partners quickly secured $55 million in addition to currently are preparing to make a flood of investments after the $31 billion home rental start-up goes public sometime within the next year in addition to employees cash out their shares.

The cycle goes back to at least the 1950s, when Fairchild Semiconductor, one of Silicon Valley’s earliest successes, was began by a group of disgruntled Shockley Semiconductor employees called the Traitorous Eight.

Decades later, early employees of PayPal, known as the PayPal Mafia, are more famous for their successes after leaving the company — many of which they collaborated on with one another — than for their initial breakthrough in digital payments. The group includes Elon Musk in addition to Peter Thiel, as well as the creators of YouTube, Yelp in addition to LinkedIn.

Silicon Valley can be currently anticipating completely new mafias connected to Uber, Airbnb in addition to their brethren after the companies go public.

“the item’s going to trigger a massive explosion in entrepreneurship,” said Howard Lindzon, an entrepreneur in Phoenix who invests in 5 to 10 venture capital funds a year. He said he particularly wanted to put money into funds with connections to the Uber in addition to Airbnb networks.

Venture capital firms are already hiring former employees through Uber in addition to various other I.P.O.-ready companies to get a foothold in their networks. Some of the fiercest recruiting has been of Uber executives, with venture firms including Sequoia Capital, GV, Javelin Venture Partners in addition to Redpoint Ventures all adding former employees through the ride-hailing firm to their ranks.

One recruit was Andrew Chen, who worked at Uber as head of rider growth in addition to left the company last year. He has since joined the venture firm Andreessen Horowitz as a general partner in addition to hosts quarterly dinners for Uber alumni turned founders.

Mr. Chen, 36, estimates that will two dozen venture-backed start-ups have come out of Uber so far. Andreessen Horowitz has recently invested in two, which have not been announced.

“Those are the prime start-up investing opportunities,” Mr. Chen said.

The problem can be that will venture firms might create a brain drain through the likes of Airbnb in addition to Uber if they keep luring the companies’ workers to start completely new companies. Talent, after all, can be a precious commodity in Silicon Valley.

Jonathan Golden, who worked as a director of product at Airbnb in addition to who joined the venture firm NEA last year, said Airbnb was fine with his plans to invest in former employees. He said he had discussed his intentions with Airbnb’s chief executive, Brian Chesky, before he left the company in 2017.

“I’m not actively trying to have people leave Airbnb,” Mr. Golden said. “yet if someone can be going to leave, I want to be supportive of them, in addition to Brian can be supportive of them as well.”

Nick Papas, an Airbnb spokesman, said, “We’re always sad when talented people move on, yet the item’s been great to watch so many of our former colleagues succeed.”

Uber declined to comment.

In February, Annie Kadavy, a former Uber executive who can be currently a venture capitalist at Redpoint, announced an investment in Ike, a self-driving truck company created by — who else? — ex-Uber employees.

Ms. Kadavy, 33, who left Uber last year, said her network of former ride-hailing colleagues would likely help her find in addition to vet deals. In addition, the item would likely help find talent to bring to various other start-ups that will Redpoint has invested in.

“If you’re a person leaving a company, who are you going to ask about what company to join next?” she said. “Your friend who works at a venture firm, because their job can be to have a point of view on a bunch of different businesses.”

In February 2018, Dan Hill in addition to Michelle Rittenhouse, longtime Airbnb employees, felt the entrepreneurial itch in addition to quit. They had a general idea to start a company that will would likely make the item easier for people to donate to charity, yet not much else.

The details didn’t matter to Wave Capital, which wanted to invest in them. “These are people we know can build great products,” said Mr. Newman. “They know us, they trust us. We know them, we trust them.”

Within a few weeks of leaving Airbnb, Mr. Hill in addition to Ms. Rittenhouse had secured $2 million — including through Wave Capital — for Alma, their newly formed company focused on philanthropy.

Entrepreneurs typically make dozens of pitches over several months to raise financing. yet Mr. Hill said the relatively quick fund-raising for his start-up was not a surprise.

“We already had a strong relationship,” he said. “So when we pitched the idea for Alma in addition to our initial plans, the item was an easier conversation.”

the item’s a common story among former employees of hot start-ups. Andrew Chapin, who previously worked at Uber, also said the item wasn’t hard to round up $3.75 million last October for Basis, his completely new mental health start-up, thanks to his reputation among the Uber crowd.

“When you look at V.C., there can be a lot of pattern matching in addition to trying to act on that will, so if you worked at Uber, you must be O.K.,” Mr. Chapin, 31, said. “I didn’t have to do a lot of pitching.”

“There are just not that will many places to find people who have seen that will kind of scale,” said Ryan Graves, Uber’s former senior vice president of global operations in addition to a member of the company’s board.

Each city that will Uber, Airbnb, Lyft or Postmates expanded into created a completely new set of operational, regulatory in addition to business challenges. Regulators balked. Rival business operators resisted. Neighbors protested. in addition to people abused the platforms, over in addition to over.

Uber managers ran each city like a mini-start-up. “If you were the general manager of San Francisco or of Atlanta, you were the C.E.O. of your region,” Mr. Chen said. “the item led to a definitely entrepreneurial approach through everyone.”

The thorniest challenge for Uber alumni may be showing that will they have learned through the company’s ugly 2017, when its toxic culture of harassment, discrimination in addition to ethical lapses was exposed.

Blaine Light, a former Uber employee, said he had taken the importance of creating an inclusive culture to heart. Half of the employees at Qwick, a 20-person start-up in Phoenix that will he joined as a co-founder in 2018, are women, in addition to the staff includes a mix of races, backgrounds in addition to sexual orientations. Mr. Light said he emphasized a culture of humility.

“Uber people, in general, are looking to take what we’ve learned in addition to make something better This particular time,” he said.