What is a 29-year-old to do when he’s already co-founded and sold a $1.5 billion Internet company? Become a venture capitalist, of course.
That describes the life of Ken Howery, who made his mark as co-founder and CFO of online payment juggernaut PayPal. In 2002, the company went public and was then acquired by eBay. Howery subsequently moved on to a hedge fund venture called Clarium Capital Management with fellow PayPal co-founder Peter Thiel, and at Thiel Capital Management, a multistrategy investment fund.
The two have teamed up again. Howery is now in the venture biz, as he’s serving as the only full-time general partner of The Founders Fund, a new $50 million VC effort focused on seed-stage consumer Internet companies. The other GP of the San Francisco-based firm is Thiel (who will continue to run his hedge fund), while Luke Nosek, also a PayPal co-founder, will operate as a venture partner of the new venture fund.
All three have supported notable early stage tech companies via angel investments, including TheFacebook, Friendster Inc., LinkedIn Ltd., Xoom Corp. and IronPort Systems Inc. Howery, however, says that the time was right for a more institutional structure.
“We’ve seen a lot of really good deal-flow recently, and figured that we might as well formulate a process to take advantage of some more of the opportunities,” he says. “We also felt that we’re at the point where enough shakeout has happened that it’s good to be back supporting startup companies.”
Howery acknowledges concerns that early stage consumer tech deals are once again being overvalued by Internet-drunk VCs, but argues that The Founders Fund’s seed-stage focus should help them get in before the bidding gets too high. The firm plans to be the first institutional money for its portfolio companies, with average initial investments of between $500,000 and $1 million. It already has made three deals, including one for Engage.com, a San Francisco-based social networking company that provides an online relationship service. The other two are stealth companies, including one in the Internet search space.
Most of The Founders Fund’s $50 million comes from the general partners themselves, with some commitments coming from individual investors. A small amount of additional LP capital could be forthcoming, although the firm has no plans to solicit such traditional VC reservoirs as pension systems, corporations or endowments.