VC spotlight shines on Facebook vets

As Wall Street eagerly awaits signs that Facebook will go public, venture capitalists are keeping close tabs on another hot commodity: the employees from Facebook.

A handful of startups founded by Facebook alumni are attracting attention and generating a good amount of buzz within venture circles, where competition is fierce to get a stake in the Web’s next big hit.

Last week, Quora, a startup founded by four ex-Facebook employees, including former CTO Adam D’Angelo, raised a Series A round of funding from Benchmark Capital that the tech blog TechCrunch reported was $11 million and valued the company at $86 million, citing an unnamed source.

Matt Cohler, Benchmark partner and former Facebook product management vice president, will sit on Quora’s board of directors.

Quora, which operates out of a small, college-dorm-like suite in downtown Palo Alto, Calif., with cardboard crates of water-bottles stacked waist-high against the walls, had not planned to raise money so early, says D’Angelo, CEO of Quora.

“We weren’t really shopping it around, but there was a lot of interest” from VCs, he said in a phone interview with Reuters after the funding announcement last week.

The company was started in April 2009, and the product, which was launched in January, can currently be used only by people who have received a special invitation.

D’Angelo declined to comment on the financial terms of the deal, but says the funding will help Quora hire more staff and focus on a wider set of technical challenges underlying the product, an online question-and-answer service based on people’s social connections.

The proliferation of startups with Facebook veterans, and the investor interest in them, follows a time-tested Silicon Valley pattern in which tech superstars from Fairchild Semiconductor to Google Inc. have spawned various startups, says Nick Sturiale, a general partner at JAFCO Ventures.

“Any entrepreneur spinning out of Facebook is going to get attention,” Sturiale says. “They’re at the vanguard of how the Web is emerging.”

Facebook, which counts 400 million active users and is the world’s No.1 Internet social networking site, has yet to submit a regulatory filing for an IPO, the typical payday that allows early company insiders to cash-out and move on to new projects.

But the active secondary market for Facebook shares—including more than $100 million in officially sanctioned stock purchases of employee shares by Facebook investor Digital Sky Technologies last year—has allowed Facebook employees to decamp at an earlier stage, say some VCs.

“We’ve seen loads of people leave Google and now we’re seeing loads of people leave Facebook. Either because they’re vested, or because they think the company’s gotten too big,” says Todd Dagres, founder and general partner of Spark Capital.

Dagres says that he’s looking at several startups founded by ex-Facebook employees, but he says that a Facebook connection is not enough.

“You definitely pay attention if somebody is leaving Google or Facebook. But then you’ve got to make sure that they really have built a track record, that they didn’t just work there,” Dagres says.

A number of Facebook-related startups have already passed muster. Asana, whose founders include Facebook co-founder Dustin Moskovitz, raised $9 million in a first round of funding in December from Benchmark and Andreessen-Horowitz. The company is currently based in Benchmark’s offices in Menlo Park, Calif.

Burlingame, Calif.-based Cloudera, which features former Facebook, Google, Yahoo Inc. and Oracle Corp. veterans on its management team, raised $11 million from Greylock Partners and Accel Partners in two separate rounds of funding last year.

Meanwhile, Path, a stealth-mode company led by former Facebook employee Dave Morin and Shawn Fanning, the creator of music sharing service Napster, has piqued a lot of interest in tech circles, although it’s unclear if the company is looking to raise money.

Some entrepreneurs, such as Net Jacobsson, former Facebook director of international business development, say there’s no overwhelming pressure to raise capital right away, thanks to the low cost that Web startups can launch these days.

Jacobsson, who advised Crowdstar, a developer of social networking games, after leaving Facebook in May 2009, recently set up his own social game startup called PlayHopper. The game development is primarily taking place in China, he said, and the goal is to generate revenue as soon as the first game is released.

He says that several VC firms have contacted him to check-in on his new project and in some cases to inquire about investing in the company. Jacobsson says that he will still mull over whether he needs to take money from outside investors.

“When it comes to VCs, it’s like a marriage,” Jacobsson says. “A marriage you can get out of, but it’s very difficult to disconnect yourself from a bad VC marriage.”