Home Venture Capital Nylas’ Alumni Fund: Investing in ex-employees

Nylas’ Alumni Fund: Investing in ex-employees

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Hello, and welcome to Pipeline. My name is Biz Carson, and I’ve listened to Beyonc sing “You won’t break my soul” too many times to count this week. On a quick housekeeping note: Pipeline will be off next Saturday for the holiday weekend.

This week in the startup world: Palmer Luckey fights back; Tomasz Tunguz steps back; and Nylas has its employees’ backs.

When a ‘friends and family’ round includes your ex (-employer)

Most companies don’t give ex-employees cash to leave and start their next business. They’re more often willing to spend to pay and retain them, even launching fancy “intrapreneurship” programs to keep startup ideas in-house.

Nylas CEO Gleb Polyakov takes the opposite approach. If his employees want to be entrepreneurs, then they should “graduate” from the company and go build their passion, Polyakov told me. In fact, Nylas will give any ex-employee starting a new company at least $20,000 to pursue it as part of its new Nylas Alumni Fund.

“It’s very CVC-feeling with the exception being though that it’s not,” Polyakov said. “The mandate here is for employee growth and bet-spreading versus ‘Here’s an M&A pipeline.’”

  • Many other corporate venture capital firms bet on ex-employees, but their goals are often strategic investing in aligned products. Cisco was once well known for its “spin-in” program of agreeing to buy startups once they hit a milestone, and it still backs a lot of alumni.
  • Other alumni-focused funds are run by ex-employees investing in their peers, not backed by company resources. Groups run by Uber, Airbnb, Palantir and Google alumni have sprung up to invest in the next wave, hoping to recreate the PayPal mafia success.
  • In the case of Nylas’ Alumni Fund, it’s a blanket offer to ex-employees, regardless of what they’re building. The only two rules are that the company can’t be a direct competitor and that Nylas will not lead or price the round. Before the program got its start, ex-employees went on to build a Peloton for rowing and a startup that’s putting works of art as computer background screens — things that aren’t in the API-maker’s M&A pipeline, but would be supported under the Nylas Alumni Fund if they were started today.

It admittedly took a bit to sell the CFO on it since a startup investing $20k checks in non-strategic startups formed by ex-employees isn’t your everyday sound financial decision (especially in a market like this). But Polyakov views it as the price to recruit talent with the potential of financial upside down the road.

  • As CEO, he takes a pretty realistic view that most people don’t spend more than five years at a job before they move on. His goal in that window is to help their career growth and develop them so that they’re ready to “graduate” and go on to a new thing.
  • “My job as CEO is to make folks as rich and as famous as they can be,” Polyakov said. The standard route to doing that is building Nylas into a company that is a massive financial success and a workplace that is a badge of honor akin to an early Google tenure on someone’s résumé.
  • But the fund provides another path, supporting employees who go on and start something new. “The thing I’m most proud of is seeing folks meet or exceed their potential and go off and do cool things,” says Polyakov.

The Alumni Fund is less a venture bet and more a talent play, but it’s still one that could have good upside for the company. If PayPal had invested in every ex-Paypal company started, it’d be sitting on stakes in hundreds of companies collectively worth billions. Polyakov is making the bet here. “I’m just supposing that if we liked them and they were employed for a long time and successful here, probably their business has an outsized chance of success,” Polyakov said. “So we’re getting access to some cool companies that get started.”

Overheard

It’s not a tech conference until Peter Pham is spotted on the dance floor. He was just one of the many sightings at parties during New York’s NFT.NYC event, which included Leonardo DiCaprio and Gigi Hadid. The greatest of them all though was when Snoop Dogg walked in — or should I say a professional impersonator paid to pretend it was him called Doop Snogg. The jokes about the NFT and crypto bubble wrote themselves.

Is this the record for most lead investments listed on LinkedIn? BTV’s Sheel Mohnot spotted that Tiger’s John Curtius has 172 deals listed on his LinkedIn page. That’s quite a robust work experience section.

“Founders should push back very aggressively on talking heads who try to destroy them,” Anduril’s Palmer Luckey tweeted. “Don’t make the mistake I did, which was waiting until after they have poisoned investors, employees, and media against you.” The Oculus co-founder decided the time to push back was at the All-In Summit in Miami last month when Luckey started to read out all the negative things Jason Calacanis, a conference co-host, has said about him over the years. The video was just posted Wednesday, so if you want to watch billionaires fight with each other on a conference stage, the Luckey vs. Calacanis drama starts at the 21:45 mark and it’s a conversation worth paying attention to.

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Click here to read more from Versapay

Inside track

If a company wants to digitally transform, it has to “find the smartest technologist in the room and make them CEO,” says a16z’s Marc Andreessen. In a new interview with McKinsey, he talked about how to have an open mind and the two mistakes that he sees in venture capital.

If you’re trying to fundraise, ask for advice from an investor, not just money, says Scale co-founder Lucy Guo. She’s now fundraised for two companies and been on the VC side, so she shared her advice on how to pitch yourself as a founder and generate FOMO.

Do you know what DPI, TVPI and MOIC are? Venture capital already involves a ton of jargon, but this week Codie Sanchez broke down 16 terms VCs know but most investors don’t.

“In 2001, I thought the world was going to end. In 2008, I thought the whole financial system was going to collapse. When cleantech imploded, I thought my career in venture capital was over. And when COVID started, I thought we were all going to die. So, in that backdrop I’m okay,” says Khosla’s Samir Kaul, who discussed the ups and downs of navigating market volatility.

Need to know

Accel raised a $4 billion fund. Quietly announced via blog post, the money could position the firm well as Tiger and SoftBank recede from the cash-splashing game.

Redpoint’s Tomasz Tunguz takes a step back. He’s continuing with the firm in the near term as a partner, but is dropping some of his responsibilities, Forbes reported.

In other changes of power, SoftBank’s international CEO leaves after five months on the job. Marcelo Claure’s replacement has decided to follow in his footsteps and leave to pursue new opportunities. Another SoftBank managing partner, Alex Clavel, is taking over the top role at SoftBank Group International.

$12.8 billion up in smoke. Dan Primack declared Altria’s 2018 investment in Juul “the worst corporate investment of all time” after the FDA ordered Juul’s products off the U.S. market this week.

Bolt is doing a buyback. The payments startup is offering to buy back shares from the employees who were laid off and had taken out loans against their shares. The company said no ex-employee is underwater on those shares because of the low exercise prices they paid.

From Protocol: You want silicon? How about a plateful? Startup Cerebras has developed a foot-wide piece of silicon, compared to average chips measured in millimeters, that makes training AI cheap and easy.

Also on Protocol: The next wave of social apps are focused on authenticity and friends, with one even going so far as to ban selfies altogether.

Your weekend reading: Have you tried to Google something recently only to be frustrated that the results seem to be ad-laden pages or just feel off? You wouldn’t be alone. It’s an “open secret,” Charlie Warzel wrote for the Atlantic, that Google search isn’t what it used to be. The question he explores is why.

SPONSORED CONTENT FROM VERSAPAY

Executives that don’t align CX ambitions with accounts receivable leave money on the table

A resounding 96% of respondents claimed that there is work to do in digitizing their AR departments, yet 60% agreed that their AR departments haven’t been prioritized as much as other departments for digitization. At a time when the importance of securing cash flow is higher than ever, many businesses are not putting enough focus on it.

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