Venture

Neo, a new ‘communal’ venture fund by Ali Partovi, has closed with $80 million

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It happens every day of the week. People who’ve been successful in tech invest in who they believe could be the tech leaders of tomorrow.

Now a new fund called Neo is taking the idea to the nth degree. Started by serial entrepreneur, successful investor and half of Silicon Valley’s best-known and networked set of twins, Ali Partovi, Neo “identifies awesome young engineers, includes them in a community of tech veterans, and invests in companies they start or join.”

The conceit isn’t entirely new. Several years ago, Bloomberg Beta, the venture firm backed by the media and services giant Bloomberg, began a data-driven campaign to identify people who it suspected might eventually begin a company. The idea was to start a dialogue with those individuals, and continue it. The personal loans startup Upstart somewhat similarly began life as a way for investors to bet on individuals poised for success. (Investors on its platform would lend money to individuals in exchange for a percentage of their future pre-tax income.)

Still, Partovi thinks he may have a special talent for identifying talent, and Neo’s investors must think he does, too, as evidenced by the fact that Neo just closed its debut fund with $80 million. Though Partovi isn’t naming names, he says the outfit’s investors include “CEOs, CTOs and founders of Amazon, Airbnb, Affirm, Dropbox, Facebook, Google, Microsoft, Quora and Stripe,” among others.

“I’m not going to say that I can predict the best founders five years before they start companies,” says Partovi, who is also an investor in the fund along with his brother, Hadi, though they are minority investors. “I’m skeptical of anyone’s ability to do this,” he adds. “But I do have some prior experience with this — both in terms of successes and failure.”

One of the hardest lessons for Partovi, he says, was not believing enough in Craig Silverstein, the first person employed by Larry Page and Sergey Brin at Google, after he studied for a PhD alongside them at Stanford. “Craig was easily the smartest kid in our class” as an undergraduate at Harvard, says Partovi. “When he told me about Google, I had already sold my first startup and I could have easily invested in it. But I missed it.”

Partovi says he “also could have told you that Max Levchin, a contractor at one of my first startups, was a genius — an absolute prodigy.”

Partovi and his brother didn’t make the same mistake when they met a young Mark Zuckerberg. “I remember Hadi telling me, ‘Mark reminds me more of Bill Gates than anyone I’ve ever met.’” The comparison was based on first-hand interactions with Gates. Ali Partovi was on the founding team of the Internet ad company LinkExchange, acquired by Microsoft in 1998 for $265 million. Hadi Partovi was on the founding team of the speech recognition company TellMe Networks, also acquired by Microsoft, for $800 million in 2007. Indeed, despite having reservations about Facebook’s business, they wound up backing it.

Partovi says now that he wishes he could “go back in time and tell myself the importance of investing in people.” Since he can’t, he created Neo, which he prefers to characterize as a “community that includes a communal VC fund.” As he explains it, he and partner Nadia Singer, who was formerly the head of outreach for the Q&A platform Quora, “hope to create a new type of entity in a way that, when YC first started, was something different and still today is somewhat different. It doesn’t occupy the same role as other VCs.”

One of subtle ways the firm is differentiating itself is by talking with top computer science students at a dozen colleges about, well, themselves. Allan Jiang, who graduated from Stanford this year, is now the CEO of Motif, a platform that allows session-recording and screen-sharing in any web browser. It’s also notably backed by Neo. But Jiang says that Partovi — with whom he had long discussions over the last year or so — didn’t talk about funding him but rather advised him as an individual.

“He kind of naturally said, ‘I would like to help out with this company that you started on,’” says Jiang, but it wasn’t like a lot of other venture firms that courted him with discussions first about capital, he says, including Lightspeed Venture Partners and Pejman Mar. “For Neo, that was secondary. It finds ways to support you as a person before there are any discussions about money.”

Christina Wadsworth, another freshly minted Stanford graduate who recently began work at one of the FANG companies (but was asked by the company not to discuss her new role just yet), similarly tells us that Partovi has been helpful to her for more than a year, even while knowing she might never start her own thing. “I never said I was going to create a company any time soon,” says Wadsworth, “and he was still happy to have me as a part of the Neo community, which I can use to build relationships and that I’ll maintain throughout my career.”

That support “may or may not lead to startup,” she adds, “and if not, that’s totally fine, too.”

Indeed, what feels perhaps the freshest about what Neo is doing is that no one is under any obligation to do anything other than Partovi. He says Neo basically makes a promise to the students it zeroes in on to back them if ever, whenever, they start a company, no matter how dumb-seeming their idea. “I’m not going to let my business judgment preclude me from an incredible business opportunity.”

Of course, whether that approach works will take time to discover. Partovi says that Neo now counts roughly 30 “scholars” from across the U.S. and Canada, and that it has written 10 checks — some to people straight out of college, as with Jiang — and some to founders outside the Neo sphere of influence but who Partovi and Singer think are special in their own way — and who may eventually benefit from an introduction to someone in Neo’s world. Altogether, that includes about 180 individuals, including Neo’s many investors, who will also happily mentor those whom Neo gives the nod.

As for students whose successful careers at big companies might get derailed by the ever-lingering prospect of startup funding, Partovi insists that he actually advises most students to get a job.

“We have a whole cohort of students who are chomping at the bit to start companies. I don’t give the same advice to everyone, but more often than not, I tell them my own story of getting a job and working at two companies before taking the leap myself. I spend a lot of time trying to discourage them from starting a company because I think it’s the right advice but also to make sure that if they do it, their heart is really in it.”

Continues Partovi, “I tell them, it’s a potentially demoralizing, depressing process, with many ups and downs. If they’re discouraged by me, then they weren’t really ready.”

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