Oct 4, 2022 - Economy & Business

Exclusive: Powerset joins the ranks of programs that turn founders into investors

Illustration of a one hundred dollar bill with wings and a glowing halo

Illustration: Natalie Peeples/Axios

There’s a new program on the block for turning entrepreneurs into angel investors — dubbed Powerset — and it’s aiming to raise $314 million.

Why it matters: Co-founder Jake Zeller previously helped lead Spearhead, a similar setup (and the inspiration for Powerset) that’s a joint venture between AngelList and venture firm Accomplice.

Details: Zeller started Powerset with long-time collaborator Jonathan Swanson, who's also a co-founder of Thumbtack, a marketplace for professional services. Powerset will debut with $30 million in capital that the two already put together largely from their own money and that of friends.

  • Powerset will start with 10 entrepreneurs for its first cohort, and give them each $1 million to invest in early-stage startups.
  • As the entrepreneurs build an investing track record, they’ll each be able to draw up to about $15 million in additional capital for follow-on investments or bigger deals.
  • Participating entrepreneurs will get 15% of the carry, though Zeller expects that structure will evolve and may be a bit different when it comes to follow-on investments. Powerset will use the management fees to provide resources for the program.

What they’re saying: “I’m specifically looking for the [entrepreneurs] who are like, ‘I’m too busy for this, I don’t have time for this,’” Zeller tells Axios of the would-be investors he wants to recruit. His experiences at AngelList and Spearhead have shown that founders investing in peers tends to generate strong returns, he adds.

  • "Everyone has hobbies — some people go to the gym, for example,” he says. “Helping other founders is another great hobby.”

Between the lines: “Our thesis is that we’re going to see a lot more of [these programs] as well — a movement of founders backing founders,” says Zeller.

  • And while Powerset and Spearhead offer fresh models, the underlying idea isn’t new.
  • Scout programs from VC firms have been around for over a decade, arming entrepreneurs and startup execs with a bit of capital to invest on their behalf. Some firms have long believed that former startup founders make the best professional VCs.

The bottom line: VC remains a game of finding and capitalizing on unique networks.

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