Powerset: A New Approach to Startup Investing

In the dynamic realm of startup funding, innovative ideas are continually reshaping the landscape. One such initiative, Powerset, launched in late 2022, is reimagining how investments are made in burgeoning companies. Founded by AngelList alum Jake Zeller and Jonathan Swanson, who heads a coaching company called Athena, Powerset has one core proposition: could the most successful investors be the very founders who are deeply entrenched in their industries?

The $1 Million Opportunity

Each year, Powerset awards a select group of five to ten founders a staggering $1 million to invest in other startups. This model not only empowers founders financially but also potentially enriches the ecosystem by fostering meaningful connections and collaborations. As Zeller explains, this approach allows founders to assist one another in navigating the complexities of startup growth and investment.

Past participants of this unique funding program include notable names such as Paul Copplestone from Supabase and Wes McKinney, the creator of the Python pandas project. Applications for the third cohort are set to open soon, sparking interest among numerous tech entrepreneurs eager to join this innovative venture.

Powerset promotes a new model of collaborative investment.

Decentralized Venture Fund Model

What sets Powerset apart from traditional venture capital firms is its decentralized structure. Zeller describes it as a venture fund run by founders, for founders, without the cumbersome bureaucracy often associated with VC investments. There is no mandated timeline for deploying the capital, nor is there a group of managing partners that possesses veto power over investment decisions. Founders receive fifteen percent of the profits from their investment endeavors, a model that encourages them to take ownership of their investment strategies.

Zeller elaborates on the operational philosophy: “There are no formal training programs to teach founders how to invest; the goal is to let them make decisions based on their expertise and insights.” This freedom allows founders to prioritize potential investments aligned with their ambitions, leading to a more nurturing environment for both investors and startups alike.

The Importance of Founder Insights

The premise of Powerset is based on the belief that founders often possess the deepest understanding of their industries, enabling them to identify promising startups more effectively than traditional investors. “I’ve never encountered a brilliant technical founder who fails to excel at investment,” Zeller asserts. They are already seeking out innovative talent, making them well-positioned to spot the next big thing.

However, this approach is not without its challenges. With the demands of running their own companies, many founders can be too preoccupied with their immediate responsibilities to engage as investors. Zeller points out that while some might not invest at all, others can quickly become highly active, thus varying the overall investment landscape.

The startup ecosystem thrives on connections and shared experiences.

Criteria for Participation

Qualifying for the Powerset program is relatively flexible, as long as a founder is immersed in the tech ecosystem and actively building a company. Zeller notes, “Ideally, your company should reach a scale where you find yourself organically connecting with other founders and products.” He emphasizes that this organic connectivity is vital for assessing potential investments.

However, there is one hard rule: Powerset seeks founders who are committed to their startups and are not viewing this as a means to transition into a full-time investment role. Zeller believes, “Those with aspirations of quickly becoming full-time VCs will not perform well in this program.” The most successful participants, according to him, are those dedicated to nurturing their own companies for the long term, ensuring that their investment decisions are made with care and relevance.

The Future of Startup Investments

Powerset’s innovative approach to investment represents a shifting tide in the startup ecosystem. By placing founders at the forefront of the investing process, it fosters a synergistic relationship that could pave the way for new levels of success among startups and their investors. As Zeller concluded, “If you’re deeply invested in your life’s work, the motivation to invest wisely in promising companies becomes intrinsic.”

As the program continues to evolve, industry observers will be watching to see how this model influences the wider landscape of venture capital and startup investing.

Emerging trends in startup investing drive unique collaborative efforts.