Venture Capital firms, like Sequoia Capital, have been using a secretive network of so-called “scouts” to funnel money to promising start ups while avoiding the publicity that an investment from a big-name VC firm can bring, according to a report Friday in the Wall Street Journal.
It was as a scout for Sequoia Capital that investor Jason Calacanis got $25,000 to invest in Uber, a bet that is now worth roughly $110 million.”Scouts invest the money in startups and keep their eyes and ears open for ideas that Sequoia might like,” according to the report. It was through Calacanis that Sequoia learned about local-services company Thumbtack, which it later invested in. Now Thumbtack’s executives tip off Sequoia to promising entrepreneurs too.
The secretive ecosystem of cash and connections is an unusually powerful example of how venture-capital firms try to gain an edge in the never-ending hunt for the next blockbuster. That search has gotten trickier now that some startups with sky-high valuations are hitting turbulence.