And Google Begat...

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The search giant's former employees are seeding tech startups—and shaping another wave of innovation

By Spencer E. Ante and Kimberly Weisul

During the holidays last year, Aydin Senkut and Elad Gil gathered 50 of their friends at a health-food restaurant in Palo Alto. Over turkey burgers and tofu wraps, they talked about tech trends and how to get rich. Or, more precisely, how to get richer.

Senkut, Gil, and their dining circle are alumni of Google (GOOG), one of the greatest engines of wealth creation the U.S. has ever known. Since going public six years ago, Google has generated more than $170 billion for its employees and investors. Many of the millionaires the company has produced are young, wired into the latest developments in tech, and at ease with risk. Which explains why so many Google alums—including many of those at Senkut and Gil's gatherings—are active angel investors, attempting to add another zero to their bank accounts and another innovative company to their list of accomplishments. "I feel like we have such a strong network, it's almost like we've recreated Google outside of the Google walls," says Andrea Zurek, a 39-year-old backer of 26 startups.

More than 40 ex-Googlers have invested in about 200 fledgling companies since 2005, according to the research firm YouNoodle and reporting by Bloomberg BusinessWeek. At least a half dozen current Google executives, including CEO Eric Schmidt and co-founders Larry Page and Sergey Brin, are also financing young companies. Numerous angel-watchers say the Google group has more in common than just pedigree. Unlike many venture capitalists, the Googlers like to swap investment ideas and back startups together. They're also willing to take big chances. "[They're getting into] very risky deals that can be extremely rewarding," says Jeff Clavier, a veteran venture capitalist who founded Palo Alto-based SoftTech VC in 2004. "They have been very active as a group over the past two to three years."

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The results have been impressive. Companies backed by Googlers include Twitter, Tesla Motors, and gamemaker Tapulous. "As Google matures, its alums are continuing to have a huge impact on Silicon Valley and the tech industry," says Ron Conway, one of the Valley's most active angel investors, who has backed 190 companies, including Google, Facebook, and Twitter.

One reason for their success is that Google's angels have more to offer struggling entrepreneurs than just money. Bart Decrem, a Stanford University law grad, turned to the Google network when he was starting Tapulous in 2008. The company's Tap Tap Revenge game requires players to tap on-screen balls to the beat of a song—not exactly a sure thing of an idea. But Decrem thought the game might become a substantial business by selling it on Apple's (AAPL) iPhone. He raised $500,000 from a dozen angels, including Senkut and Zurek, who advised on strategy, connected the company with new partners in Asia, and helped it explore platforms for mobile phones that use Google's Android software. Today, Tap Tap games have been downloaded more than 25 million times and Tapulous is solidly profitable, with $1 million in revenues a month.

Google's Angels dabble in a wide variety of businesses. Zurek has money in a premium vodka maker and a South Korean frozen yogurt emporium. Yet the angels tend to concentrate their cash in what they know—search technology, mobile computing, and the consumer Internet. Already, Twitter, backed by former Google executive Chris Sacca, is the hottest startup in Silicon Valley, pioneering a new field of real-time communications. The online personal finance service Mint.com, with money from Senkut, proved so popular that market leader Intuit (INTU) bought it for $170 million last year and made founder Aaron Patzer one of its top execs. Search provider Powerset, backed by Senkut, was acquired by Microsoft (MSFT) in 2008, and its technology became a key part of the Bing search engine.

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The most active Google angel thus far is Senkut, a 40-year-old native of Turkey who has invested between $25,000 and $150,000 in more than 60 startups. Senkut joined Google in 1999 as its 63rd employee. He left in 2005 and promptly took his mother to Paris for her 60th birthday, purchased two multimillion-dollar homes in the Bay Area, and treated himself to a Lamborghini.

With that out of his system, he set about becoming a full-time angel. Senkut is often the first investor behind an idea, and to date 11 of the startups he helped fund have been bought by companies including Google, AT&T (T), and Microsoft. Senkut also fosters the investment of others by organizing two regular events for alums, one for angels and entrepreneurs, and another for all ex-employees, at spots such as the Calafia Café in Palo Alto, owned by Google's first in-house chef. Senkut is raising money for his firm, Felicis Ventures, according to two angel investors, and could not comment on his investments for this story. (Securities laws prevent the public solicitation of funds.) In an interview last October, though, before four of his companies were sold, Senkut said his investments had produced double-digit annualized returns and that, at the time, he was being pitched new business ideas several times a day.

If Senkut is the established star among the Google angels, Chris Sacca is the up-and-comer. The 34-year-old Georgetown University law grad joined Google in 2003 and left in 2007. Of the 31 startups he's backed, his biggest hit is Twitter, in which he invested $50,000 just as it was getting started in 2007.

Working out of a 3,000-square-foot home in Truckee, Calif., a small ski town near Lake Tahoe, Sacca hikes and snowshoes most mornings before breakfast and commutes to San Francisco for three days every two weeks. It's an unconventional way to supervise investments, but Sacca has an unconventional approach to investing, period.

One Friday night in December 2008, he posted a message on Twitter asking if any startups were working late. "We tweeted back, 'we're FanBridge and we work hard every Friday night,'" says Spencer Richardson, its 25-year-old co-founder. FanBridge makes software that helps musicians manage marketing and relationships with their fans. A few weeks later, Sacca flew to New York and met with the company's founders. "They had day jobs and built this site that had 20 million users, adding 100,000 users a day," says Sacca. "It was a no-brainer."

Over the next few months, Sacca invested $50,000 and pulled in several hundred thousand dollars from other angels. Last year, FanBridge's founders considered offering their products to authors, comedians, and other artists; Sacca advised them to stay focused on the music industry. Today, FanBridge is profitable and used by 55 million music fans. "The feedback from him was, 'start by being the best at something, then branch out,'" says Richardson.

The Google Angels may have several more breakout companies developing in their portfolios. Sacca has invested in Lookout, a promising developer of security software for mobile phones. Several ex-Googlers and current Vice-President Marissa Mayer are behind Square, which aims to displace credit-card swiping machines with a cheaper payment system that works through smartphones. And current Google exec Joshua Schachter helped finance Foursquare, a mobile phone service that lets friends share tips on local hotspots and is being used more than a million times a week. "What drives us is the innovation, the excitement of working with people we like," says Zurek.

Paul Graham, who co-founded the startup incubator Y Combinator, believes the tech industry has just begun to appreciate that Google's wealthy ex-employees may have not just a single innovative second act, but potentially hundreds of them. "When people write the history of Silicon Valley 20 years from now," says Graham, "the true impact of Google could come more from all the things that Google people go on to do after they leave Google."

Who are the top angel investors? To find out, go to www.businessweek.com/go/10/angels

Ante is an associate editor for BusinessWeek. Kimberly Weisul is editor of BusinessWeek SmallBiz .