Powerset gives founders $1 million to invest in other startups

Powerset, founded at the end of 2022, is an investment program with a simple hypothesis: what if the best investors are not venture capitalists, but other founders, writing checks between night coding sessions and meetings of the council?

Every year, Powerset, founded by AngelList alumni Jack Zeller and the founder of the coaching company Athena Jonathan Swanson, hands five to ten founders $1 million to invest in other startups – potentially giving millions more if the founders bring good investments. Past cohort members include Paul Copplestone, co-founder of developer platform Supabase, Jordan Tigani, co-founder of analytics company MotherDuck, and software engineer Wes McKinney, who created the Python panda project. Applications for the third cohort open this week.

Zeller described Powerset as a sort of decentralized venture fund: There’s no programming to “teach” founders how to invest, no timeline for when founders need to deploy capital, and no group of managing partners who can veto an agreement. The founders take home fifteen percent of any profit a business makes.

It is an experimental model that lies somewhere between angel investment – except that the founders do not invest their own personal money – and the old school VC scout programswhere VCs engage people, including founders, to help source businesses. Cohort founders are then encouraged to mentor and advise portfolio companies, just like any investor.

In the case of Powerscout, however, the investments are made entirely at the whims of the already overworked and stressed founders. “There are some founders who are so busy with their companies and so demanding that they don’t invest at all,” Zeller said. Or a founder will go from not making investments “to being one of the most active very quickly.”

Despite the complications, Zeller believes Powerset’s strategy will produce massive returns. “It’s often the best founders who build the best companies that make for the best investors,” he said.

The founders, after all, deeply understand the intricacies of building a startup in their field and are always on the lookout for top talent anyway. “I’ve never found a genius-level technical founder who built an incredible company that just sucks investment,” he said.

There are no hard and fast rules for who is qualified for the Powerset program – just that you are building a company and immersed in the technological ecosystem. “Hopefully your company reaches a scale where you get some organic connectivity,” Zeller said, meaning other founders like your product and are naturally reaching out to you.

But Zeller has a deal: He’s not interested in anyone who sees PowerSet as a stepping stone to running a company, with aspirations to soon become a full-time venture capitalist. “These people are doing terribly,” he said.

He states that the best performing Powerset participants are the founders who plan to spend the next five, ten years building their own company. “If you’re building something that’s very important, and your life’s mission and your life’s work, you’re not going to invest in a marginal company,” he said. “It doesn’t justify the activation energy.”