Jack Selby was one of PayPal Holdings Inc.’s first employees and, after the payments company was sold, started hedge fund Clarium Capital Management with Peter Thiel.
He later helped manage Thiel Capital, the billionaire’s family office. Now Selby is branching out with his own investment fund focused on technology companies in Arizona, where he spent part of his youth and returned to after EBay Inc. bought PayPal for $1.5 billion two decades ago.
His Phoenix-based AZ-VC has allocated money to a handful of companies this year after raising $110 million for its debut fund from mostly local investors, with almost a quarter coming from the owner of Arizona’s largest electric utility. Selby is now lining up more deals and is confident of another growth boom for US tech firms following the recent slowdown.
“This is when the next PayPals get started,” Selby, 48, said in an interview from the United Arab Emirates, where he traveled to see the US men’s soccer team at the World Cup. “To be able to have a fund with dry powder, to be able to pounce at this time is a really, really great opportunity.”
Selby has parlayed his PayPal fortune into making movies as well as early investments in companies. They include Elon Musk’s SpaceX and Affirm Holdings Inc., the financial technology firm led by PayPal co-founder Max Levchin that’s plunged almost 90% this year. He’s also a managing director of Thiel Capital and plans on keeping that role even as he turns most of his attention to AZ-VC, which has about six employees and doesn’t count Thiel — a PayPal co-founder and Republican donor — as an investor.
AZ-VC recently led a seed round for bookeeping company Uplinq that raised $5.6 million, joining Kuwaiti royal family members as an investor in the Scottsdale, Arizona-based firm targeting small-business owners, according to a statement Thursday. Before this year’s downturn, Selby said he sold his stakes in Affirm and SpaceX, which has more than tripled its value in the past five years to about $125 billion.
In the interview, Selby spoke about the state of venture investing, the movie business and his love of hiking in Wyoming. His comments have been edited and condensed.
What’s going on in venture investing?
The 2020 or 2021 vintages for venture capital funds will probably be the worst of all time. They were just outrageously overvalued, and we’re seeing that coming home to roost. I’m really lucky by avoiding deploying during that very frothy period.
Entry points from a valuation perspective are now far better. Most companies that were overvalued over the past few years were real businesses. The good news for them is they’ve got a war chest to help them grow into their valuation, but at the same time the valuations have to get marked down. The public markets are considerably ahead in this process, so I think private markets still have some way to go.
How’s business for AZ-VC?
We’ve made two investments so far. We’ll probably make a handful more before the year is out. I started a nonprofit about eight years ago, InvisionAZ, to help Arizona’s tech ecosystem and, as part of that work, I’ve been running around the state and taking meetings with every entrepreneur I could find. I like to joke I’ve kissed a lot of frogs, but at the same time I’ve also met a lot of really qualified, impressive entrepreneurs and companies. And so I’ve been compiling this list of people that, as an investor, I’d potentially look at. It’s a running start — not a standstill — and that’s really beneficial for deploying capital quickly.
I’m hoping I can build a team where I can fade into the background. Venture capital is a younger person’s game and I’m probably at the cusp of aging out relatively soon. I’d love to hand the reins over one day and have this fund move into its second, third, fourth vintages.
Why focus on Arizona?
I’ve always felt that Arizona had most of the ingredients to have a proper tech ecosystem. If you wanted to get a seed or angel-level check — say $500,000 — you could get it from a variety of local sources. But it’s been harder to find that next level of funding. That’s forced entrepreneurs to get on a plane to raise money.
A lot of local companies failed to raise that next level of capital, but if they did in places like Salt Lake City, Denver or California, there’s almost a gravitational pull to the person that wrote the check. If there’s a good financial outcome, any windfall typically gets enjoyed and recycled in the location where the check was written. We’ve missed out on this flywheel effect.
And you produce movies?
I overlapped at Hamilton College with Thomas Tull, the founder of Legendary Entertainment, which made The Hangover series, Inception and The Dark Knight trilogy. We knew each other through a trustee in our network and he asked me to get involved in Act of Valor, a 2012 film about a team of Navy Seals. We went to work together on a few more projects after that.
I reconnected with childhood friends to start High Frequency Entertainment in 2014. We’ve made several films and the most recent one, Memory, now in post-production, was Jessica Chastain’s first after winning an Oscar this year. We also have Windfall out on Netflix with Lily Collins, Jason Segel and Jesse Plemons. It’s a very different world to tech. It exercises another part of your brain.
I usually make a few appearances during our movie shoots to ensure we’re on budget and on time as it’s my money at stake. It’s important we keep a strict discipline in that respect. We end up doing two to three films a year on average. The work ebbs and flows — it’s very manageable.
How does your Thiel Capital role fit in?
I’m a managing director at Thiel Capital. I don’t manage anybody and it’s a very flexible arrangement. Peter’s a very good friend. He’s been very kind to let me adjust the dial as I’ve needed. The new fund is going to take up a fair amount of my time to get it off the ground.
Any political ambitions?
I'm now a stakeholder in Arizona, so I feel I have a responsibility within the community to make sure we just stay normal and business-friendly. I'm certainly in favor of outcomes for that, but I’m much less in favor of those that are more extreme, whether on the left or the right. The only type of involvement I would have is very much behind the scenes. There's definitely no ambitions to run for office or anything like that.
How do you relax?
I love to hike. I spend my summers in Teton Village, Wyoming, just outside of Jackson. I can go out my back door and run up a mountain and then take a gondola down. In Phoenix, the town clears out in the summer because it’s so warm. Most folks get away and go to the beach or the mountains. I choose the mountains, and Wyoming is my happy place.
This article was provided by Bloomberg News.
