This top VC bet close to 20% of his fund on teenagers — here’s why

Kevin Hertz tends to be the first through the door. In 2001, he co-founded Xoom, when sending money across borders meant standing in line at Western Union. In 2013, it went public and in 2015, PayPal paid $1.1 billion for it. Four years after launching Xoom, he co-founded Eventbrite, which went public in 2018 and made buying event tickets something you can do without throwing your laptop in the ocean.

After working at Founders Fund, Hertz co-founded his own venture firm, A* Capital (a nod to the computer science algorithm), then in 2020, he saw another trend go public: the SPAC boom. His blank-check company, “One,” swallowed 3D printing outfit Markforged in a $2.1 billion reverse merger in 2021, just as every other Silicon Valley financier suddenly decided the SPAC’s future.

Now Hertz comes up with his next subject — teenage founders, not as a social experiment but as an ill-conceived investment thesis. His firm recently cut a check AruAn AI-powered prediction engine whose founder was too young to get his driver’s license at the time. Hertz is not alone. The dropout-and-build movement, championed by founders like Steve Jobs, Bill Gates and Mark Zuckerberg, is becoming a standard lifestyle choice for a certain type of ambitious kid.

Consider Corey Levy, who interned at Founders Fund, Union Square Ventures and TechStars while in high school, then bailed on the University of Illinois after freshman year. Today he runs Z felloA one-week accelerator that gives tech founders — even high school students — $10,000 in grants. When Levy dropped out a decade ago, the Thiel Fellowship was a radical new idea. Now, “the community of dropouts is at an all-time high,” he said told Business Insider Last spring “at a large group dinner of 15 or 20 people, we’d look around the table, and nobody had a college degree.”

It’s becoming enough of a “thing” that accelerator Y Combinator, which has quietly fueled drop-out culture since its inception, recently Roll out a program It is designed for students who want to start a company but don’t want to drop out. The program allows them to apply while in school, get accepted and funded immediately, and defer their participation in YC until graduation. (For YC, known as countercultural, this move is on brand.)

Naturally, TechCrunch covered the trend: see here And here And here. But to learn more, I’ll be sitting down with Hertz at the StrictlyVC event inside TechCrunch’s rollicking interrupted The show opens Monday, October 27 in San Francisco. (Hertz speaking Tuesday, October 28.)

In the meantime, here’s an excerpt from a chat we had on Friday, where we started exploring the topic:

TC: We’ve always seen teenagers start companies, but it certainly seems like we’re seeing more than ever before, and you’re telling me it’s a behind-the-scenes phenomenon. Why do you think so?

Kevin Hertz: You find these really bright kids who are so bored in school. I see classes of Stanford freshmen or sophomores who fall into this category — they were completely bored, some ended up homeschooling, and barely did well. Even at top universities, they still leave with a thirst to create, to learn, to push the envelope. We had a company where the founders were 18, 18, and 15. I think the CTO is probably 16 now, but he was 15 when we supported them. But it’s not really unusual.

How does it compare to Z Fellow? Thiel FellowshipLaunched years ago by Peter Thiel?

It is incredibly similar. The difference is that the Thiel Fellowship is a nonprofit, and — I’m a big fan of Peter — but as a nonprofit, you might not be running as hard. Corey [has] only [been] There have been Z Fellows built over the last few years, and it’s a really great program. It’s again Peter’s curve ahead of this thing, seeing the value in the irony of the drop out meaning proposition. This phenomenon is growing and building, and who knows how far it will continue, especially with university costs and what many people see as a toxic environment at universities with poor governance. All these lines are meant to drive teenagers to ask, ‘Why don’t I just drop out and build?’

Does Z Fellow take equity in the company?

They offer a very small check – $10,000. Then there’s a fund where they support people later down the line. But it’s mostly a no-obligation $10,000 starter piece. I think Corey picks a few people to put $100K in pre-seed [rounds]very

what do you do Statistics We see, related to children not getting jobs from school? I have to think some of this is driven by the realization that even after you graduate, there may not be a job waiting for you.

This other phenomenon is happening – this flipping that could happen in ’26 or ’27 where the 1099 will be higher than the W-2. This means that 30 years ago, people worked for large corporations like Nestlé or McKinsey or IBM. Now they are working for themselves. They are doing crypto business or building their own business. It refers to American individualism. It’s almost like US entrepreneurship is going into hyperdrive.

I think it’s because people want to start companies, but I also think that, increasingly, companies need to be started as people are elbowed out of their roles due to AI and other skill gains.

Paul Graham said something a few years ago that has always stuck with me, that it’s both good and bad for a young founder when their startup takes off, because it takes over their life. You were a young entrepreneur. How do you feel about funding a 15-year-old, knowing that his company can do really well and that person may never have the ability to experience what 15-, 16-, 17-year-olds experience?

I found it an enjoyable experience, but it was punctuated with painful challenges. It accentuates everything. And that’s a good point. [Seventeen,] That’s the age of Marines that they send into battle because they’re fearless. Maybe there’s something about that age where people are too hard-driving. But I wonder if it is too soon to understand the implications of this phenomenon given its novelty.

We’re just at the beginning of what I’d call a supercycle of expansion in technology, with AI and everything else – especially AI. We are in very early innings. Your OpenAI and Anthropic base models are growing incredibly fast in parts. Now we all start working on application layers. You have coding co-pilots like Cognition and then you have Decagon and Sierra in the AI ​​CRM space. But there are still many other categories left to disrupt. Even Sierra and Decagon are early in their mission.

you have a daughter Do you want to see them go to college? How would you feel if they said, “Dad, I want to start something now without going to college”?

Our 17 year old is now applying to colleges. He wants the college experience. He wants that taste of life. He really questions it. I tried to give him as many opportunities as possible to consider options and I will do the same with our next 13 year old.

Of the bets you’ve made over the past year, how many would you say involved teenagers?

Close to 20%.

What did you say two years ago?

About 5%.