Ali Partovi's Startup Experiment: From Coding Tests to Success

Ali Partovi: The Unconventional Venture Capitalist

Within Silicon Valley, Ali Partovi has established significant influence, despite maintaining a relatively low public profile. The Iranian-born Harvard alumnus boasts an impressive early career, including foundational roles at LinkExchange – acquired by Microsoft in 1998 for $265 million – and iLike, which was sold to MySpace in 2009 for a reported $20 million.

The Rise of Neo and a New Approach to Investment

Partovi, alongside his twin brother Hadi, also became an early investor in prominent tech companies such as Facebook, Airbnb, and Dropbox. Industry observers have long recognized the Partovi brothers’ involvement in a startup as a positive indicator, but Ali’s prominence is now expanding beyond traditional tech circles.

This increased recognition is largely due to Neo, his venture firm established eight years ago. Neo was founded on the premise of fundamentally changing how exceptional talent is identified, and is now demonstrating tangible results.

Notable Investments and Early Successes

Neo was the first investor in Bluesky, the decentralized social network, outside of Twitter, with a reported valuation of $700 million as of January. The firm also invested in Kalshi, an online prediction market that gained traction during the recent U.S. presidential election.

Partovi, described as both gracious and persistently driven, stated on Friday that this year marks the first time his firm is consistently identifying future industry leaders before others do.

Identifying Potential: The Michael Truell Story

The relationship between Neo and Michael Truell exemplifies Partovi’s investment strategy. In 2019, while interning at Google, Truell was encouraged to meet with Partovi.

During their meeting, Partovi administered a coding test, which Truell completed in just 15 minutes. This practice, common when investing with his brother, involved evaluating potential teams as if they were applying for positions at Google.

From Neo Scholar to Founder: Anysphere and Cursor

This evaluation served as a starting point for a deeper conversation, ultimately leading to Partovi’s backing of Truell. Truell subsequently co-founded Anysphere, the creator of Cursor, an AI-powered coding editor currently valued near $10 billion and poised to become one of Neo’s most successful investments.

A Rethinking of Venture Capital

Like Y Combinator, Neo represents a departure from conventional venture capital. Instead of focusing on specific sectors or teams, Partovi prioritizes identifying exceptional individuals, often while they are still in university, and supporting their development through mentorship before company formation.

The Neo Scholars Program

Partovi, along with partners Suzanne Xie and Emily Cohen, runs the “Neo Scholars” program. This initiative provides a $20,000 grant for a gap semester to thirty students annually, without requiring equity.

Additionally, in 2022, Neo launched a traditional accelerator program, offering funding and mentorship to twenty early-stage startups each year.

Cultivating Risk-Taking and Ambition

“I aim to encourage them to embrace greater risks, step outside their comfort zones, and set more ambitious goals than they currently have,” Partovi explained.

From Neo’s inception, Partovi has actively sought out promising students across the country, conducting interviews and coding tests to identify “tomorrow’s changemakers.”

A Portfolio of Emerging Leaders

Neo scholars have founded companies such as Cognition, a coding assistant company valued at $4 billion; Pika Labs, a text-to-video generative AI tool valued at $700 million; and Chai Discovery, a molecular structure prediction company that recently secured $30 million in funding from OpenAI and Thrive Capital.

Partovi proudly noted that last year, all of OpenAI’s new graduate hires were Neo scholars.

Key Qualities: Ability, Inclination, and Challenge

When assessing potential, Partovi focuses on three core attributes: technical skill, entrepreneurial drive, and a willingness to question conventional wisdom.

Technical ability is valued not for its coding proficiency, but for its impact on critical thinking. Partovi cites examples like Jeff Bezos, Reed Hastings, and Larry Ellison – all computer science graduates who became influential business leaders.

Prior entrepreneurial experience demonstrates a willingness to take risks and a passion for creating products that resonate with users. The third quality – challenging the status quo – indicates a founder’s capacity for innovative thinking.

The Importance of Magnetism

Partovi also emphasizes a fourth crucial quality: magnetism. He asks himself whether a candidate’s most talented peers would be drawn to join their venture.

This was particularly evident in his assessment of Truell, whose “quiet confidence” led Partovi to believe that his brightest colleagues at MIT would consider joining him.

Maintaining Selectivity and Increasing Personal Investment

As Neo’s reputation grows, applications to its programs have doubled annually. Despite this demand, Neo has deliberately chosen to prioritize selectivity over expansion.

This philosophy extends to fund size. Neo recently closed a $320 million fund, a modest increase from the $235 million raised in 2023. Notably, Partovi significantly increased his personal investment in this fund, contributing more than he did to all three previous Neo funds combined. Backers include Sheryl Sandberg, Bill Gates, and Reid Hoffman.

Strong Early Returns and a Focus on Enduring Value

Neo’s early funds are performing exceptionally well. The first fund is currently valued between three and four times its initial investment, with potential for further growth. The second fund has already more than doubled in value, largely due to the Anysphere investment.

Regarding the current challenging exit market, Partovi advises founders to prioritize building lasting value. “I encourage people to focus on serving others, rather than solely on making money,” he said.

“Create a product that is so exceptional that others genuinely love it. Financial success will follow, but it shouldn’t be the primary objective.”

Pictured above, Partovi and his two partners at Neo, Suzanne Xie and Emily Cohen.