VentureBeat

The Founders Fund, the venture firm led by former PayPal chief executive Peter Thiel, has hired Sean Parker, the controversial entrepreneur, who has just turned 27, as a managing partner.

Parker somehow attracts attention wherever he goes. He has already launched three well-known companies. At 19, he co-founded Napster, and his cheekiness drew anger from the recording labels, which eventually shut down Napster with lawsuits. Parker told VentureBeat last week, in an interview, that his time at Napster was his biggest lesson — about who to hire to run companies and who to take money from. “I wasn’t sophisticated enough, I didn’t know any better.” But Parker’s past still has some investors in Thiel’s fund nervous. Thiel responds: “Sean has rubbed a lot of people the wrong way, in part because he’s been so successful.”

One person he rubbed is the big-gun himself, Michael Moritz of Sequoia — an early backer of Yahoo, Google and YouTube. After Napster, Parker co-founded Plaxo, a site that updates contacts. Soon, Parker was in peoples’ faces again. Some accused Plaxo of spamming, because of its constant update requests. During the post-bubble downturn, Parker got pushed out by Sequoia Capital and Ram Shriram, and there’s been silence over the real reasons ever since. There were reports of private investigators going after Parker. And things weren’t improved, Thiel says, when Parker wouldn’t let Sequoia invest in his next company, Facebook. “Sequoia had no chance to invest,” Thiel explains, “because of the way they mistreated him at Plaxo. He’s been treated worse than he deserved.” VentureBeat has contacted Sequoia for comment.

Without Parker, Plaxo has become more diplomatic — but almost too much. You never hear about it anymore.

Parker soon met Mark Zuckerberg in New York, after the young “Zuck,” as he is known, had launched Facebook. Parker helped Zuckerberg learn the ropes. He helped him raise money at great valuations — ticking off several VCs who’d wanted in on the deal. They first raised seed money from the Founders Funds’ Thiel, who Parker had met through Sequoia’s Michael Moritz — an irony. Facebook raised only $500,000, and it was profitable immediately. Facebook’s traffic rocketed, and the company went in red again after taking more venture capital from Accel Partners to expand.

While Zuckerberg has been widely acknowledged as Facebook’s leader, even by Parker himself, there’s little question Parker helped Zuck keep control and ownership. Zuck loves coding, so with Parker’s business sense the two were a great pair. Parker helped bring in Owen Van Natta as COO. Parker was one of four board members at Facebook (along with Zuck, Thiel and Accel’s Bryer). He hired former Napster employee Aaron Sittig to redesign the site as we know it. Parker obsessively negotiated with the owner of facebook.com to buy the domain. Parker also came up with much of what we see as the Facebook News Feed, and he believes that format is the future of communication on the Web. “The social graph,” he says, referring to the connection people have with others through multiple degrees, “is the critical ingredient.”

[Side note: See this link here for other details. It was written by Numair Faraz, a friend of Parker's who said Parker had tacitly agreed to the post. Numair forwarded it to us a couple of weeks ago. At the time, we ran Numair's blog post by Facebook's spokeswoman, who reviewed it, and declined comment. When we ran the facts by Parker, he clarified the following: Plaxo had two other co-founders, Tipping Point was not an inspiration for either Plaxo or Facebook, he met Facebook's Zuckerberg met in NYC and Zuckerberg had every intention of turning the site into a business; Parker just accelerated the process, he clarified. Finally, regarding Numair's comparison on Parker with Jim Clark (pictured above), the same comparison was made by Peter Thiel. In an interview, Thiel said Parker reminded him of Clark, who also founded three high-profile companies (SGI, Netscape, WebMD) but that Parker was twenty years younger: "He's just getting started," Thiel said. "The time horizon is really long."]

Parker’s self-acknowledged insecurity is what drives him to be edgy, but also to excel: “I’m still super insecure,” he said. Parker feels it in talks he’s having with entrepreneurs on behalf of the Founders Fund, he says: “I always feel like the underdog. I walk away from meetings asking myself ‘Did I add any value, or are they going to tell other people that shouldn’t talk with us?’”

Like many people at Facebook with ambition, Parker left Facebook quite early in the game. Facebook is firmly in Zuck’s grip, along with a few trusted “family” members, as his close-knit circle is referred to. Parker retains a sizeable chunk of Facebook shares. Others have left, impatient because Zuck won’t sell the company or give them more responsibility.

Parker says his three start-ups have also exhausted him, another reason for him to try out VC: There was “a lot of stress, a lot of conflict,” he said.

He said he joined Thiel because of Thiel’s maverick ways. Thiel is not a classic VC; he runs the firm with an entrepreneur’s bent, from his Clarium Capital hedge fund offices — swanky, we add, nicely perched atop the hills of the Presidio. Parker says too many VC firms are run by people who never launched and ran their own companies. At Founders Fund, Thiel is focused on investing in early-stage companies, and he’s given Parker a carte blanche to find the best companies he can, Thiel says. Founders Fund is investing a $50 million fund, and it is about to launch a second, larger fund.