Updated

engage.gifThe PayPal co-founders who just set up a new VC firm have just announced their first investment.

It is an undiclosed amount into Oakland-based Engage.

Engage, as we write in today’s Mercury News (or just keep reading), is a new kind of online dating company. It forces the people doing the dating to “engage” a third person to help match-make.

Third-party introduction always works better, said Chief Executive Suneet Wadhwa, who co-founded digital photo company Snapfish.

“Imagine . . . walking around in the real world, surrounded by an army of wing-men and wing-women, whose only job was in setting you up,” he said.

How it works: (more)

You search Engage’s database for a date, basing your search on certain characteristics — for example, where the person lives. When you find someone interesting, Engage pops up a message form that you send to one of your friends, the matchmaker. The friend then gets an e-mail which automatically allows him or her to set up an introduction between you and the date.

All three people see the introduction note, but the prospective date can send messages back to your friend to get the real skinny. Your friend, depending on how loyal he or she is, can tell the date what a great guy you are, or tell the truth, i.e, that you’re a loser.

But here’s how Engage plans to make money: After six months, it will charge people to use the service. And it will also build a reputation rating for matchmakers, where prospective dates judge the matchmaker on how honest they were. The best matchmakers can even get paid for their work.

Problem is, online dating is a crowded field: There’s eHarmony, Match.com and all the other social networking companies like Friendster and Orkut that seek to help eager singles score dates online. Wadhwa says the latter are good in letting you see how you are linked to a great dating prospect, but they lack an automatic way to enlist your friends in the process.

Still, it remains to be seen how swift the PayPal guys will be this time in helping Engage rise above the noise.

Engage’s Wadhwa hails from the City, and decided to go to Oakland for several reasons. The cost of living is lower, for starters. And that may be why “great engineers and talent are coming out to the East Bay now,” he says. He found Trish McDermott, a 10-year executive at Match.com, over there, and hired her to handle Engage’s public relations, he said.

Links
–Here’s their launch announcement a couple a couple of weeks ago.
–Here’s an early blog, and some early response (see comments), but it doesn’t look like any of the commenters actually tried it.

Any thoughts? Is this the latest dot-bomb, or is it really a breakthrough idea?