Thrive Bet Big on GitHub Days Before It Blew Up, Then Doubled Down

It was past 11 at night when Miles Grimshaw, a 23-year-old investor at Thrive Capital, made his pitch. GitHub, the website where software developers store and build code together, had bootstrapped for years, had raised money only once, and was not seen as a fast grower. Grimshaw argued that it sat at the center of software, because more of the systems that run the world were being turned into code.

Thrive, the New York investment firm founded by Joshua Kushner, agreed. By the middle of 2015, it had committed about $28 million to GitHub, or 7% of its $400 million fund.

Days after Thrive wired the money, GitHub seemed to fall apart. Chris Wanstrath, GitHub's founder and chief executive, fired the chief financial officer, the head of product, and the head of marketing after a sexual harassment scandal. The verdict in Silicon Valley was that GitHub was not just slow growing but broken, and Thrive's phones rang with investors asking whether that share of the fund was lost for good. Mentors at other firms told Grimshaw to sell and move on.

Around then, Thrive had hired Nabil Mallick to lead a team that helped its startups operate, a team that then consisted only of Mallick. Mallick, a Pakistani-born executive raised in New Jersey, had come from the Brazilian investment firm that owned Heinz, where at age 30 he had run finance and operations for North America.

He knew almost nothing about startups. When he met Kushner for coffee, he warned that he carried a BlackBerry, had never owned an iPhone, and did not know what software terms like SaaS meant. Kushner hired him anyway, and his first assignment arrived immediately: go to San Francisco and steady GitHub.

For nine months, Mallick commuted between the East Coast and California and acted as GitHub's temporary finance chief. He helped finalize the budget, set up basic measures of how the business was doing, and build a plan for selling to customers. From that seat inside the company, he concluded that growth was not stalling but accelerating.

So Thrive did the opposite of what the industry advised. Less than a year after buying GitHub shares at a $2 billion valuation, it invested another $120 million at a 25% discount. The firm went from owning about 1% of GitHub to about 10%, became one of its most important partners, and was asked to observe board meetings.

Eighteen months later, that nerve paid off. Thrive made about seven times its money when Microsoft bought GitHub, first offering $6.5 billion in cash and finally paying $7.5 billion in stock. Microsoft shares issued at $95 in the deal later traded at $500. Grimshaw and Mallick later said being in New York helped, because they were removed from the Silicon Valley panic and could see GitHub was still where developers built software together. Mallick later joked, "It also helps to know ketchup, which is just like software."