The college dropout who invested billions to cozy up with Elon Musk

Venture capitalist John Hering was 21 years old when he turned a publicity stunt into a billion-dollar startup.

He lurked in the crowd outside the 2005 Academy Awards and clandestinely scanned the cellphones of arriving celebrities. As expected, he found security holes that exposed the superstars to hackers. Hering touted his findings, drawing national attention to a cybersecurity outfit that he and tech-savvy friends started while at the University of Southern California.

After falling short of broader success, Hering turned his promotional talent to a singular quest—earning a favored seat beside Elon Musk atop the tech world’s Mount Olympus.

To win Musk’s attention, and ensure access to funding rounds of his startups, Hering and Alexander Tamas, a German tech financier, have essentially committed their venture firm, Vy Capital, to serving the world’s richest man.

Such venture giants as Valor Equity Partners and Sequoia Capital also have invested large sums, but none are as far out on a limb as Vy Capital. More than half of its $8 billion in reported assets is parked in Musk’s startups.

Hering, 41 years old, donates most of his working hours to aiding Musk startups and holds company ID badges to grant him entry. In June, he gave $500,000 to America PAC, a pro-Trump super PAC that Musk created with his allies and Republican donors.

“There are very few investors at any point in history, for any company, who are willing to go sleep in a tent or sleep in a trailer or sleep at a factory or leave a vacation at a moment’s notice to go try to solve problems,” said Shaun Maguire, a Sequoia partner.

Yet Hering and Vy Capital have done just that, said Maguire, who shares an office with the firm in Los Angeles. “John is my office mate, so I know where he is every day,” he said. “Two, three days per week, he is on a last-minute flight to help an Elon company.”

On a 2022 investor call, Musk singled out Hering for his work with tunnel-building startup Boring Co., and he rewarded Vy Capital with the largest investment for its latest funding round, $300 million. Months later, the firm put $700 million toward Musk’s Twitter takeover, behind only Oracle co-founder Larry Ellison, Sequoia Capital and a Saudi prince.

This spring, Musk’s new AI startup, xAI, raised $6 billion, valuing it at $24 billion. Vy Capital was one of the largest investors and helped xAI set up a data center in Memphis.

For all their efforts, neither Hering nor Tamas holds a board seat at any of Musk’s companies.

The latest results of their abiding faith haven’t been promising, either. Eight years since Boring’s founding, it has only one tunnel open to the public and has struggled to win new customers. The social-media platform X has been bleeding users and advertisers since Musk took control. Last fall, its valuation fell to $19 billion from $44 billion, resulting in a roughly $400 million paper loss for Vy Capital.

Yet for two men working overtime to join the proverbial lunch table with Silicon Valley’s popular crowd, Vy Capital’s investments have paid other rewards.

After Vy Capital’s first SpaceX investment, Tamas grew close to Steve Jurvetson, one of the rocketmaker’s directors and a close Musk friend. The two men met up at the Burning Man festival in the Nevada desert, and Tamas was the best man at Jurvetson’s 2019 wedding in the French Alps.

Hering, a USC dropout, fared even better.

This article is based on interviews with dozens of investors and people close to Tamas and Hering, as well as investment filings and other public records. Tamas and Hering, through a spokesperson, declined to comment. Musk didn’t respond to requests for comment.

Highfliers

After Hering’s Academy Awards caper, he spent seven years as chief executive for cybersecurity startup Lookout, which he co-founded with college friends. He gained experience hobnobbing with venture capitalists and raised more than $100 million.

Lookout fell short of the success Hering had hoped for, and he stepped down as chief executive in 2014. He pitched his Silicon Valley connections to Tamas, who made a killing from an early Facebook investment and had moved to a mansion in Dubai.

Tamas, 47, was born in a small town in Romania, where his father, a political dissident, was imprisoned under the communist dictator Nicolae Ceaușescu. The family fled to West Germany when Tamas was 2.

In 2006, Tamas joined Goldman Sachs and covered European internet companies, including the Russian webmail service Mail.ru. Moscow-based tech investor Yuri Milner persuaded Tamas to join his venture firm DST Global in 2008. Tamas helped land a $200 million investment in Facebook the following year, as well as lucrative deals with Airbnb and Alibaba.

“He is Yuri Milner’s human supercomputer,” wrote the venture-capital leaders Marc Andreessen and Ben Horowitz about Tamas in 2011. “He’s on speed-dial for everyone trying to build the most successful, highest-scale, global Internet companies today.”

Tamas started Vy Capital in 2012 and set his sights on tech companies around the world. He described to investors his vision of building a firm similar to Warren Buffett’s Berkshire Hathaway, attracting such big-name backers as Facebook executive Javier Olivan and TikTok CEO Shou Zi Chew. Vy Capital’s largest investor was Hillhouse, the Chinese private-equity giant led by Lei Zhang.

After efforts to launch a hedge fund failed, Tamas turned to the emerging U.S. tech startup scene, centered in Silicon Valley. Tamas bought a home near Stanford University in Atherton, Calif., one of the nation’s most expensive locales. In 2015, Tamas hired Hering to run Vy Capital with him.

Hering, the son of an investment banker and an interior designer, grew up in Newport Beach, Calif. He studied public policy at USC and left in 2006 without a degree, according to the university.

After joining Vy Capital, Hering set to work building its brand. He got Musk’s attention in 2015, after former colleagues at Lookout became the first to hack a Tesla Model S. Hering emailed Musk about the hack before publicizing the feat that summer.

Hering moved Vy Capital to a San Francisco office shared with Valor Equity Partners, a Chicago-based investment firm and major Musk investor. Hering already knew Valor co-founder Antonio Gracias, who sat on the boards of Tesla and SpaceX, and he believed Gracias could help the firm.

His instincts were right. Gracias helped Vy Capital clinch its first ties with a Musk company—a $20 million investment in SpaceX at a $15 billion valuation. Valor also invested in Hering’s new cybersecurity startup, Redacted.

Hering believed Vy Capital needed a way to stand out from its big-name rivals. He and Tamas decided on a private club at a landmark address.

The firm secured a lease on the 59th floor of the Salesforce Tower, the tallest building in San Francisco. Hering hired John Terzian, founder of luxury hospitality chain The h.wood Group, to design an 18,000-square-foot facility that would include a cafe, bar and lounge.

Marketing materials for the club, named 59, listed a $1 million initiation fee and $60,000 in annual dues for a chance to congregate with “the world’s leading thinkers,” a pitch that fell flat among the crowd that Hering and Tamas sought to impress.

Hering tried to get Sam Altman, then the chief executive of the noted Silicon Valley VC firm Y Combinator, to lease part of the 59th floor for his new startup OpenAI, as well as become a founding member of 59. Altman turned him down.

After failing to draw enough interest, Vy Capital gave up on the club.

Seat at the table

Hering searched for ways to gain Musk’s favor. In 2016, he heard talk that Musk intended to launch a brain-implant startup called Neuralace. He asked his staff to buy the domain names for neuralace.com and neuralace.ai with the intention of offering them to Musk.

He never got the chance. Musk named the company Neuralink.

Hering had his Musk breakthrough in 2017. Gracias brought him to the Hawthorne, Calif., campus of SpaceX and introduced him around. He became a frequent guest and offered his assistance to Starlink, a project that SpaceX hoped would provide global internet service. Hering spent his own money on recruiters to help Starlink find engineers.

Hering also sent Pablo Mendoza, formerly a Goldman Sachs investment banking associate, to work on-site at SpaceX, where Mendoza created financial models and business plans for Starlink’s global rollout.

As of late last year, Vy Capital’s first venture fund had put $147 million into SpaceX, valuing its stake at $1 billion, the firm’s top-performing investment.

Hering perfected a formula to demonstrate his loyalty at Musk startups, spending long hours on-site to observe and advise, offering help with recruiting and providing investment money as needed. He prepped Mendoza to substitute for him, bouncing the 30-year-old between California and Texas for Musk-related work.

After finishing at SpaceX, Mendoza moved to Bastrop, Texas, to help out at Boring. Then Mendoza moved to San Francisco to join Musk’s transition team at Twitter, discussing cost-cutting plans with Musk, at all hours.

During the renegotiating of office-space costs, according to a lawsuit filed by former Twitter employees, Musk told Mendoza during a 4 a.m. conversation that he would pay rent only “over [his] dead body.”

After a few months, Mendoza returned to Texas to continue his work with Boring. This year, he was called back to San Francisco to help with Musk’s xAI startup.

Vy Capital has ended up looking little like the venture firm its founders had imagined. It remains largely unknown and has had few major hits outside of Musk’s companies.

Tamas sold his house in Atherton and relocated to Italy in 2022, taking a back seat at the firm. He and Hering have told investors they intend to wind down the venture-capital business entirely.

Hering, though, finally landed a spot in Musk’s orbit.

Musk and his brother Kimbal Musk went to Hering’s 2022 wedding in Venice. Hering also vacationed with Musk’s family and friends, including a ski trip to the Revelstoke resort in British Columbia with Kimbal and Musk cousins Lyndon Rive and Peter Rive. Kimbal Musk and the Rives didn’t respond to requests for comment.

This spring, Musk held a video call with investors about his plans for xAI, including setting up data centers to train cutting-edge AI models.

Hering sat next to Musk during the call, the only investor in the room.

Alexa Corse contributed to this article.

Write to Berber Jin at berber.jin@wsj.com and Rolfe Winkler at Rolfe.Winkler@wsj.com