Posts Tagged ‘John Doerr’

VC Industry Hits Headwinds: Creative Capital Gets Nod in San Jose Mercury News

May 19, 2008

The venture capital industry is clearly in transition. The old school business model of raising modest amounts money to invest primarily in early stage startups is giving way to a different industry that features larger funds and, perhaps, less risky investments in more capital-intensive businesses that are more mature.

Scott Harris, a reporter from the San Jose Mercury News, picked up on this trend and made it the major theme of his recap of the National Venture Capital Association Conference’s annual confab.

In the story, Harris focuses on the conference’s highlight: a conversation between the two most successful venture capitalists of the last decade–John Doerr from Kleiner Perkins and Mike Mortiz from Seqouia Capital.

In the middle of the story, yours truly shows up as an expert source, talking about the growing concerns in the VC business over the industry’s generally poor investment returns.

[Begin]
Successful companies are facing a longer path to the liquidity deal that enables VCs and LPs to realize the gains from their investment. “We’re all frustrated because the average time to liquidity for a venture-backed company is now seven years,” said Pascal Levensohn of San Francisco-based Levensohn Venture Partners.

“It’s not a crisis, but there’s tension,” said journalist Spencer Ante, who explored the history of the venture industry in his new book, “Creative Capital.” “A lot of money is getting raised, and a lot is getting invested. But what are you going to get out of that money? That’s the question.”
[End]

One final thought: As the older more mature funds wrestle with these challenges, what is equally interesting is the crop of new back-to-basics funds–such as Founders Fund, O’Reilly AlphaTech, and 406 Ventures–that have been cropping up over the last few years. These new funds may help fill the void in early stage investing.

Is Kleiner Perkins’s Apple-Focused iFund a Good Idea?

March 7, 2008

One of the most interesting things that came out of Apple’s announcement that it was entering the corporate wireless market was the news of the Kleiner Perkins iFund. According to the statement on KP’s Web site, “iFund is a $100M investment initiative that will fund market-changing ideas and products that extend the revolutionary new iPhone and iPod touch platform. . . Focus areas include location based services, social networking, mCommerce (including advertising and payments), communication, and entertainment.”

iFund is the latest example of an emerging trend in venture capital: platform-specific VC funds. By a large measure it is also the largest venture fund ever devoted to a single technology platform. In 2007, several funds were created exclusively to invest in Facebook applications. Last July, Silicon Valley VC fund Bay Partners caught some flack when it earmarked a few million dollars for investment in Facebook developers. In September, marquee firms The Founders Fund and Accel Partners (an investor in Facebook itself) launched a $10 million fund for Facebook applications called FBFund.

Kleiner Perkins is putting its top talent in charge of the fund. iFund will be managed by KPCB Partner Matt Murphy in collaboration with partners Chi-Hua Chien, John Doerr, Bill Joy, Randy Komisar, Ellen Pao and Ted Schlein.

So is it a good idea? Sure–especially if you are arguably the premier VC firm in the world. So far, platforms like Facebook have fueled an explosion in software development and wealth creation. The most popular Facebook applications, derisively referred to as widget makers, have created businesses that are valued in the hundreds of millions of dollars–and the business model for social networks and widgets is still in its infancy. Kleiner Perkins is betting that the iPhone represents a similar breakthrough in computing, and that it will be able to pick the winners of the market. With so much potentially at stake, that’s a bet worth taking.

One Kleiner Perkins alum has already set himself up to make a killing off of Facebook. Khosla Ventures, the firm started by Kleiner Perkins affiliated partner (and former General Partner) Vinod Khosla, has shown the foresight and brilliance to invest in two of Facebook’s blockbuster apps–Slide and iLike.

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