Kleiner Perkins Caufield & Byers

To accompany my presentation this Wednesday, I have written this blog post as a repository for all the need-to-know-info for our trip to Kleiner Perkins Caufield & Byers.

A Lesson in Early-Stage Financing

There are several different financing routes that a startup can take to build their company. The four main option are the following:

  1. Bootstrapping: By far the most common method, bootstrapping involves financing a company with internal cash flows. The use of existing resources allows a founder to hold complete ownership, but may not be sustainable as their capital requirements grow.
  2. Incubators & Accelerators:  Similar to boot-camps, these companies and competitions provide mentoring, resources, and a small amount of capital to early stage businesses and startups. This is an ideal option for first-time entrepreneurs.
  3. Online Platforms: Through online platforms, startups can get a sense of demand for their product, find angel investors and mentors, and get feedback from across the globe.
  4. Venture Capital: These are firms or funds that provide financing for startups which are either are high-growth or posses this potential. Venture capital firms are classified as private equity.

 

Quick Facts: A Venture Capital firm

Kleiner Perkins Caufield & Byers (KPCB) is a Silicon Valley based, blue-chip technology venture capital firm. KPCB makes seed investments (incubation) ranging from $0.1 million to $1 million, early-stage investments between $1 million and $10 million, and growth-stage investments between $10 million and $75 million.  As of 2017, the firm has raised $10 billion through 20 venture funds and four growth funds. According to Crunchbase, KPCB has participated in 1009 investments in over 850 companies and has stood as the lead investor in 250 of these. As a mark of this company’s incredible success, KPCB has made only 191 exits.

History and Founders

Founded March 1st, 1972, the company was born on Sand Hill Road in Menlo Park, California. (Out visit to KPCB will be right after they turn 46, so a happy birthday will be in order!) KPCB is named after its four founding partners: Eugene Kleiner, Tom Perkins, Frank J. Caufield, and Brook Byers. 

Thomas J. Perkins, who studied engineering at MIT and received his MBA from Harvard, entered the workforce leading a computer division at Hewlett-Packard Co while simultaneously building a small laser design company. When his company merged with Spectra-Physics, Perkins became inspired to enter venture capital. Looking for help, Perkins called San Francisco investment banker Sanford R. Robertson who connected Perkins to his first partner: Eugene Kleiner. As one of the founders of Fairchild Semiconductor, an immensely successful chipmaking company, Kleiner was incredibly intelligent and familiar with the startup world. Together, the two formed Kleiner Perkins in 1972. The firm would go on to become Kleiner Perkins Caufield & Byers by 1980 after acquiring Frank J. Caufield, and Brook H. Byers as partners. Caufield also received an MBA from Harvard Business school and was a former U.S. Army intelligence officer. Byers graduated from Georgia Tech and was expert in electronic and medical technology.

Investment Strategy: Keiretsu

Like most venture capital firms, KPCB invests in talented people as they believe this is the greatest asset a business can have. A concept can be changed and grown, but the entrepreneurs behind the company must have a certain strength and intelligence. Investing in the intangibles requires asking critical questions including how do the founders work with each other? How do they communicate? What do they know that no one else knows? How are they uniquely positioned to solve this unique problem? 

This said, KPCB is constantly looking for ideas that hold the promise to invent new business categories or radically alter existing ones. They focus on new technologies and  applications that have the potential to drive high-impact change.

“We don’t just try to launch successful companies. We try to launch successful industries.” – John Doerr (a KPCB partner), Washington Post (1990)

KPCB leverages an informal version of a Japanese business practice known Keiretsu. Keiretsu is a term describing a group of affiliated corporations with broad power and reach that encourages resource sharing and deal making among affiliates. Under this method, KPCB offers entrepreneurs access to their unmatched company portfolio and global business relationships. With this, companies have the means to forge strategic partnerships and share insights. Ultimately this helps entrepreneurs build new ventures faster, broader, and with less risk. Additionally, KPCB partners will often sit on the boards of the companies they sponsor to further maximize the benefits of a professional name and mentorship.

Investments

The companies KPCB invests in can be broken down into 5 categories:

  1. Consumer digital 
    • Sub-categories: Digital health, eCommerce, EdTech, Gaming, Marketplace, Messaging, Mobile, New media, Social
    • Examples: Airbnb, Snapchat, Uber
  2. Enterprise digital
    • Sub-categories: Data analytics, Hardware/Semiconductors, Infrastructure, SaaS, Security
    • Example: Gusto (a cloud-based payroll management and HR service)
  3. IoT/Connected devices 
    • Example: Nest (a home automation producer of programmable, self-learning, sensor-driven, Wi-Fi-enabled thermostats, smoke detectors, security cameras, and other security systems)
  4. Life sciences & Digital health
    • Example: Spruce (a platform for communication and care outside of the exam room)
  5. Sustainability
    • Example: Beyond Meat (a producer of plant-based meat substitute. Beyond Meat’s Products became available nationwide at Whole Foods Markets in 2013)

Many of KPCB’s investments have gone public or been acquired including Amazon, Google, Twitter, Uber, Waze, and Nest.

#Relatable!

I was very excited to learn that Kleiner Perkins has invested in 9 of the 23 companies our class has made presentations for and that we are planning to visit:

  • Airbnb

  • Facebook

  • Google

  • Spotify

  • Square
  • Uber

  • Veem

  • Zynga

We will also be visiting one of KPCB’s principal competitors: Sequoia Capital.

Principal Competitors

On the topic of competition, it is useful to know who KPCB is up against. These companies are as follows: Accel Partners, Benchmark Capital, Hummer Winblad Venture Partners, Menlo Ventures, Redpoint Venture Partners, and Sequoia Capital.

Thanks so much for making it to the end of my blog, I look forward to presenting on Wednesday!

References: Wikipedia,  BloombergFundingUniverse, NYTimes , KPCB Website, TechCrunch, ReferenceForBusiness

13 thoughts on “Kleiner Perkins Caufield & Byers

  1. Great post, Lizzy! Since I researched a venture capital firm too, I found it super interesting to compare KPCB to True Ventures in all the different factors you mentioned. They definitely have very different investment targets and financing goals. Also, wow those are some big name drops! I’m excited to hear you present on Wednesday!

    Liked by 2 people

  2. Looking forward to your presentation on Wednesday to learn more about KPCB! I liked reading about the strategies KPCB uses to decide when it’s best to “invest in intangibles,” as this part of venture capitalism can often seem like a gamble. I’m curious if the 5 categories of investments were predetermined and the company has decided to stay within those boundaries, or if all previous investments can be put into these categories and a new category could arise with an unprecedented investment. Nice post!

    Liked by 1 person

    • It’s my impression that the categories arise as they expand their portfolio since they try to invest in ideas that can make new markets. Consumer and enterprise digital have several sub-categories, while IoT/Connected devices , life sciences & digital health, and sustainability have none.

      Like

  3. Lizzy, awesome post! I really liked comparing your post to Clare’s about True Ventures, and learning about each VC firm’s different strategy and approach. While True Ventures focuses on Capital Efficiency, I really enjoyed how KPCB focuses on the people leading the company as well as the Japanese business practice that you mentioned, Keiretsu. I think having a powerful network of resources and information is the most important asset that a VC company can offer to startups. Looking forward to hearing your presentation on Wednesday!

    Liked by 1 person

    • Thanks Dan! The different portfolio compositions for KPCB and True can be attributed to the large differences in funding each company raises. Interestingly enough, the two companies do share some commonalities. In 2016, True participated in Series A funding for Handshake (a career-service platform for college students) alongside Kleiner Perkins Caufield & Byers.

      Liked by 1 person

  4. Lizzy, great post about KPCB and their innovative investment strategy. To think that KPCB has invested in 8 of the 23 companies we are visiting is absolutely mind boggling. Looks like they are in for one heck of a pay day!! VC firms are super interesting and pivotal in the landscape of starting companies, I can’t wait to visit them this spring break.

    Liked by 1 person

  5. Great post, Lizzy! As someone who knew very little about KPCB before this, I was really excited to learn about them and very impressed with their success. I’m also curious about their competition with Sequoia, though: how do you think they compete with such a strong and well-known VC firm? Is their approach similar to the one with True Ventures, where they simply avoid overlapping, or do they go directly for the same startups? I find the dynamic between these companies to be super interesting, as we often only focus on the companies receiving their funds and rarely discuss the other side of providing them. Awesome job again!

    Liked by 1 person

  6. Awesome post! KPCB’s history of success is absolutely crazy – they were early investors in both Amazon and Google. The Keiretsu philosophy was something that I never knew about, but definitely want to hear more about. If you haven’t seen yet, I recommend you check out KPCB’s Internet Trends report by Mary Meeker that details the hottest internet trends of the year!

    Like

  7. Awesome overview of KPCG. It was great to learn about the founders and the vision of the company, including their Keiretsu strategy that guides them when making the investments. I love that you pointed out their investments in 9 companies your classmates are presenting on–impressive!!

    Like

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