Kleiner Perkins is one of the most storied venture capital firms in Silicon Valley, making early investments in companies like Genentech, Amazon and Google, and serving as home to big names over the years including John Doerr and Al Gore.
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Kleiner, which celebrates its 50th anniversary next year, has always gone through iterations in its many decades of venture investing.
But starting around 2018, the firm made significant leadership changes following the departure of partner Mary Meeker and the hiring of a slew of new investors, including general partners Mamoon Hamid and Ilya Fushman. The following year, it announced a new investing strategy and slogan—“Back To The Future”—along with its 18th venture fund.
Now, even as the firm appears to be doing fewer deals than it has in the past, it’s poised to have its best year of exits from its portfolio in at least a decade.
With Kleiner’s long history and new strategy in mind, we dove into the firm’s portfolio and spoke with Fushman about the firm’s investment approach and future.
Kleiner Perkins in recent years has been especially focused on early-stage investing.
When Fushman, Hamid and partner Bucky Moore came in during 2017 and 2018, the firm had raised its 17th fund, KP17, but hadn’t deployed it. The team got to work investing early in companies like Loom and Figma.
Most recently, Kleiner Perkins raised a $700 million fund, KP19, which it announced in March 2020, and a $750 million fund, KP Select, which it announced in April 2021.
Of course, the venture world’s definition of what constitutes an early-stage company—and how big the check sizes for those companies are—has been changing.
“This spectrum of what early-stage investing is has been evolving, right? We heard some pretty large seed funds being raised pretty recently,” Fushman said in an interview this week with Crunchbase News. “The way I think about it is that there are moments in time for a company where having a real hands-on partnership with a great investor can be trajectory inflecting. And that moment can happen at the seed, so the letter or the number of the round doesn’t really matter. It can happen at the A, at the B. It can happen at the C.”
The team Kleiner assembled is made up of people dedicated to careers in VC and had operating experience, Fushman said. It’s a small team that punches above its weight and wants to partner with entrepreneurs early to build companies, he said.
As Fushman explains it, they’re generalists with a broad range but have a “core center of excellence.”
Kleiner likes to invest early and work with its portfolio companies across talent, go-to-market strategies, and marketing, focusing on a few core things, he said.
“The ethos is still to keep it very tight, as lean of a team as you can, while leveraging networks, activities and capital to do more,” Fushman said.
Kleiner Perkins appears to be investing in fewer deals these days.
The firm has made 49 investment deals so far this year, according to Crunchbase data, with about a quarter of those deals at the seed stage.
June was the most active month for the firm so far in 2021, in terms of deals being announced.
Some themes when it comes to the kind of early-stage companies Kleiner has recently invested in: the metaverse (Stardust, Inworld AI, Metaverse AI), workplace collaboration and communication (Coda, Spot, Sidekick, Glean) and robotics (Rapid Robotics, Chef Robotics).
The number of investments the firm makes has been lower in recent years than it was a decade ago, when it was investing in around 100 deals a year (from 2011-2014), an analysis of Crunchbase data also shows.
Since 2016 or so, the number of investments Kleiner makes annually has been between 50 and 70, with the peak of the past five years being 2019, when it made 67 investments.
It also appears to be leading fewer funding rounds than it was just a few years ago—in 2018 and 2019, for example, the firm was the lead investor in 26 and 28 deals, respectively.
Founder-firm fit is key for Kleiner Perkins, said Fushman. The firm wants to focus its resources and attention to help a company grow, he said.
“A lot of what we do is with the intent of truly supporting a company over its full life cycle, which means deploying tens of millions of dollars over the lifetime, kind of the path of the company, and that has to come with conviction,” he said. “And then what it comes down to is a small team, building a lot of conviction, going all in on a company and truly helping the entrepreneurs build that company to its fullest potential. (That’s) the kind of the model that we think works.”
While the size of the deal and the stage at which Kleiner invests may change, its model stays consistent, he said: “The fundamental of it is still the same thing, which is truly, truly connecting, believing and then building.”
Kleiner has led 13 of the 49 deals it has invested in so far this year, the majority of the fundraises its led being at the seed through Series B stage.
According to regulatory filings, Kleiner was among the largest shareholders in companies including Duolingo, LegalZoom and Coursera at the time of their respective IPOs.
With 26 exits so far in 2021 and still a quarter of the year to go, Kleiner could have its best year in at least a decade, in terms of the number of exits (not dollar value on returns).
The only years in the past decade in which the firm has produced more exits than 2021 so far were 2014 and 2018 (both with 28 exits) and 2019 (27 exits).
With so much attention on early-stage companies and traditional growth-stage firms like Tiger Global Management turning their attention to them, there’s certainly competition to get in on deals.
From his perspective, Fushman said venture deal making is as competitive as it’s ever been, but Kleiner tries to focus on building a relationship early with founders. The brand of the nearly 50-year-old firm and its network certainly helps in that regard.
“That comes down to relationship-building first and foremost,” Fushman said. “From a high-level perspective, a 50-year-old firm, it has a lot of leverage: For entrepreneurs in terms of recruiting, in terms of customer relationships, in terms of the network. If you just think about the companies that Kleiner Perkins has helped and supported over that 50-year history, that network and the expansion of that network is all accessible to our entrepreneurs today.”
Capital will become easier for entrepreneurs to obtain in a more commoditized way than ever before, Fushman predicts.
“At the end of the day, we’re all selling capital and money is money,” he said. “But it’s really what you get with that money that should matter most. And I think the smart entrepreneurs, the thoughtful entrepreneurs really take their time to understand what value they’re getting incremental to capital.”
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Correction: A previous version of this story incorrectly stated that Kleiner Perkins recently led funding rounds for Fin.com and Stardust. We apologize for the error.
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