Guiding the Kleiner Keiretsu - The VC with the most clout in the Internet
Economy.
Mark Gimein, June 21, 1999
Copyright =C2=A9 1999 The Industry Standard
Category: Most Powerful Venture Capitalist
Winner: John Doerr
Partner, Kleiner Perkins Caufield & Byers www.kpcb.com
Runner-up: Bob Kagle
General Partner, Benchmark Capital www.benchmark.com
In November 1998, America Online (AOL) set off a wave of huge Internet
mergers when it announced a complicated deal to buy Netscape, the struggl=
ing
Net pioneer. The conventional wisdom held that the deal essentially saved
Netscape's bacon, because Microsoft (MSFT) was attacking Netscape's core
businesses. Outside observers thought the strategic links between Netscap=
e
and AOL (AOL) seemed tenuous at best, but Net insiders noted one key tie
between the companies: Both were backed by the venture-capital firm Klein=
er
Perkins Caufield & Byers. Frank Caufield, one of KPCB's founders, sits on
AOL's board; John Doerr, its highest profile partner, sat on Netscape's.
It might have been possible to let this pass as an interesting coincidenc=
e
were it not for another multibillion-dollar merger announced just three
months later. AtHome, the cable-modem service backed by KPCB and cable gi=
ant
Tele-Communications Inc., announced that it would merge with Excite (XCIT=
) ,
the Net portal. Excite, too, was backed by Kleiner Perkins. And it was an
AtHome board member from, yes, Kleiner Perkins, who urged AtHome CEO Tom
Jermoluk early on to consider the merger. The board member, of course, wa=
s
again John Doerr. When one suggests to other venture capitalists that Joh=
n
Doerr is the most influential person in the Net investment world, many ar=
e
ready with an immediate response. Tim Draper and Steve Jurvetson of Drape=
r
Fisher Jurvetson www.dfj.com came up with the concept of "viral marketing=
,"
perhaps the most influential idea in the Internet Economy right now. Mich=
ael
Moritz of Sequoia engineered his firm's investment in Yahoo (YHOO) , whic=
h,
over the short run, is possibly the most lucrative venture-capital deal o=
f
all time. Bob Kagle of Benchmark backed auction house eBay (EBAY) , the
darling of the Net.
Fair enough. But venture capital right now is not just about choosing
investments, crucial as that might be. For many years, Doerr has been
preaching the virtues of the Kleiner Perkins "keiretsu," the tightly knit
network of KPCB-funded companies. Last year's deals were perfect examples=
of
what he means. Here's another example: In April, Drugstore.com, a
Seattle-based online pharmacy, filed documents with the Securities and
Exchange Commission announcing plans to raise over $60 million in the pub=
lic
market. It was not unusual that this e-commerce company had no profits an=
d
had not yet reached the million-dollar mark in sales. But it is unusual t=
hat
the company had launched its Web site an astonishing two months before
announcing that it would go public.
What gave Drugstore.com the confidence that investors would buy into a
retailer at such an astonishingly early phase of its development? Its
backers. Two key players fund Drugstore.com. One is Kleiner Perkins, whic=
h
has two partners on Drugstore.com's board =E2=80=93 Brook Byers, and, yes=
, John
Doerr. Its other key backer is online powerhouse Amazon.com (AMZN) . Klei=
ner
Perkins, naturally, also funded Amazon in its early stages. And who was t=
he
KPCB partner who sits on Amazon's board? Surely, at this point you've
already guessed.
Tushar J. Mehta
email: [email protected]
voicemail: (206) 405-2335