Venture capitalists John Doerr and Ted Schlein of Kleiner Perkins Caufield & Byers have had a front-row seat at Silicon Valley’s recent Web froth and its fallout.
Their venture firm in the past decade made a big bet on clean technology. In the last couple of years, Kleiner has also put money into high-profile and fast-growing digital startups, but only after they were valued at $1 billion or more-a far cry from the firm’s traditional strategy of investing very early in young companies.
Some of those more recent investments-in companies such as messaging service Twitter Inc., mobile-payments service Square Inc. and music service Spotify AB-have at least doubled in value based on their last private funding rounds.
Kleiner also invested relatively late in daily-deals site Groupon Inc. GRPN +3.30% and in social network Facebook Inc., FB -0.35% whose stocks have disappointed since their initial public offerings.
In recent months, particularly since Facebook’s May IPO, Silicon Valley has been grappling with a less-heady startup investment environment. Still, Mr. Doerr, 61 years old, and Mr. Schlein, 48, say they remain confident that the mobile-device revolution will catapult more startups to greater heights.
The two investors recently sat down at their Sand Hill Road offices in Menlo Park to discuss Kleiner’s investments in tech and clean tech, as well as their thoughts on the “four horsemen” of the Web.
WSJ: Why did you pay such high prices to get into Twitter, Square, Spotify and others?
Mr. Doerr: If you’re working with great entrepreneurs in a rapidly growing marketplace, you have a conviction to work with them and you can be rewarded all along the way. Every one of those investments is leveraging the trends of mobile, social and commerce. These aren’t waves of innovation; they’re tsunamis.
WSJ: Given such investments, do you think you have retained your identity as a company-builder?
Mr. Schlein: The vast majority of what we do is ‘series A’ [early-stage company] investing. It’s the core of what Kleiner Perkins has always been about.
Mr. Doerr: In the digital sector we have [magazine app] Flipboard, Chegg, the world’s best textbook-renting company; and Coursera [offering college-level courses online], which is five months old but already has two million students. Path [a social networking mobile app] is another very successful company.
WSJ: Is the sharp rise in the value of private tech companies sustainable for investors?
Mr. Doerr: What we’re experiencing right now is not different from the very early days of the Internet when there were huge winners who more than made up for the losers, and that’s happening right now in mobile.
Mr. Schlein: There’s a lot of talk about how there are too many angel investors [who invest small amounts in very young companies]….But the main event is that we have 1.2 billion people with smartphones, and that’s up 40% year over year and that’s still just 17% of the world’s population.
WSJ: There’s much talk about competition among tech’s “four horsemen” of today-Google, GOOG -0.31% Apple, Facebook and Amazon. How do you view these companies and the way they are expanding into each other’s turf? (Mr. Doerr sits on the board of Google and two other Kleiner partners are board directors at Apple and Amazon.)
Mr. Doerr: Today, these two products at Apple [holds up an iPhone and an iPad mini] that didn’t exist a few years ago are now $100 billion a year of very profitable revenue. That has never happened in any industry in any economy in any planetary system we know of.
The best is yet to come. This is day zero. Apple is not done, Facebook is not done, Google is not done, and Amazon is not done. Those companies have massive opportunity. I would be a long-term shareholder of all of them-and I am.
WSJ: Do you still have the conviction that your clean tech bets from the past decade will pay off?
Mr. Doerr: We’re very committed to green and the numbers are showing how that pays off. In 2011, $1.3 billion was the cumulative revenue of all of Kleiner’s clean-tech portfolio [comprising about 70 companies, with more than half not publicly launched]. Do you know how much it was this year? $2.4 billion-that’s up 80% year over year.
The biggest single trend is urbanization, people moving from rural to urban areas. And if they urbanize the way we did-they can’t, the planet can’t afford it. Our green investing doesn’t depend on government policies. It’s about basic supply and demand.
WSJ: When will U.S. policies restricting the number of foreign entrepreneurs and computer scientists who can come to this country start to hurt us?
Mr. Schlein: That takes decades, but if we think we own the right to innovate, we’re just wrong. We’re doing everything we can to export that when we should be doing everything we can to embrace it. Can you believe there’s a cap on H1-B visas [to hire foreign workers]? Innovation is a strategic weapon around national security, our economy, job creation, and I don’t believe we do enough in this area.