I've spent the last several months working on a magazine feature about why ‘Queen of the Internet' Mary Meeker and her growth investing team decided to split off from venerable venture firm Kleiner Perkins Caufield & Byers in September.
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But to tell that story, we have to understand how Kleiner got here in the first place. Once the very embodiment of Silicon Valley venture capital, the storied firm has suffered a two-decade losing streak. It missed the era's hottest companies, took a disastrous detour into renewable energy, and failed to groom its next-generation leadership.
After numerous pivots in strategy over the years, Kleiner never quite found its footing. The firm's early-stage unit repeatedly missed promising young companies like Uber, Pinterest, Robinhood, Slack, and Airbnb — only to have Meeker's growth team invest later at much higher prices.
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I spoke with more than 20 current and former employees, investors in Kleiner's funds, entrepreneurs and other industry observers about what went wrong and how, if possible, the firm can ever regain that old Kleiner magic.
| I've spent the last several months working on a magazine feature about why ‘Queen of the Internet' Mary Meeker and her growth investing team decided to split off from venerable venture firm Kleiner Perkins Caufield & Byers in September. |
| But to tell that story, we have to understand how Kleiner got here in the first place. Once the very embodiment of Silicon Valley venture capital, the storied firm has suffered a two-decade losing streak. It missed the era's hottest companies, took a disastrous detour into renewable energy, and failed to groom its next-generation leadership. |
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| After numerous pivots in strategy over the years, Kleiner never quite found its footing. The firm's early-stage unit repeatedly missed promising young companies like Uber, Pinterest, Robinhood, Slack, and Airbnb — only to have Meeker's growth team invest later at much higher prices. |
| I spoke with more than 20 current and former employees, investors in Kleiner's funds, entrepreneurs and other industry observers about what went wrong and how, if possible, the firm can ever regain that old Kleiner magic. |
| Below is an excerpt from my story: |
The inability to get in on a hot startup's ground floor, only to subsequently pay a far richer price, was all too common for the once-storied firm. Kleiner had sat out on another generation of technology investments, the crop of so-called Web 2.0 companies, including Facebook in the 2000s. Now, in the 2010s, it was failing again to make early-stage investments—the traditional meat of venture capital investing—in the most sought-after startups of the day. But this time its whiffs came with a perverse twist: Kleiner was succeeding wildly with a new strategy centered around Meeker, who ran a separate fund within the firm focused on more mature private companies that required capital to grow as opposed to merely establish themselves.
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"Growth" investing, with its more developed companies, should be somewhat safer than "venture" investing and would also earn commensurately lower returns. Yet Meeker's investment team outperformed the venture group overseen by longtime Kleiner leader John Doerr and a rotating ensemble of lesser-known investors who joined and left him over the years. Meeker, not the venture capital investing unit, was landing stakes in the era's most promising companies, including Slack, DocuSign, Spotify, and Uber, breeding resentment over tension points as old as the investing business: Who gets the credit and, more important, who gets paid.
Worse, a class system developed inside Kleiner, evident to the outside world as well, notably among entrepreneurs mulling accepting Kleiner's money: Team Meeker was a top-tier operation while the venture unit was B-list at best. Says Ilya Strebulaev, a Stanford finance professor who studies venture capital: "Twenty years ago, Kleiner Perkins was at the pinnacle of venture capital. These days it's just one of many firms trying to compete."
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| What happened next is another age-old tale in the business world, of how a once-proud stalwart found itself on the edge of irrelevance. It's about just how much succession planning matters and the ramifications of not adequately grooming the right successors. And it's a reminder that something as elusive as identifying early-stage winners from the pack of wannabes doesn't get easier, even after more than four decades of practice. |
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