Friday, 9 July 2010

VC Factsheet: KLEINER PERKINS CAUFIELD & BYERS (KPCB)

Company summary & history
Kleiner Perkins Caufield and Byers (KPCB), widely known as KP, is one of the most successful venture capital firms in the world. KPCB has offices in Beijing and Shanghai, but is headquartered in Menlo Park, California. It is one of the first firms to have its founders, Kleiner and Perkins, from non-financial backgrounds when they set up the first fund in 1972. In 1982 they raised 150 million USD, which was the largest venture capital fund of its time and for a long time since.

Key people
Eugene Kleiner: Founded Kleiner Perkins with Thomas Perkins in 1972. He served in the U.S Army before going on to gain his Bachelor's in mechanical engineering and Master's in industrial engineering from Polytechnic University of New York and New York University, respectively. He founded Fairchild Semiconductor in 1957 with seven of his former colleagues, from William Shockley.

Thomas Perkins: Teamed with Eugene Kleiner to form Kleiner Perkins in 1972. He attained a BSc in Electrical Engineering and Computer Science (EECS) from MIT in 1953 and an MBA from Harvard in 1957. He became the administrative head of the research department of Hewlett-Packard in 1963.

Frank Caufield: Joined Kleiner Perkins in 1982 along with Brook Byers to change the name to Kleiner Perkins Caufield and Byers. He was the president of the National Venture Capital Association as well as the Western Association of Venture Capitalists, both US organisations. He graduated from the United states Military Academy in 1962 and later on went to Harvard Business School to acquire his MBA.

Brook Byers: Joined Kleiner Perkins together with Frank Caufield in 1982. Byers, just like Caufield, was once President and Director of the Western Association of Venture Capitalists. He has supported several high-profile life sciences and medical technologies start ups. He attained his Bachelor's degree in Electrical Engineering from Georgia Tech in 1968 and an MBA from Stanford University.

High-profile deals
Several high profile deals have maintained the firm's best in class reputation. These include Tandem Computers: 1.6 million USD was invested in 1975, which grew to 203.4 million USD by 1982. KPCB also bought a 13.3% stake in Netscape for 5 million USD, which grew to 455 million USD within twelve months. Netscape was later acquired by America Online for 4.2 billion USD in 1999.

KPCB were also early investors in Compaq, Sun Microsystems, Juniper Networks, Cerent Corporation, and Amazon. They also backed Google in 1999 wtih 25 million USD for 20% equity. Google's market capitalization is currently over 110 billion USD.

More recently, KPCB invested 29 million USD in Zynga's second round of funding in 2008. Zynga is currently the biggest online gaming developer focused mainly on social networks with projected 2010 annual turnover of 750 billion USD.

Some deals have also gone south. Notable bad investments include the 75 million USD in investments in Go Corporation which collapsed, Excite@Home in 2002, and Martha Stewart's Living Omnimedia which was invesitgated for insider trading.

Requirements for capital investments in start-ups
KPCB have historically favoured ventures that have a sound business plan, indication of the service cost peaking at a third of the total revenue, insight into an emerging new market, and a competitive advantage through technology.

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