Financing the Emerging Growth Venture
Case In Point: Kleiner Perkins Caufield & Buyers
How much money do you need? When do you need it? How do you value your venture and structure a “good” deal? Who are the best investors for your deal? And what are your financing alternatives? A concise financing strategy threads these important elements together.
If you are looking for outside funding, you are not alone. We found that 49 percent of the CEOs leading the Inc. 500 companies, who raised later-stage financings, got it from venture capitalists or other private-equity investors.
At the top of Sand Hill Road in Palo Alto, CA sits the home of America’s most famous venture capital firm with the most celebrated venture capitalists including John Doerr and Vinod Khosla. Founded in 1972, Kleiner Perkins Caufield & Byers became successful by funding and building over 350 ventures that were disrupters in their days.
Kleiner Perkins has supported hundreds of entrepreneurs leading ventures that include household names like: Amazon.com, America Online, Compaq Computers, Genentech, Google.com, Juniper Networks, Lotus, Netscape, and Sun Microsystems.
In 1995 Pradeep Sindhu, an engineer at the Xerox Palo Alto Research Center in San Jose created an improved algorithm that could be used to build a better router than Cisco was selling at the time. Khosla gave him a check for $275,000 to build out some hack models and Juniper Networks was on its way. It is considered one of the best investments anyone has made to date in Silicon Valley. Khosla’s decision to invest a total of $3 million in Sindhu returned some $2 billion.
Kleiner Perkins was formed with the goal of providing operating advice and resources to entrepreneurs in addition to capital investment. Over the years, the firm’s partners have been instrumental in helping to create some of the most innovative and rapidly growing businesses of the 20th century, with assets measured in tens of billions of dollars. From fund to fund, the billions Kleiner Perkins invested has returned over $550 billion, creating some 130 companies that generate over $75 billion in revenues, and employ some 250,000 people.
In 1996 Jeff Bezos, the founder of Amazon.com closed an $8 million round with Kleiner Perkins as the sole investor. Said Bezos at that time, “Kleiner and Doerr are the gravitational center of a huge piece of the Internet world. It’s the equivalent of prime real estate.”