May 03, 2004
Google's VC
Posted by Gordon Smith

Two years ago, a reporter called me to ask if I would evaluate Silicon Valley venture capital powerhouse Kleiner Perkins. The reporter was interested in showing that machinations by KP partner John Doerr (and others like him) led to the internet stock bubble, but I wasn't biting. Venture capitalists did not create irrational exuberance, I said, even though they benefitted handsomely from it. I find it interesting, therefore, that today's New York Times article on John Doerr begins as follows:

As far as John Doerr is concerned, the Internet frenzy of the late 1990's was not a bubble. No, to Mr. Doerr, a prominent venture capitalist in Silicon Valley, it was the "Great American Boom."

"It was a good thing," he said in an interview last month. "It made the American economy bigger. It raised incomes for everybody. It made us more of a leader in the world in all respects."

John Doerr has long been recognized as the biggest booster of internet companies, and his enthusiasm seems unabated with the recent IPO filing by Google. That sort of optimism is contagious, and it is no wonder that entrepreneurs are drawn to him. In the case of Google, Doerr and KP will be handsomely rewarded. For an investment of $12.5 million, KP will own shares that may be valued over $3 billion when Google's IPO is priced! That makes up for a lot of failure.

P.S. Always on the prowl for the new, new thing (see Michael Lewis), venture capitalists are alread talking about the next search phenomenon. The NYT article quotes Tim Draper or Draper Fisher Jurvetson, perhaps second only to John Doerr in race for head hypemeister of the internet: "Google is the current state of the art, but it could be replaced. I've got a new search in my office that will take on Google."

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