Letter #250: John Doerr (2013)
Chairman of Kleiner Perkins | 700 Investments, 192 IPOs, 375,000+ Jobs Created
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John Doerr is the Chairman of Kleiner Perkins. His investments include:
Two $2tn+ companies: Amazon (mc: 2.2tn) and Alphabet/Google (mc: $2.1tn)
Two $150bn+ companies: Intuit (mc: $180.5bn) and Uber (mc: $151bn)
One $75bn+ company: DoorDash (mc: $75.2bn)
Three $25bn+ companies: X/Twitter (acq. $44bn), Slack (acq. $27.7bn), and Compaq (acq. $25bn)
Two $10bn+ companies: Zynga (acq. $12.7bn) and Symantec (acq. $10.7bn)
Two $5bn+ companies: Sun Microsystems ($7.4bn) and Bloom Energy (mc: $6.3bn)
Three $2bn+ companies: Netscape (acq. $4.2bn), Macromedia (acq. $3.4bn), and QuantumScape (mc: $2.7bn)
He started his career at Intel working with Andy Grove.
Today’s letter is the transcript of a talk John gave at Stanford in 2013. He starts the talk off a little unconventionally, asking the audience for questions and filling up a whiteboard with those questions before jumping into his presentation.
In his presentation, he introduces KPCB, listing a few of their portfolio companies and areas of interests, before shifting gears to go over the three huge waves of innovations (personal computers, internet, mobile/social/cloud), pointing out the mobile/social/cloud is like three tsunamis converging, with a multiplicative rather than additive effect. He then jumps into mobile, sharing some charts on the adoption of iPods, iPhones, and Android phones, then social, reimagining industries such as news and information flow, higher education, health awareness, power distribution, mobile power, nutrition, and more, before transitioning to career advice, highlighting in particular the difference between mercenaries vs missionaries, the difference between the deferred life plan and a whole life. He then ends the presentation portion with a few words on leadership.
After the presentation section, he returns to the whiteboard and fields more questions from the students. He then goes through the questions on the whiteboard one by one, crossing them off as he answers them, and fielding a few more as he goes. He ends the talk by asking the students to email him their three favorite books if they would like the slides and his three favorite books, before sharing three books that he had recently read and had been enjoying.
I hope you enjoy this presentation as much as I do!
[Transcript and any errors are mine.]
Related Resources
KPCB
Mark Meeker Compilation (3,341 pages)
Vinod Khosla Compilation (1,190 pages)
Transcript (and Slides)
Q&A Section #1
John Doerr: It's really a pleasure to be back here and see you on such a wonderful new setting where we're above ground, and there's windows, and you can stretch your legs. My hope is that this time is your time. And we talk about topics that are really of interest to you. So this is going to be much more of a discussion; hopefully not a lecture. And we'll drive it off topics and questions that are of your interest.
I have prepared a few slides that we'll get to eventually that says something about Kleiner Perkins, but more about where we see major opportunities. But I want to get to those after we've filled out this whiteboard. The topics I thought it would be great to start with included any questions you may have or discussion about your career, or the next big thing, or mobile, and the web. Thank you. Energy, startups, venture capital, Kleiner Perkins, education, policy, global change. We could discuss some personal topics if you want. I can offer some hot stock tips--that's HST. And other. We can put in other categories. Really, this is your time.
So let's begin now. If you put your hand in the air, I'll recognize you, and I'd love to get your name and then a question. And thank you, mic runners. We'll try to do it with the mics. I'll probably go faster. Thanks.
Student: Hey, John, thanks for coming. My name is Mike Volpe, I'm a second year here. My question is around the advancements in the production of unconventional natural gas and how they may have impacted the thesis in cleantech investing, and then whether Kleiner is still bullish in that area and will be raising future funds.
John Doerr: Natural gas, cleantech, energy innovation. Great question. Another one, please. Yep.
Student: Hi, John. I'm [Padir Anomalay], MBA One. I got a question about mobile payments and specifically around NFC and sort of why like, although NFC has been here over the last like three, four years, like it's not been adopted en masse.
John Doerr: Okay. Mobile. Payment. NFC. Great question.
Moderator: We have one up here.
John Doerr: Thank you. Up top.
Student: Who is a CEO who you think is doing most things right? And what are those things that they're doing right?
John Doerr: My favorite CEO. And your name is?
Student: Senya.
John Doerr: Okay, I'm gonna put that under startups, all right. But, certainly some of the CEOs I'm fond of are running something more than a startup. We've got a microphone here, and a question. Yes.
Student: Hi, I'm Neal Sangal, I'm a JD/MBA here. And my question is about your career and the value that your time and industry at Intel added to your career as a VC and if you would do that again.
John Doerr: The value of Intel. Great. Thank you for asking about that. Question over here. Yes, sir.
Student: Hi, Steve Grossman. I'm a first year MBA student. I was just curious as to what advice you gave the President as part of your advisory role, and which of it he took.
John Doerr: Well, I'll answer part of that question. Advice to POTUS. Yes.
Student: My name is [Dominic Ballarin], I'm visiting Stanford. You have been attributed of saying that it takes 25mn US dollars to develop a VC, as a person, as a career person. I wonder how you take this now people are talking about establishing their new website servers for $100/month. In this new environment, what's your view? If you would estimate like a medium sized venture capital fund, what would it take to be a partner, financially, and also perhaps in terms of number of deals that you have gone through?
John Doerr: Right. I'm gonna answer that right on the spot. What I meant is, to be a successful VC, you're gonna lose money. So it wasn't the size of the fund. And the losses would be about equal to what it would mean to crash an F-16. And that was around 25mn at the time. But there's a better--there's a good question to build on that. Yes, sir.
Student: Great. Hey, John. My name is Tony. I'm a second year here. My question is actually somewhat related. So in VC under very long feedback cycles, how do you know if you're doing a good job on a shorter timeline?
John Doerr: That's a great VC question. Another one, please. Who's got a mic? Yes.
Student: My name is Remy Malhotra and I'm--the Jobs Act is passed. And that potentially opens the door for non-accredited investors to play in the VC world. From a policy point of view, is that a good thing? How does the VC community view that?
John Doerr: Jobs Act. Great question. Up top. Yes, thank you. Ma'am?
Student: My name is Katie Holt. I work here at the Business School, and I'm interested in what you think is happening in the markets right now, if you've got hot stock tips or what sectors you're bullish on.
John Doerr: I don't have to answer all the questions I put on the board. Because a number of I'm not qualified to answer. Yes.
Student: Hi, John. My name is Katy Elkin and I'm a first year MBA. I'm curious to hear your thoughts on the future of digital education.
John Doerr: Great. That's education, digital, right.
Student: Hi John, I'm Greg Mulholland. I'm a first year MBA. I'm interested to know where do you see VC in the energy space? Because so many energy projects require so much capital that most VCs can't set up an entire energy deal.
John Doerr: Right. Role for VC. Because of the capital required. Let's do two more. Yes.
Student: Hi, John. This is Lukas, I'm a first year MBA. I would like to know your vision on what VC can do to plug the valley of death for developing new therapeutics.
John Doerr: Mhm. Okay, so I'll put that in other. Maybe... Valley of Death for therapeutic innovation. Who else has a mic?
Student: Hi. My name is [Jonas]. I'm a first year MBA here as well. I don't know whether you can see that back here. And my question is whether you think there are enough frighteningly ambitious startups around at the moment.
John Doerr: All right. So, are there enough disruptors? Folks who want to put a big dent in the universe, as Steve Jobs would have said.
So let's do this. Hold other questions, and in fact, gather them as we go along. Because if this goes according to plan, we'll have another 20 or 30 minutes to have more interaction.
I want to take on a couple of these at first, and then tell you a little bit about Kleiner Perkins, and where we see opportunities.
I think a place to begin is with the value of of Intel for me. And it was formative, it was the most influential thing in my career other than my father. And I went to Intel at a time when it had a couple hundred employees, as a summer student. I fell in love with the place--I even, somehow, as a summer student, talked my way into Andy Grove's first course at the company, which was called the Intel Organization, Philosophy, and Economics. And even at that time, I could recognize this was a very well run company. Very aggressive, very disciplined. And many of their practices I've tried to take to our partnership, and then to other companies, like Objectives and Key Results, which Google has adopted for everyone, or how you do performance reviews and performance management. And Andy Grove has a little book, if you don't have it, High Output Management. I think it's one of the best books available on management. Jim Collins says there's a return on luck--a lot of life is luck. And I'm one of the most luckiest guys in the world that I landed at Intel instead of at--I mean, I was thinking to go to work for Burroughs, because I thought their computer architecture was pretty good. And they went straight out of business. This--generalizing this value, I think of operating experience in a rapidly growing company, where you're going to learn from the people who are there, that's a key element of career advice that I'll be giving you.
A number of the other topics I'm going to address in the slides, so maybe if we could cut to those. If you go to the PowerPoint, that that would be ideal.
Presentation Section
So, I'm one of the partners at Kleiner, Perkins, Caufield and Byers. People would think I run the place, I do not. I get one vote around the table in what we invest in and what we do. Our partnership is, I think, unique in Silicon Valley in that we're not a quantity shop, we're trying to invest in the most things--we're like Stanford Business School, more interested in quality. And in particular, in the entrepreneurs who are disruptors, the ones who want to change the world and make a big bold difference in what they do. We also invest across a spectrum of technologies and stages of companies. And I think that's resulted, for our partnership, in really a pretty impressive array of companies. I've just selected some of them.
Some of them here are newer. Some of them are older, like Genentech, which pioneered the life sciences industry. But whether you're looking at a Coursera, which is the newest of these investments we've made--it's been out in the market for 11 months or so. Twitter, which is the largest check we've ever written to back a company. Amazon, Google. These are companies that we're incredibly proud to be associated with. Not so much for their IPOs, but the thing that impresses me the most is the number of jobs that these innovators have created. With over half of those jobs being in the US. Almost all of them, most of them when they get to any scale, become global companies.
Now, I've done this work together with 18 other senior investing partners at Kleiner Perkins. We're in three fields. So you can figure that's about six partners per field. Six partners for life sciences, or for digital, or for green. It's not quite evenly divided. But we're investing in three areas. One is the life sciences, or biotechnology--I refer to that as BT. Another is new energy technologies--think of that as ET. And then there's information technologies, IT. So BT, ET, IT--all driven by innovators, all investing against an initiative, a thesis, or a theory, or a passion, that something important, new, is going to happen. And I do want to tell you, since we're doing big, bold things--these companies can fail. Even whole initiatives can fail. And that's okay with our limited partners. They have a number of managers and venture investors, and they'd like us to swing for the stands. Let me say one other thing. Of these 18 or so senior partners that we have, four of them are alumni of the Graduate School of Business. I applied, I've audited courses, but I didn't quite make the bar get in. I want to focus on IT. Not so much on BT, or ET. And it's because, as the dean said, You and we are extraordinarily fortunate to live where we are. This is Ground Zero. Within 20-30 miles of here is most of the world's innovation. And most of the technologies that have changed the world. It's really remarkable. And I can't imagine Silicon Valley without Stanford University.
There have been three huge waves, I think, in the information technology innovations during our lifetimes. The first was when Intel popularized the microchip in the 1980s. And we saw it as the personal computer era. Companies like Microsoft and Apple Computer grew out of that. 15 years later, in 1995, we embarked on the Second Great Wave. And that was the internet. And it led to companies ranging from Netscape to Amazon.com. And I want you to know, through the worldwide economy, most leaders and most businesses were terrified. They could not understand what it is that that internet would do to their businesses. Coincidentally, run the clock forward 15 years further, to 2010. And there's a third huge revolution underway. And it's driven by mobile devices, by the special properties of social networks, combined often with those devices, and the transition to the cloud. And we've seen leaders emerge, like a Facebook and a LinkedIn. I've highlighted here some of the companies that we're investing in in those areas. The combination of mobile and social and cloud coming together is like three tsunamis converging. So their effect is multiplicative--not additive. And that's why I think there's such extraordinary opportunity.
Look at the trends just here in mobility. I want to start with the growth of the iPod from the first quarter it was launched, the first device that made Apple a mobile computer company. Compare that, if you will, to what happened with the iPhone.
That's the iPhone relative growth compared to the iPod in the beginning. And now layer on top of that, if you will, the iPad.
And look at that growth, relative to the other two. What's happened at Apple Computers--remember, there was no iPhone six years ago, in 2007. There was no app store five years ago, in 2008, at this time. There was no iPad three years ago. And in those three innovations, Apple has created a new business, several new businesses that are running at $100bn a year of revenues. 100bn a year of new businesses. It's quite extraordinary. And so the company today is worth $400bn. And one of the four horsemen that are really setting the pace for innovation. And of course, it doesn't stop there.
If we go from Cupertino to Mountain View, and visit our friends at Google--that's the growth of iPhones, right? Look at the growth of Androids in the same quarters.
So there's something really extraordinary going on that's creating enormous opportunities in, around mobility. But mobility is not the only story.
Another powerful one is social networks. Eight years ago, there was no Facebook. Today, Facebook has 1.2bn users. 500mn of them use it every day. And what that's allowed entrepreneurs to do, is to reimagine and reinvent the web. Every application, every service, is now being recreated in the form of mobile and social. So we're moving from the old web of documents and websites, to the new web, based on people and places. From documents and websites to people and places. And it's having a quite extraordinary effect.
If you look at the companies that just in the last few years, that are reimagining and reinventing the web.
Back then, newspaper was the way we got our information. Today, it's Twitter, with real time reporting and graphics.
Back then, we used magazines. Today, these are social magazines, and moving very rapidly, to be a rich way to get to the most valuable stuff on the web. I'm citing Flipboard.
Look at Path. Back then, it was diaries. Today, it's really intimate sharing of frequent moments in a truly personal, truly social network, not just a gathering of your acquaintances.
Next one, Coursera. Somebody asked about re-envisioning higher education. And competitors. We're quickly moving from this world of lectures and rote conversations to where that material is online and you can educate kids in a blended academy or get the world's best universities available any- and everywhere.
Traffic. We've gone from maps to social maps. Anybody here use Waze? Who has Waze on--okay, next slide. Haha.
Health. Digital health is a frontier that the nation, our country, desperately needs. Which is to use big data, use mobility, and use smarts and changed incentives to deal with the crisis in healthcare costs. And we're investors and a half dozen or so these companies, and very excited about what that can mean. Healthcare system. The single largest most screwed up part of the American economy.
There are important innovations underway in energy. The most efficient machine in the world in converting natural gas into electricity without burning it is Bloom Energy, in Bloom Boxes. They sold almost $400mn of those last year. They have a bigger backlog than that for the coming year. What I want to tell you about these, though, is they take a lot of capital, and they take a long time. They have entrenched incumbents. But the markets are enormous, and really ripe for innovation.
Here's energy innovation: how many people have seen or installed a smart thermostat from Nest? We're blown away by the results of this company. In just a year's time, they're more than 5x their revenue forecast. And who would have thought you could take an ugly old thermostat, reimagine, reinvent it, and then sell it at $300. It's quite extraordinary and disruptive.
There's another part of energy that really matters--about 15% of the world's energy is used in data centers. And what limits the performance of those mobile devices is the energy they consume. So we have a low power initiative that involves five breakthrough technologies that will do everything from taking us past Moore's law to delivering displays that are 10x more efficient. Very exciting work in that low power initiative.
And as another example of innovation, we're backing some entrepreneurs that have found a way--and you can buy it at Whole Foods now, in small quantities--to deliver chicken. It has none of the entrails, none of the diseases, none of the blood. It completely tastes like chicken, more protein from legumes, and it's lower cost, which has tremendous implications for the developed world. So look for Beyond Meat.
I want to transition from those if I can, for a moment, to a little bit of career advice, and then dive into these questions. The--if I could have the next slide, please. Thanks very much.
Here's what I did when I was making my career choices. I don't know if it's relevant or right for you, but I prioritized looking for a place and way that I could learn and grow, as opposed to just ordinary income and compensation. Next one, please.
I think it's really important to build a strong foundation of experiences. Many of you come to the school with some--or maybe you think enough of those. Others of you don't have very many of them. But I would try gaining experience in different fields.
Always, always network, okay. Everyday you want to do more networking. And I don't mean on Facebook. It's reaching out to people. I think one of the very best things about this school is not in the programs or in the classrooms, but it's in the networking you can do around the rest of the university and with the entrepreneurs and CEOs who come in and speak with you.
When you're looking for an opportunity, my choice was to try to get in on the ground floor of a very rapidly growing company, where it also thought it was well managed. In the dream scenarios where you're working for somebody you really think you can learn from, it's hard to get all those factors together. But rapid growth is going to create lots of opportunity, because to advance you don't have to climb over the back of someone else. Rapid growth tends to attract other really great executives, and you'll strengthen your network.
I think they'll come a time, probably, not certainly, where you're gonna decide I want to swing for the stands: I want to found a company, I want to be a cofounder of a company, I want to run my own show. For those of you working in the private sector--I believe that's also for entrepreneurs working in the social sector--you don't have to do that right away. There's always going to be a demand for outstanding leadership. On the other hand, I don't want to discourage you. If you happen to be the next Mark Zuckerberg, I'd like to meet you right after this conversation.
I think, across all these factors, one of the most important things you can look for is the culture of the place you're going to join. Culture really matters. Culture has to do with values.
And in my years in the Valley, I've seen--there's companies with really--cultures that appeal to me, and others that do not. I don't want to make a judgement about these, but just have you be tuned up for them. My partner, Randy Komisar, wrote a book--he teaches over at the engineering school--called The Monk and the Riddle. Great book for your read about Lenny, in his startup venture, funerals.com. But he contrasts the difference between mercenaries and missionaries.
And the difference is really very profound.
The mercenary cultures are quite driven. And paranoia is kind of at the heart of what drives them. I would frequently have arguments with Andy Grove--Andy would say, Only the Paranoid Survive. And I'd say, Hey Andy, paranoia is a disease state. That may not be the best way to motivate. Because instead of paranoia, you can have passion for what you're doing. Paranoia pushes you forward, passion draws you into an opportunity.
It's the difference between opportunistic and being strategic, or the difference between mercenaries and missionaries.
It's the difference between the pitch and the deal, or forming a real partnership. This difference can be seen in the time view that you have.
Is this venture on a sprint to go build the next Instagram as fast as we can? Are we going to take a very long view, the way Jeff Bezos does at Amazon.com? I'm not judging one or the other is right or wrong, but it's an important dimension.
Are you going to obsess on the competition or obsess on the customers?
Are you going to set up the culture so there's a kind of aristocracy of the founders who really call all the shots? Or do you want a meritocracy--we can get all the ideas on the table, have the best ideas win.
It's the difference between focusing on the financial statements or the value statements.
I think it's the difference between whether or not you're in a culture where there's a lot of loners and you're on your own or there's a real emphasis on mentoring, on coaching, so that the whole team gets better.
I think it's a difference between an attitude of entitlement, which I find unappealing, or the Hewlett Packard idea that people go there, they make a contribution, it's recognized. That makes everybody more effective.
In Randy's book, he calls it to the difference between the deferred life plan and a whole life. One that really works.
My take on this is it's a difference between a lust for making money, and a lust for making meaning, as well as money.
And any entrepreneur that comes to tell us that they're not interested in making money, these are the enterprise for-profit entrepreneurs, I usually don't believe them. But I think you can achieve success and significance, not just focus on success, by choosing what it is that you choose to do.
Here's my last thought on this topic. Anything that you want to do of consequence, I believe you're going to do with others. And what this school is all about is helping you grow and be more capable as a leader.
Ideas--I worship at the altar of ideas. Innovation--I'm a junkie for it. And I'm sure you're attracted to it as well.
But ideas are, relatively speaking, easy. It's execution that's everything. The difference between Sun Microsystems and Apollo was how they executed. The difference between Facebook and MySpace was how they executed. And it takes a team to execute well. These three ideas--that ideas are relatively easy but important, execution is everything, it takes a team to win.
You want to figure out how to be a very effective member of a high performance team. And then lead a team of your own to enable them and empower them. And that I daresay is gonna be the most valuable thing you'll take from your time here at the Stanford Business School.
I think this would be a good time to throw a few more questions up on the board, and then I'm gonna work on answering some of them. So if we can pull the mics out again, whoever gets the first mic I'm gonna call on. Yes, sir, it's you, and then up there.
Q&A Section #2
Student: Hi, John. I'm Dan, I'm a Sloan alumni. My question is about what you see the opportunity in enterprise software and enterprise infrastructure. Do you think it's a biggest next thing.
John Doerr: Yep. I'm going to put that under Next Big Things. Enterprise opportunity. Another question, please. Name. Topic.
Student: Hi, thanks. My name is Elad, I'm a first year MBA student. You said in your slides before that focus not on competition, but focus on your customers. Now, in technological innovation, you sometimes enter a field with lots of existing intellectual property and existing patents and lots of hurdles to innovate and--how would you recommend an entrepreneur entering saturated field, but still with a passion to disrupt--to handle these issues?
John Doerr: I'm gonna put that under startups entering saturated field. Couple more. Who has a mic? Up there. Thank you.
Student: Hi, I'm Jasper. I'm a first year MBA. I'm curious--what are some spaces and opportunities that you're excited about now that you have no idea whether you'll be able to make money doing?
John Doerr: Okay. New spaces that may be nonprofit? Who else?
Student: I'm Alex, I'm a first year MBA. My question is a bit similar, but, if you're an MBA right now, where would you be focusing on?
John Doerr: All right. MBA now. I didn't come here to talk about it, but are there any questions about Kleiner Perkins? If so, I want to not overlook that. Yes, sir.
Student: Hi, I'm Tom. I'm a second year MBA. I'm curious what your thoughts are about startup markets in the US outside of Silicon Valley. So New York, LA, and so on.
John Doerr: Okay. Next to the Valley. Yes, sir?
Student: Hi, John. I'm [Ricard], MBA II, from Mexico City. I'm curious on what your thoughts are on the proliferation of startups outside of the US, going a little bit deeper into that.
John Doerr: Okay. Startups outside the US. One more, and then maybe I'll dive into some of these. Who else has a mic? Yes, up top.
Student: Hi, John. My name is Dhruv Boddupalli, I'm a joint MD/MBA. So my question is about Kleiner's strategy in healthcare that's not just biotech. I know you're very large in medical devices, but it doesn't seem like that's as much a focus right now. Your thoughts on that industry.
John Doerr: Where did I put healthcare? There was another healthcare topic. Oh, therapeutics. So that's a Kleiner question, really. What's KP's healthcare strategy?
Let me--if you can--ask you to hold the questions. And I'm going to tick through some of these that we didn't cover before. I think we're gonna have time to come back for more.
So I talked about the value of--my experience, anyway, at Intel. And then somebody asked me a really tough question, which is, what would be my advice to an MBA now.
And I think the place where I'd start is to recommend that you go to a field, first that you believe is attractive, but secondly, where you have technical expertise, some kind of technology expertise. And that doesn't mean you got to go get a degree in engineering or computer science, if you don't have one. But if I had decided that I was really interested in the technology of hybrid seed breeding, I would find, while I'm here, one or two courses outside the school, and audit those or take those for credit. Because you are also at one of the great scientific and engineering institutions of the world. And I've worked to network in that way. Because I think innovation in technology is a great disrupter. That doesn't mean you've got to pursue seed breeding as a career for the rest of your life, but I must tell you--all the CEOs that I know or startup executives who are trying to lead and run technology companies, and who can't program, or don't have some grounding in the technology--they regret that. So that'd be one piece of advice.
The second thing is--I would, as I said before, network like crazy. I hate to say this with the dean here, but I don't think your grades at Stanford Business School matter. What matters is going to be the--of course they're important--but I think the quality of the networks and your hunger for learning and figure out how you're going to make a difference in the world is, I believe, more important than those.
Is there any third advice? Okay, so this is out of the professional domain. But I am convinced, without doubt, and it goes without saying, that the most important decision you'll make during, say your 20s, is who it is that you would choose to spend the rest of your life with. So don't give that short shrift. Don't wait until you're 30 to figure out who you may marry. Because you might find yourself running out of time by that time, and end up choosing whoever it is you happen to be with. There's a wonderful author who has just put out a book on this topic called The Defining Decade. And her name is Meg Jay. And I won't say anything more about that. But those would be three of the top things on my agenda. And price, the number jar, I have that covered, so forgive me.
Let's go to the next big thing. Enterprise opportunities in new spaces. There's a revolution underway. That's almost as big as mobile. And that's the move to cloud computing. And enterprises initially resisted this. And now they're embracing it. The estimates are that we're going to go from zero cloud revenues, which is when Amazon Web Services started here. A few years ago, we held a reception with Jeff Bezos, to $270bn by 2020. That's an enormous--just services. That's an enormous shift in how computing is done. So I think the cloud, fundamentally for economic reasons, is going to transform how we compute around the world. And that has consequences in terms of the architectures for cloud computing, the software--systems are now being built to scale horizontally in services, as opposed to go vertically. And the opportunities ahead are fantastic.
I have a couple--actually, three partners at Kleiner who focus on this--sorry, three and a half, including Mike Abbott, who is the guy who went to Twitter two years ago when the fail whale was always coming up--do you know what I mean? And he did two remarkable things.
The most impressive was: in 18 months time, he personally recruited 300 top engineers in the toughest recruiting market in the world, which is San Francisco. And then he organized those engineers to stand up that service. So it's scaled as they've gotten 150mn even more users without going down. We took a bet on him. That's when we invested--when he arrived. And I think it illustrates the power of those cloud technologies. And also something else I said, which is the new currency is engineers--they are what are very dear.
And I think that's true whether it's in computer science, or whether it's in life sciences, or whether it's in energy innovation, which goes back to my recommendation to you, which is: Don't be afraid of technology. If you're not an engineering technologist, dive in there, audit those courses, figure out the publications you want to read. Bill Gates graduated from Harvard without a degree at all, and he self taught himself to be an expert in vaccines. You can do this.
What are the new spaces, the big wide open ones that we're looking for, anyway. I'm not going to tell you about all those, but there are some we talk about. And every year, we go off and we look out three to five or more years in the future. Our partner Bill Joy sees even further than the rest of us--he looks around corners. But in each of the areas that we work in, for example, in healthcare technologies, we think it's possible now to build very targeted therapeutics with something we call a tiger team, where our venture doesn't go through the long expensive clinical trials, but takes a technology right up to that point, and then sells it in a very novel way to a large pharmaceutical company. That's exciting.
So, as I said already, is digital health.
In the area of energy innovations, my particular passion is batteries. It sounds pedestrian, but storage is the holy grail. If we could, together, make a battery that had 3x the energy density of today's batteries, that would mean it will weigh 1/3 as much and cost 1/3 as much. And if that was the case, electric vehicles, without subsidy, would be cheaper than gasoline vehicles. Think of that. We've backed four battery companies--some of them look promising. I don't know if any of them are going to work, but it's showtime, we're gonna figure out in the next year or two.
I think the biggest opportunities though, are in and around the digital technology, the mobile and the web. And you can just see hints of what those transformations are when you hang around Google or read the technology press. How many have been in a self driving car? It's an extraordinary experience. It really is. And what that will mean for the productivity of people who are wasting time in traffic, the fuel that's wasted, the dollars they have tied up in cars as opposed to typing in on your smartphone, like it outside your apartment or dorm room and it appears, the safety--35,000 people in the United States die in traffic accidents--the congestion on the roads. God bless Larry Page... and Sergey. He's got a great big vision.
We believe that these wearable devices, whether they're smart bands, or Google glasses or gathering more data... watches are going to be quite big. There's gonna be a big opportunity there. In many cases, I think they'll take the place of the smartphone that you carry around with you.
I'm particularly passionate about innovations in education. I think the second largest, most screwed up part of the American, and the worldwide economy, is public education. And in particular, and about 20% of those skills, in schools in our country, we are killing the kids. They do literally design where they're going to put prisons around the neighborhoods where the academic performance is terrible. Bill Gates says every life ought to be created equal--I think every kid ought to have an opportunity to a great education.
And I've been working in this field with a Stanford GSB Ed School alumnus, Kim Smith, to create a venture fund called the New Schools Venture Fund, and encourage entrepreneurs, and fund them. And I think only now can we begin to see something that will scale very quickly. You see it in Khan Academy, which has over 5mn daily users taking their courses. And we know by studies, advancing a lot further. You see it in Coursera. Coursera is 11 months old. They now have 2.5mn students who've signed up for 3.5mn courses that come from 58 universities, with a course catalog of I think it's something like 300 offerings. And they have good competition also in this field.
So finally, I think one of the last bastions resistant to change--the education system, once dominated by teachers unions, or higher ed, which as the benefits of tenure, are extraordinary. I remember when John Hennessy called me about Coursera. And I said, So John, why are you excited about this? And he said, You know what? The community college model in the United States is broken. Their business model is broken. They can't get enough really great faculty, they can't get great curriculum. But if you can take the mainstream, or even the specialty courses, and offer that to US community colleges, that's a great deal of good. And I haven't said anything about education global either.
Okay, payments and NFC. I confess: I should know more about this than I do. I think there's very little doubt we can all agree that these devices: this Android, which has NFC in it, are going to become our mobile wallet. These are amazing things. They're broadband, they're connected. They're always on, they know who you are, they know where you are. It's your diary, it's your entertainment, it's your wallet, it's your identity. But I remember talking to Steve about this, from the point of view of Apple. He just didn't believe in NFC. And he didn't actually believe in trying to create a digital wallet until you could put everything in it. Your driver's license, your social security card. So payments wasn't enough for him.
Fortunately, I'm really proud we were able to back Jack Dorsey in his company, Square, where my partner Mary Meeker is on the board. And they took a particular part of the unserved payment system, which is very small merchants, and said, We're going to sweep through there with an innovation, and then partner with large retailers like Starbucks to transform the purchase experience. So how many of you use Square on a smartphone?
Okay, so maybe 30% of us. With Square on your smartphone, you walk into Starbucks, and you just tell them what you want. And it's never run up. It identifies who you are, it concludes the transaction, it gives the retailer the history of what you bought before. And I think that will spread. It will spread rapidly, but not explosively. I think change in that behavior takes time. Mobile payments is a really big deal. And probably there'll be multiple winners.
Let's go to venture capital for a moment. This notion about it takes $25mn to start a VC fund--as I said before, No, I think it takes 25mn of losses to train a good venture capitalist. Which is to say the business that we work in is one with risk, and there are failures. Most ventures fail--as measured by they're not in business five years after you invest in them. So at least for my partnership, the way we work is we try to find, in any given fund, several ventures that we'll deliver 10x or 30x or 50x, and those will cover for the losses of of other ventures.
And you live in an extraordinary place. This is the only place in the world that I know where it's okay to fail, and you can change your job without even changing where you park your car. I mean it's very, very special to the culture and economy of this place.
The long feedback cycles are incredibly frustrating. What I will say is, the long feedback cycles in venture capital, in backing a team--what I will tell you is: along the way, you can measure project progress. Andy Grove says if you don't measure, it doesn't matter. And I'm definitely of that religion. You can have ventures that'll lay out goals by audience, by revenue, by technical progress. And talk to your partners about how that's going.
At Kleiner, every quarter, we have a very detailed operational review. Sometimes there's not much to it, because we're trying to build a breakthrough battery. But other times, it's what's the audience now, for Path? How engaged are the Path users in using this service? What is their engagement rate? How do the cohorts stay engaged or not? So I think lots of things about the business can be measured.
But the average to a return--they call them exits--I don't like that word--but to liquidity--is going to be on the order of 5-6 years. It was five years after we invested in Google that it became a public company. It'll be 13 years after we invested in Bloom Energy, that it'll be a bigger than a billion dollar profitable energy provider.
Somebody asked who my favorite CEOs were. And without ranking them in any particular order: Of course I think the one we all miss the most is Steve. But Jeff Bezos is extraordinary for the clarity of his vision, his commitment to the long term, and his willingness to experiment and innovate. I'm a big fan, as you can imagine, of Larry and Sergey and Eric Schmidt. What those three guys did, when they welcomed--or those two founders did when they welcomed Eric into their team--in the next decade, they built, from nothing, a quarter billion dollars of value in technology companies. And through that period of time, our hope was that Larry would be ready to take over from Eric, which turned out to be the case. Great team, great CEOs, their founder. I really admire Jack Dorsey. Here's a guy who was the founder of Twitter and the Founder of Square. Incredible sense of taste. Some people say that Elon Musk is going to be the next great CEO. It's extraordinary what he's done, right? He founded a successful solar company that's public, a successful car company that is public. Those are two great big green wins. And along his way, built a spaceship company. So there's something going on there that's quite important. Who else? Who else who else thinks there's a great CEO out there who you admire? Just put your hand in the air and call it out. I'm not gonna get any takers here? Come on. Yeah.
Student: Pat Romano.
John Doerr: Pat Romano. Okay. Any others? Yep.
Student: Marc Benioff.
John Doerr: Marc Benioff. I think Marc's fantastic. Among the new generation of CEOs, I'm a huge fan of Mike McCue over at Flipboard. And Dave Morin is one of the younger CEOs that we've backed, at Path. I'd watch these companies; I think they're going to do very well. Hey, Tony Fadell, who built Nest company, he did the iPod before that. Favorite CEOs, disruptors.
What do you do if you're going to be in a venture that's got saturated competition? Lots of entrenched competitors. Do you then obsess on the competition instead of on the customer? I'd suggest No. I'd suggest you do something else. The best way to build a great company is to find a large underserved market, or a displacement market, that exists. So, now, if the Google guys followed my advice, they wouldn't have built yet another search engine.
Here's the point. They had a really disruptive technology: the PageRank system, that they were running out of their dorm room at Stanford. And it was growing so rapidly that Stanford decided they were gonna throw them off campus. It was a real load on the networks. So they went down University Avenue to the office above the ice cream parlor, and the rest is history. But I really think there's wisdom in this--Jeff Bezos says this: I'm gonna obsess on my customers, not my competition. Because if I serve those customers better than the competitors, I'm gonna win.
Jeff's very disciplined in his communications. You'll notice the only words that come out of his mouth, the only thing you'll find on an Amazon press release are customer benefits. If it doesn't convey a customer benefit, don't say it. That's all that matters. I remember when I first met Jeff. His--he was going to build the world's most customer centric company. That was his goal. And I think, to large measure, he's achieved it.
Payments. Natural gas. A word or two about natural gas. This is a big disrupter. Nobody forecasted this. And if I can be a red blooded, patriotic American citizen right now, it's a very good thing for our economy. I think it's going to mean manufacturing comes back. It's a very good thing for our climate. The greenhouse gas emissions from an equivalent unit of energy are about half what they'd be from coal. It means we're not building new coal fired power plants. It advantages some of the investments we've made and disadvantages others of them. You'll be happy to know we haven't invested in any coal fired power plants. But Bloom Energy--great advantage in having cheap, reliable natural gas for a long period of time.
What's the role for venture capital in these kinds of innovations? Look, we've we've learned some lessons along the way. We started investing in green energy in 2007, I think. And some of the projects were capital intensive. And of those projects, some of them I wish we didn't do. We made mistakes. But others that are capital intensive, like Bloom Energy, I think they're going to be huge winners.
So remember that slide I put up at the end: ideas are easy, execution's everything, it takes teams to win? The great difference between the successful ventures and the not successful ones, in green, whether or not they're capital intensive, is how they execute. Elon Musk executed with Tesla incredibly well, in a capital intensive car company. It's worth $4bn today. So execution is everything.
Nonetheless, I think if you're going to invest as a venture capitalist in this field, you better pick the low capital projects. And you better build a broad base of investors and get strategic alliances to help get to the market. These are incredibly large markets. It just takes time to get there. Time and smarts.
This is the personal one. That was mostly hot stock tips. And to the question, what I think was up there, was, So John, what's your financial forecast for sectors of the economy? I don't know. I'm not gonna be able help with that.
The dinner with the President. What was the advice to the President that came? Not so much for me, but all the executives who are around the table, who included Carol Bartz and Larry Schmidt, Mark Zuckerberg and Steve Jobs. We put Mark on the right of Steve. I asked him to not wear sandals. And on his left was Steve. And it was a very free ranging conversation with an incredibly bright leader of the country. As I recall, Art Levinson argued for changing the regimen for approving drugs based on the new molecular understanding that we have of diseases with the FDA having slowed up. Let's see. Reed Hastings made some impassioned arguments in favor of public education. Larry Ellison--he went on a real tear around immigration. This whole idea that we ought to staple a green card to the deployments of foreign nationals who are educated, and the difficulty, the craziness that we'll have foreign nationals come to our great universities and then tell them they have to leave? I mean, what kind of national strategy is that? I think there were themes that you would know about and resonate with. What was impressive is that he came here to learn about technology, and not to do any fundraising. Came for dinner, and then went up to the Pacific Northwest.
The Jobs Act is something that came out of the President's Jobs Council. And Steve Case deserves enormous credit for driving that through Congress in a bipartisan way. In a Congress that really didn't do anything. There's three components of that. The first that I really cared about was reforms and how you go public so you're not subject to the withering criticism that a Groupon, for example, had to endure. Now you can file, not have all that information be public until you decide you're really going to go out for an offering. They also changed some of the overreaches, I believe, from the Spitzer era, around disclosure and analysts. There's a couple of other parts of the Jobs Act that it's going to remain to see what happens. There's people who are predicting there'll be a lot of abuses when any entrepreneur can raise a million dollars off the web, essentially.
But here's what I believe: our country ought to have more entrepreneurs. We ought to have more capital that can get to entrepreneurs. And more innovation. So I'm glad this act was passed, and I think any corrections that need to be made can be done on a regulatory basis.
We're coming quickly to the close of our time. So I think what I'd like to do is ask for three more questions. Just those three, and I'll try to answer them right after you pose them. You got a mic there. Thank you.
Student: Hi, my name is Josiah. I'm a second year MBA. You mentioned, and you showed us the growth of smartphones and then tablets. I'd be interested in your thoughts on what you think the next screen's gonna be, and how far behind we are in terms of that next growth trajectory for that specific screen, whether it's home television, Google Nest--
John Doerr: So, I think the next great screen is going to be the second screen in the living room. And Apple does not yet own the living room. Neither does Comcast. We've backed some entrepreneurs who hope to build services in advance of those screens coming out. Maybe they're going to be Android tablets. I don't know. But I think that's the most important next screen.
If your question was about the screen display itself, there's this company called Luxview that's figured out a way--did you know 90% of the power that goes into a screen today is wasted? There's this backlit emitting device, and it goes through all kinds of filters. Well, if instead, you have a technology that can put down tiny LEDs, two of them per pixel, and they directly emit the light, you get 10x greater brightness out of that device, and is flexible, it can fold, so you can see it vividly out of doors. That's what Luxview is making, and building. And it'll transform the biggest source of power consumption in the devices. Thank you.
Student: Hi, John. I'm Lance, I'm a PhD student here. And I'm curious to know what you guys aren't interested in, either because you think there's been over investment or because the impact of technology is overstated.
John Doerr: Hm. That's a good question. We're not interested in the next relatively inconsequential, anonymous social dating site that will allow you to get laid before you get to the end of palm drive. We've ruled those out. We can't do everything.
So, there are some venture firms that are focusing on, for example, retail technologies. There are venture firms that are investing broadly in diagnostic devices, which we did, at a period of time, and we've stopped investing in. We're generally not investing in new new hardware. But Nest to be a counterexample. Whatever rules I tell you, I want to tell you, are just guidelines.
The key to my business is, every year, we receive 3000 proposals from entrepreneurs. We read them all. We take probably 500 meetings with entrepreneurs out of those 3000. And the first thing we read, by the way, is the back of the proposal. Look at the resumes. We take 500 or so first meetings. Those will result in 100 second meetings. And in the end, we'll make 30 new investments per year over those three groups that I'm talking about. So, we're pretty picky.
We measure ourselves on how many of the investments we see that our competitors have made. We do a six month retrospective; there's half a dozen competitors we pay attention to. We are seeing right around 50% of the investments our competitors make, and our goal is to drive that to greater than 60. It's been improving about 10% a year. Then we measure how often we think we make the right decision. I'm not going to reveal that number haha. But I will tell you, when we decide to compete for an investment, we measure that, and we win 80% of the time. So we're not trying to work on that ratio so much as coverage and better decision making.
I'd like to close with two thoughts.
The first is that for those of you who would someday like to be in the venture capital business, my advice is Get really meaningful, successful entrepreneur experience first. I really recommend that. Because it's going to help you serve the entrepreneurs you're working with, it's going to help your judgment, it's going to help you compete, to win the opportunity to advise them. You can't buy a position on a board of directors, you want to earn the opportunity to do that because you can hopefully add some value to what the entrepreneur is going to do. And together you can make new mistakes instead of affecting the mistakes of the past.
My second thought is, There's never been a better time than now to start a new company or to be part of a startup. It may or may not work in your career, but this explosion of technologies that I describe, the fact that the market of Internet users is a billion people, I kind of pinch myself and can't believe I'm alive at this time, working in this place, with the really great opportunities that we have.
So here's the deal. If you would like a copy of these slides, I'd like you to send me a mail message to jdoerr@kpcb.com with your three favorite books. And I'll send you the slides and three of my favorite books.
Before I sign off, I want to tell you the three that I've read recently and that I'm enjoying a lot. The first is Al Gore's The Future--a very unpretentious name--where he's describing six global drivers of change, and it's really worth reading, maybe a chapter at a time. A second is this book I already mentioned called The Defining Decade, by Meg Jay. It's not written for me--it's written for 20-somethings. And then the third, if I can promote it, is a Sheryl Sandberg book that just came out today called Lean In, which is about women, work, and the will to lead.
Thank you very much for the time. I look forward to hearing from you.
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Wrap-up
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