John Doerr: The five criteria of great Series A investments

At Post Seed, Kleiner Perkins VC spells out the five things he seeks before backing a company

Today we're hosting our second annual Post Seed (#postseedconf) event at Ruby Skye in San Francisco to discuss the world of entrepreneurship and venture capital. We're specifically curious to explore what the industry needs to know about the new gap between the seed stage and the Series A investment.

Paul Martino (General Partner at Bullpen Capital) kicked off the event in a fireside chat with John Doerr, the venture capital legend who has served at Kleiner Perkins Caufield & Byers (KPCB) since 1980.

At one point, in a discussion of KPCB's affinity for Series A investments, Doerr shared with the audience the five criteria he uses to distinguish really great ventures from the so-so ones.

1. Technical excellence

This is probably a given in Silicon Valley today. Any startup looking to move past its seed stage and pitching for a Series A investment needs to have a rock-solid product and engineering team.

2. Outstanding leadership

Doerr made sure to point out that this is different than "technical excellence." A technical leader is great for cultivating a strong engineering team, but you also need someone who can focus on operations, culture, and leading the business overall.

3. Strategic focus on a really large market

It makes sense that KPCB, one of the famous fixtures of Sand Hill Road, doesn't care for bite-size opportunities. Rather, Doerr and his colleagues look for companies that want to have a huge impact on the world. "Most of all, we get turned on by the passion and vission of entrepreneurs who see the world differently," said Doerr.

4. Reasonable finances

There is such a thing as companies that have raised too much money. Ventures looking for a Series A at Kleiner Perkins need to have the right balance of fundraising and revenue numbers.

5. Sense of urgency

Going hand in hand with #3, Doerr says he looks for entrepreneurs who not only see a big market for their venture, but also understand how urgently they must act to capitalize on that market.

The five criteria were developed, according to Doerr, by him and his fellow partners at Kleiner Perkins by looking back at their prior Series A investments. No ventures will possess all of the criteria, noted Doerr, but you need some of them to be a great company.

To the five criteria, Doerr also added one bonus point.

When a venture or entrepreneur has met several of the above yardsticks, then Doerr asks himself an important question about that entrepreneur: "Do I want to get in trouble with her or him? Because I know we’re going to get in trouble together."

The relationship of trust between investor and entrepreneur is immensely important, says Doerr, because he wants to know they have each other's backs. That way they'll be unafraid to go forward and "try to make new mistakes."