Transcript: John Doerr at Post Seed 2015

Mitos Suson · January 5, 2016 · Short URL:

Legendary Silicon Valley VC talks early-stage VC strategy with Paul Martino of Bullpen Capital

At Post Seed 2015, hosted by Bullpen CapitalVator and Venture 51John Doerr, General Partner of Kleiner Perkins, sat down with Paul Martino (Bullpen Capital) for a Fireside Chat. See full transcript below.

Fireside Chat with John Doerr (Kleiner Perkins) & Paul Martino (Bullpen Capital) 

[Introductory music]

Martino: John, again, thank you for being here and as someone said, it really is a pleasure to interview you ten years after you invested in the company. It’s nice to do the round trip. And so, let’s kind of cut right to it. As you saw in the opening remarks, this is really all about this whole change that’s happened in the past ten years in the venture ecosystem. So --

Doerr: It’s actually pretty remarkable to be here at nine in the morning. Usually --

Martino: [laughs]

Doerr: Usually, I get here at nine at night.

Martino: Right, right.

Doerr: For one concert.

Martino: I can picture you partying here.  

Doerr: So tell me about who’s out here. How many of us are entrepreneurs? Okay, and of the entrepreneurs, how many have raised seed investment? Okay. And how many of us are looking for Series A? All right.

Martino: Yeah, gives you an idea.

Doerr: Yeah.

Martino: And, you know, one of the things that’s been interesting about Kleiner Perkins, you guys stayed true to being in the early stage. To some extent, many funds, due to the fund size requirements, went later and later and Kleiner stayed seed Series A and has done it for the past ten years. So tell me a little bit about the decision to kind of stay true to the roots.  

Doerr: So, you are where you’re born. You can’t choose your parents. It’s hard to change who you really are and so, Kleiner, for four decades now, has been a Series A investor, primarily a Series A investor. And things change in the venture industry, I’m sure we’re going to talk about that, but we’re a couple dozen investing professionals. If you give me a moment, I want to – seven of them are in the audience here with us this morning --

Martino: Wow, great.

Doerr: -- to show our level of commitment. There is Anjney, who’s one of the leaders of our edge fund, Shabih, who ran the Playstore at Google for Socio. There’s MZ, who is an entrepreneur, Y-combinator alum, graduated from there. Others that I know are going to be here as they get through the traffic are Swati – John Maeda’s here, as an example of the services we provide. John Maeda, would you put your hand in the air? He was the president of RISD, a great guy in design, best design blog on technology. Christina Lee heads our marketing services effort and I think Ruby and Roneil are going to be here. Is that right, Anjney? Are they here now? Yeah.

So look, stayed true to Series A. Over the course of just the last two years, we’ve made 30 Series A investments.

Martino: Great.

Doerr: And we do that because that’s where you can make the most difference. You can serve the entrepreneurs the best, you can earn the highest returns and you can match the skills to your team. Every one of my venture partners has been an entrepreneur. They’ve started technology companies. They’ve started companies that have failed. And so, that’s why we’re in Series A.

Martino: Now, you’ve also added things. Mary Meeker runs the growth fund, obviously been in the news with what Bambi mentioned with Square. Tell me what it was like bringing on such a completely different practice even though you’ve been a traditional Series A fund?

Doerr: Right. So the secret here is I’ve tried to recruit Mary Meeker for a couple of decades.

Martino: Right.

Doerr: Ever since she really set herself apart as somebody who can see big waves and big trends. And the venture industry, as you know well, Paul, is changing. It’s easier to start a company now than ever before. Takes less capital, the markers are larger. Entrepreneurs are staying private longer. But they still have the needs to grow their teams and get more capital along the way. So we said -- if we’re very selective; if we’re very careful, if we choose the Lending Clubs and the Squares and the Ubers honestly, and also the Twitters, at the right place in their development, we can earn really healthy returns for our limited partners, and most important of all, help these entrepreneurs build companies and you make a big difference.

Martino: Right. Now, tell us about some of the other offerings. You mentioned the design service, which is very interesting, but you’ve done the S-fund and the I-fund, you now have the edge fund, you know, if I’m an entrepreneur in the audience and I want to know what Kleiner Perkins offers, give me the cheat sheet.

Doerr: So, we believe that at every stage that you’re building a company, from seed through Series A, through Series B, through these growth rounds and going public successfully, that Kleiner can help. Mary Meeker’s an expert in how a company can successfully go public. One of the initiatives I’m most excited about is something we call “edge”. And so, for those of you who do not have seed funding, edge is a different kind of seed fund. It’s not these crossover funds that are discovery funds where the partners who are trying to make venture investments and growth investments are also trying to make seed investments.

That may work out, but what we believe is that by focusing, by having three seed entrepreneurs, whose only job is to find the best seed investment and focusing on where we think there is really monster market opportunities in particular fields, and then, helping these companies even write code, build tools along the way, that you can be a very successful seed investor. And that’s what our edge fund is about. It’s led by Anjney, by Ruby and by Roneil, and each of them is a proven entrepreneur or product manager and since we’ve formed that fund about six months ago, we’ve made seven seed commitments. They are on the website at kpcbedge.

Martino: That’s great. One of them, right, is FRC’s Dorm Room Fund, that seems like a great experience.

Doerr: Anjney started the Dorm Room Fund. Roneil is an expert in block chain, he started a venture in that field and Ruby is an awesome product manager, refugee from Google.

Martino: You used that word “discovery fund” in a prior answer and I must say, having been involved as an adviser to some of those over the years, I feel like the results have been pretty mixed when the big funds have done that discovery fund. So, edge is going to be different than discovery? What are maybe some of the lessons learned from some of those discovery fund to try and avoid?

Doerr: Well, I haven’t been at discovery fund so I can’t comment about that. What I can say is that the edge partners are online every day, they have office hours every day. They’ve developed an app, you can download the app from the App Store to communicate with the edge partners, Kleiner partners in general. They have lots of meetups, lots of recruiting, quick decisions, one meeting, got a $100,000 check for whatever works.

Martino: I think that model is interesting. I would say, a question I get more than almost any other question from an entrepreneur coming into our office at Bullpen is, “Paul, you know, I have a chance to get a $100,00 from Greylocke’s discovery fund. I get a chance for $100,000 from the now, edge fund. Boy, is there a real signaling risk if those guys don’t support me in the next round?” I’d say I get that question more than any other question. 

Doerr: Perfect. So let’s hit that square on. There are signaling risks in everything. There’re signaling risks from seed to Series A, there are signaling risks from A to B, from B to C, and I just say, “Handle it.” [laughs] Everybody’s really clear that edge is an independent fund. It makes independent decisions and Kleiner Venture has got a fight to win the opportunity to invest in the best of the edge ventures. And that’s what we do. We get up every day and we network and hustle and try to make really good choices and then, fight really hard to win.

Martino: Let’s switch gears a little bit and talk a bit about the world that we’re on the side of. I’m on the dark side with you now, right, the investor side, right?

Doerr: But you’ve been an entrepreneur.

Martino: Right.

Doerr: You’ve seen both sides now.

Martino: I appreciate pointing that out because there are now 300 of these micro-funds, of which we’re one of, and boy, the world is really different. Most of the people who run those funds are former entrepreneurs, came up in a different way, so how about you come in a little bit about how the GPs are different over the last ten years?

Doerr: GPs of venture funds or micro-funds?

Martino: Yeah, all over the map. It seems like there’s almost two different kinds of GPs now.

Doerr: There are two kinds of GPs. One kind is what I’m going to call the MBA consultant type. And those are people who generally, not universally, have never had a real job, have never had to hire people, make a payroll, fire people. They’re typically not technical and many of them are very successful investors. I don’t want to take a thing away from them in that regard. But the other model is the Kleiner model where there was Eugene Kleiner, who was at the Shockley Transistor lab when they invented it.

Martino: Yeah.

Doerr: Or Eric Feng or Wen Hsieh who just joined us as new GPs at Kleiner. These are technical people who’ve been entrepreneurs who built companies that have been – Eric was like employee number two at Hulu. Wen Hsieh has incubated three different companies. And so, they’ve been in the shoes that you are in. They’ve had to fight to hire a team. They’ve had to make hard calls. And that’s the kind of person that I, as an entrepreneur, would want to have on my board, somebody’s who’s not going to panic easily, who’s been there through tough times and is going to understand what I’m going through.

Martino: So, with the vast number of options that are now available to entrepreneurs, the Kickstarters, the Y-combinators, friends, families, accelerators, it’s a great time to –

Doerr: Crowdfunding.

Martino: Crowdfunding. It’s a great time to be an entrepreneur.

Doerr: Never been a better time than now.

Martino: Has that changed the founders who come into your office ten years later?

Doerr: Sure it has. Yeah it has. The founders are younger, they’re more technical, they’re more knowledgeable. They’re less experienced.

Martino: They’re less experienced, interesting.

Doerr: And sometimes, they have a world view that’s not grounded in the essentials of building a business as opposed to, I’m going to say, playing the game, you know?

Martino: Right. Yeah, no, I definitely can pick up on that theme a little bit. It seems like sometimes, the demo days and the education camps teach you a little bit too much about the game and not enough about how hard it is to really hire and fire, you know, what’s it like to miss payroll? Those are the days when you learn how to be an entrepreneur.

Doerr: I remember there’s a company I started and we missed our revenues and so, we were running out of cash. And so, we had a choice. We got together as a team, are we going to lay-off people on our team? What we chose to do is everybody took a voluntary salary reduction in exchange for more equity in the startup and we worked our way through that difficult time. I’m not saying that’s always the right answer, but I think it’s hard to start a new company and I don’t think you learn how to be an entrepreneur at an accelerator.

Martino: Yeah.

Doerr: I think you are an entrepreneur or you’re not. You can learn the language of entrepreneurship, you can learn the processes and the steps, but this ability to see the world differently than it is, this ability to do more than anyone thinks is possible with less than anyone thinks is possible, that’s my definition of an entrepreneur -- does more than anyone thinks is possible with less than anyone thinks is possible. That’s shaped by who you are, who your models and mentors are, how you grew up and your passion and your dream for the world.

Martino: One of the best compliments I got form one our portfolio CEOs said something to the effect of, “You know, Martino, you went through a tough day in your last company and you had to layoff half the people, that’s the advice I want on my board if I ever had that tough day.” And, you know, you can’t learn that. You know, I’m a 30-year old CEO, you got to layoff half the company and half the people who work for you are twice your age. That’s a tough day and you got to know what to do.

Doerr: Yeah. By analogy, can you learn about the business from business schools?

Martino: Right.

Doerr: No way.

Martino: Right.

Doerr: No way. The only way to learn about business is by doing business and the most that a business school can do for you is teach you the language of business so then maybe you can learn a little faster when you get out there.

Martino: Right. Great. Well, post seed is really what the focus of this conference is all about and it’s a very specific stage. If you saw some of the comments in the brief opening, there’s a real gap between the milestones required for the A and the seed. To some extent, this stage didn’t even exist a few years ago, that’s how rapidly the ecosystem is changing. So, could you give us some thoughts on what it takes to get a Series A if you walk in the door to Kleiner Perkins?

Doerr: Sure. And I don’t just mean a Series A, but the partners, we got together a while ago and looked back at the prior period of Series A investments we had. The question was what distinguishes the really great ones from the ventures that are kind of so-so successful and we found five things. Now, no Series A is going to possess all these five but you’re going to want to have them in your development and to some degree, you’ll possess them.

So, the five are number one, technical excellence. Number two, outstanding leadership, different than technical excellence. Number three, strategic focus on a really large market. Number four, reasonable financing. And number five, a sense of urgency. Those five again are technical excellence, outstanding leadership, strategic focus on a large market, reasonable approach to financings, ventures can raise too much money as well as too little, let’s get that right. And then finally, an incredible sense of urgency because that’s what the startup possesses, that it’s larger, more established and competitors don’t.

When a venture or an entrepreneur, even a lone, small entrepreneur, understands those things and wants those things and possesses some of them, then, I add one other important criteria to the Series A. And Paul, I try to figure out early on in the conversation, do I want to get in trouble with her or him?

Martino: Right.

Doerr: Because I know, no matter – Jeff Bezos, Larry Page, Mark Andreessen, whoever it is, we are going to get in trouble together.

Martino: Yep.

Doerr: You want to have a relationship and trust. I want them to know that I’ve got their back and vice versa. And then, we can go into it with the attitude that we’ll try to make new mistakes, not repeat mistakes of the past. We can bring some of those scar tissue and wisdom, from you having started Aggregate Knowledge, from me having started Silicon Compilers or at-home networks or having watched Larry build Google to what – this is vital, crucial Series A is going to be about. Series A is a pivot point. It’s a turning point. You get A right and you can move on to B and C. You get A wrong and it’s really hard to recover.

Martino: Yeah, and I will say this, having been in the portfolio, when we had to completely change the business model of Aggregate Knowledge, Randy Komisar, who’s on the board, he went into the board meeting and he said to me something like, “I’ve never had a board meeting like that. We got to shut down the business and go do another, but you know what? I’m in it with you. You got six months to go figure this out. Let’s go do it.” There’s nothing better you can hear as an entrepreneur than, “I’ve got your back, let’s go solve the problem together.”

Doerr: Yeah. Let me tell you another story about a Series A investment for a stealth company, it’s the last Series A investment that I made. And the entrepreneur, she’s a refugee from Google, she bootstrapped her company, largely out of her credit cards and on-savings for several years. She got to the point where she had a couple of customers with a working product and a small team, a team of five people, and a huge vision from transforming the healthcare industry. And my partners learned about it, we talked to the customers, but we came to the view that this really could be a very important company, so those were the criteria. Technically excellent, recruited amazing people, a recruiting machine and so far, it’s looking good.

Martino: Some other funds that we work with at Bullpen are a little bit prescriptive about – you know, “Martino, don’t send us something unless they’re doing their first million dollars in revenue.” It sounds like that’s not part of the primary piece of the metrics you use. Are there any kind of useful, kind of guidepost for the entrepreneurs in the audience?

Doerr: Well, the chart you put up there I think is probably useful for consumer internet investments that are mobile. And I’ll be the first to say that mobile is the biggest technology revolution that we’ve seen, but it’s not all of entrepreneurship. Right? There’re people that are serving enterprises that are different numbers. There are people pioneering in the life sciences or in transforming the healthcare industry or making drones or augmented reality and visions.

The one thing that the partners and I are at Kleiner, I think you know this, is yeah, we got a point-of-view about the world, but we’re open for business, you know? We don’t presume that we’re smarter than entrepreneurs. We know we’re not. We want to be open to the best ideas that are out there.

Martino: Yeah, and actually in that spirit, Duncan Davis and I, we hadn’t quite figured out post-seed. Post-seed basically came out of a math problem. Mike Maples asked me to be his first partner at Floodgate and I started looking at math and I was like, “Well, wait a minute. If all these are over here,” it was kind of a knowledge style prediction that the Series A crunch –

Doerr: You’ve always been incredibly data-driven and I love that about entrepreneurs. We can do some more math. There’s a lot of talk lately about bubbles and booms and unicorns and all that and I think basic math is going to cause a crunch there also.

Martino: Right. There are inescapable realities to the math and one of the things we noticed, when we came in, we were actually talking to some of your partners before we started the fund. Ted Schlein was the guy who got it. I mean he literally stood up in the meeting and said something like, “You know, Martino, if this gap or this thing that didn’t have a name yet is as big as it is, if we don’t play there, if we aren’t in business before and after it, we’re just going to be the guys who have to pay up later.”

Doerr: Right.

Martino: And I just thought that was very perceptive on his part that he could look at that math and draw that kind of conclusion because I think a lot of other funds drew the opposite conclusion, which is, “No, that’s fine. You go babysit it for a while. I’ll pay more than I can actually put all the money in what I want to.”

Doerr: That’s not going to work. That’s an unidentifiable business proposition. Ted Schlein is an amazing guy. He’s an entrepreneur who I recruited to Symantec in the very – and he got him in the antivirus business, and since then, he’s incubated three different security companies. So, cybersecurity is an example, right? It doesn’t really fit that paradigm, but I’m not here to take a thing away from that. I do think that if you look at the numbers, consider the following: Google. Google has acquired a company a week, one company a week since 2010.

Martino: Wow.

Doerr: Google has only five times paid more than a billion dollars to acquire a company. There are 153 companies in the world right now, considered unicorns, worth more than a billion dollars. Most companies don’t go public. Most of them are acquired. How is that math going to work? 150 unicorns, 93 of them are in the United States and this data is courtesy of Forbes. They call them “Americorns”, if you will. All right? You would expect there’s going to be a great looming disaster there compared to the dot com bubble.

But at the time of the dot com bubble, there were only 400 million people on the internet. What are there now? Between two and three billion people on the internet? If you take the dollars that were invested at the height of the boom, and compare them to the dollars in venture capital today, there was more capital going into tech companies at the boom than there is right now. If you inflation adjust it, today’s dollars going into ventures are 1/3 of what they were at the height of the boom and the markets are so much bigger than they were before.

So I presented two different economic arguments here. One is these unicorns, they’re not going to get acquired and so, the investors that are paying these high prices are fools. The other side of the argument is the markets are so large, the dollars that are flowing in are not as large as they were before. I think the problem is in the hedge funds and the private investors who are bidding up companies to these unicorn valuations. And I want to say to you, as an entrepreneur, when you get there, having a billion-dollar valuation can really be a problem.

As Ted Schlein puts it, the unicorn is really an albatross and recruiting people, dealing with the inevitable down rounds, as you know, having built a company, is going to be a leadership and management problem.

Martino: Well, how do you feel that you, to some extent, are the grandfather of the term. Aileen Lee gets the credit for it, so it’s of your lineage.

Doerr: Well, look, Aileen Lee is brilliant, you know, and she’s observed this, she’s a great networker and marketer and I don’t think she’s responsible for the problem.

Martino: [laughs] That is certainly true. What a lot of entrepreneurs don’t understand is that these rounds that get done, they are quasi-dead rounds with massive liquidation preferences. They’re more like debt instruments than they are really price rounds.

Doerr: Yeah. In fact, the conversation that goes on is you, the entrepreneur, tells me the valuation. I, the investor, am going to tell you the terms. “I can pay a billion dollar valuation if you guarantee me I’ll get two times my money.” That’s what – if there’s any outcome at all. Go for clean terms. Let the market set the valuation. Get a competitive process going, but in the end, don’t choose your investor based on the valuation. Choose it based on the value that you believe you’re going to get by hiring that investor. It’s hard to fire them. It’s like hiring a vice president for your company. You agree?

Martino: Right. That’s absolutely right. You know, a lot of times, a first time CEO will say this, “Wow, I have a meeting at Kleiner Perkins. I have a meeting at Sequioa. I’m so excited that I’m going to meet John Doerr. I’m so excited that I’m going to meet Ted Schlein, pick a partner.”

Doerr: That’s --

Martino: Right. And so, what’s interesting though is I always kind of follow up that question with who are you meeting with? So, that’s great that John runs that firm and you’re going to get to meet him, but who’s going to be on your – who’s the person you got to call up on a Tuesday night when you lost your biggest customer and say, “Hey, what do I do about this?” So, the partner matters a lot more to some extent than the firm.

Doerr: Look, here’s why partners matter. Deep in the DNA of Kleiner, since Kleiner and Perkins and every one of the investing professionals I’ve told you about has been an entrepreneur before, they’re not necessarily been a CEO. Some have, many have, but I don’t think that’s what matters. What matters is they’ve been entrepreneurs. They’ve lived in your shoes. Well, you want them to serve you, to be service providers and so, as you’ve experienced, at the heart of it, we’re getting up every day and saying, “We don’t run these companies, we’re not setting the strategies. We understand them, but we, like Randy Komisar, are there to challenge your thinking, to support you in the directions you want to go.”

Whether or not you technically have founder control, the founder’s better be in charge. The CEO better be in charge of the business. Or you’ve got a really bad problem.

Martino: This operational excellence is definitely a topic that’s quite in vogue now. A lot of firms are really talking about, “I differentiate my firm because I’m going to infuse you with operational excellence.” You mentioned your design partner, but you’ve been doing this for 15 years. I met Julian Flynn back in 2005 and she had been there for years. So, you’ve been in this operational excellence infusing process and it seems like some funds feel like they just figured that out the last year. Tell me a bit about how that’s been ingrained in the process over the years?

Doerr: So, operational excellence at Kleiner Perkins came from Andy Grove, who I think is one of the best technology managers ever. He built Intel in this generation to be the best semiconductor company. Andy taught me a philosophy of empowering the people while holding them accountable, while making sure that your culture encourages risk-taking and it boil down to a really simple system that became a way of life in a language called OKRs. Anybody heard of OKRs out here? Yeah, right.

So, objectives and key results. I would love to give you, in some other setting, an update on objectives and key results, but here’s the deal. He ran Intel with it and taught me it, and so then, my partners and I took it to our companies, like Google. I showed it to Larry and Sergey when we were just a couple of dozen people around a ping-pong table on University Avenue above the ice cream store. Larry’s such a learner and observer. He had adopted it and to this day, every one of the 60,000 knowledge workers at Google has their OKRs prepared quarterly on their internal website graded. And Larry stands up in front of the company four times a year and shows his. And this gets alignment. People are only expected to get two thirds or 70% of them done. That’s a good grade. It’s okay to try and fail. What a powerful idea.

And so, let me close with this thought on operating excellence. I’m a junkie for technology. My partners are. We worship it at the altar of ideas and innovation. But relatively speaking, ideas are easy. It’s execution that’s everything. Ideas are easy, execution is everything. If you’re going to execute at scale, you need a team. You need a team to win. Ideas are easy, execution is everything. It takes a team to win. And that takes operating excellence. The famous coach Campbell, Bill Campbell said, “All that matters is we achieve operating excellence.”

Martino: That’s right. Yeah, and –

Doerr: And so, competing venture firms, they’re going to tack this on. Everybody’s going to talk the same language. You got to pay attention to who walks the talk. Interview these investors. Do reference checks on them. Find out how they behaved when the chips are down.

Martino: Absolutely right. So, tell me a little bit about – this is what I know less about. I’m familiar with some of the other services, but tell me a bit about the “Fellows program”? That seems like a kind of different way of –

Doerr: So, over the course of five years, we’ve said we would like to bring to the ventures that we’ve backed the best and brightest college students, for the summer before they graduate and ideally have them join your team. And so, over the course of five years, this program has grown and grown. So, we’ve had 3,000 applicants very year for 200 – how large is the class, Anjney? The latest class?

Anjney: It was 75.

Doerr: 75 in the latest class. Cube 200, we’ve been this very patiently over time and 95% of these interns go to work at the Kleiner company that they were introduced to. It’s a source of talent that no small company could mount and it becomes a network. It’s kind of like a Y-combinator network of 20-something, amazing women and men in design, in product and in engineering, the “Kleiner Fellows Program,” harder to get into that than it is to get into Harvard.

Martino: How do you apply?

Doerr: Well, there’s an open season, you send your application in and then interestingly, the entrepreneurs, the companies choose who they want to be part of this network that we organize.

Martino: I got one or two more and then, we’re going to open it up for the audience to get a couple of questions for you, John. Over the past ten years, kind of this time frame that I really kind of put in my head as when venture really changed, the lean thing kind of started. I give Koppelman credit for the guy who kind of really figured out, “Wow, it’s cheap to start a company. I need to do something different.”

Doerr: Yeah, and Jeff Bezos who made it possible with AWS. AWS is a game changer.

Martino: Right. It’s amazing because –

Doerr: It’s amazing that they don’t have real competition yet. It’s coming.

Martino: Azure tries and Rackspace has tried, but –

Doerr: It’s coming. Don’t count Google out.

Martino: Between ’05 and ’10, you took a zero off and between ’10 and ’15, you took another zero off. It’s really kind of amazing. So, in that ten years of massive innovation, what were some of the things – we talked a lot about the innovative programs you’ve put in place, etcetera – what are some of the things you got a little bit wrong?

Doerr: So, one of the things we started was a pandemic and bio-defense fund. And our limited partners at Kleiner have encouraged us to start new funds. And honestly, we led wonderful scientific innovations, but not high returns. And so, you have to couple the two of those. Another thing we started that I’m very proud that my partners did was the iFund. I’m reaching in my pocket here – that’s not it. There’s another one.

Martino: You carry two or three?

Doerr: This is the original iPhone. How many people remember the original iPhone? Released in 2007, you can see the signatures of the designers on the back of it.

Martino: Tony Fidel right there, yeah.

Doerr: With no App Store. Steve Jobs did not want the iPhone polluted with the applications of third parties and re-released the iPhone, the OS, three times to counteract the people who have jailbroken it. But Steve was nothing if not open to changing his mind, and when he saw the pent-up demand for this as a platform, and we pushed him, Kleiner Perkins did, we launched something called the iFund at a time when [indiscernible 00:30:49] believed mobile applications were a joke. Most of the first ones were games.

Our limited partners at Kleiner really wanted us to conduct those kinds of experiments, to try to be bold and different. And you better innovate because the venture industry is changing. It’s changing every day.

Martino: So, give me a prediction in the next ten years. What are some spaces and what’s going to happen to venture over the next ten years?

Doerr: I think venture will be ever more specialized in terms of services. Obviously, I believe in division of venture is all about service, not about money. And I think the fundamental rate of scientific innovation is going to continue, with the exception of Moore’s Law. Moore’s Law will come to an end and we’ll have to innovate with other architectural features, but we’re no longer going to be able to count on 40% more dense – every two years, doubling the density of transistors. We’re cutting it in half.

That’s been an underlying reality that we’ve kind of taken for granted. Moore’s Law will come to an end. Metcalfe’s Law will continue. The value of networks will be the square of the number of connected devices. Everybody will be connected online. Internet will be ubiquitous, from balloons and satellites. Augmented reality will be the important new user interface, not virtual reality. Virtual reality will be important but will it be as important as a mouse?

Martino: For a guy with vertigo, I’m glad to hear that.

Doerr: Yup. And on and on and on. And by the way, I’m probably wrong about a number of those things so there’ll be many more.

Martino: What’s the one category that’s got you super – it’s my last question, what’s the one category that you’re really itching for right now?

Doerr: As my partners know, I’m interested in helping entrepreneurs achieve really big change. If we’re going to do something, let’s do something big, not small. In the online ad market globally is how big right now, Paul? $600 billion maybe?

Martino: Yeah, half a trillion, for sure.

Doerr: Half a trillion dollars. Healthcare in the United States of America alone is $3 trillion. It’s five times bigger than the global online advertising marketplace where all this value and wealth has been created. In fact, if healthcare in the US was its own country, it’d be the fifth largest country in the world. Only in the United States itself, Germany and Japan and China would be bigger than US healthcare, which is bigger than all the economic opportunity activity in France.

Now, let’s talk about the US healthcare system. Who knows what the healthcare procedure really costs? Show hands please. One person. Do you think the people who run hospitals in the country know what healthcare procedures really cost? No, they don’t. Their goal is to fill all the beds in the hospital. The patients, the providers, and the peers in the US healthcare system are not linked in any rational economic market, just like before Google, the advertisers and the consumers and the people who created the ads had no transparency, no accountability and the overwhelming power of big data and page rank brought that to online ads, which took off as a consequence.

I believe entrepreneurs and innovators are going to go right into the belly of the US healthcare system. The oceans of money that flows through this, and they’re going to transform it, like we did online ads. And that’ll be a good thing. So, the healthcare system is a monster opportunity. Equally, or maybe more screwed up, is public education, right? And so, those are two fields that excite me, but most of all, my partners and I get turned on by the passion and vision of the entrepreneurs who see the world differently than anyone else, including us and our job is to help them.

Martino: Great. Well, John, with that, let’s get one or two questions from the audience. We have a mic out there, anybody want to grab a question?

[inaudible voice]

Martino: On this side, anybody got one? This side? I can’t believe you got John Doerr up here and we got no questions for him. There we go. You’re up.

Doerr: Thanks.

Audience 1: Hi, my name is Raul Snod. And –

Doerr: What company are you with?

Audience 1: I’m with a company called TestLoop. We’re doing city-to-city transportation in Teslas and I’m curious as to your thoughts on the influence of both electric and autonomous technology for vehicles.

Doerr: Yeah, I’m really glad you brought that up. I think those are monster changes. You know, we’re investors in Uber, so we get to see – and I can’t really reveal their financial statements, but they are growing bigger, faster than any company I’ve ever seen before. I think you know the companies we’ve seen. Uber will – I think they’ve said they’ll deliver three million rides today and they don’t own any cars or any drivers. Transportation is in for an enormous change, whether they’re self-driving in cars, whether it’s electrification.

You didn’t ask me what the biggest technical breakthrough I think will be. And that’ll be batteries that are three times better than today’s batteries. When you can achieve three times the energy density of a battery improvement in one or two years, suddenly, electric vehicles are going to be as cheap as internal combustion vehicles. In India, this is a really exciting development. And so transportation as a service, the connected car, the car is the second largest expenditure in a household, after the home itself. I think that it rivals healthcare. 

Martino: One more question and we’re done. There you go.

Audience 2: Hi. [inaudible 00:36:45] Friedman from Genentech.

Doerr: I can’t quite hear you. Can you pull the mic up or --? Perfect.

Audience 2: Pull the whole thing up.

Doerr: You’re name is? Genentech. Yeah. Love Genentech.

Audience 2: My question is about cyber security. You talked about that in the Series A context, what the targets are? I know a number of people that face that. So the way I describe it is maybe same kind of metrics, but one round behind in terms of more product development, but also, more mature buying ecosystem in terms of valuation support for the companies. Do you think that’s a fair sort of overall way to think about it than with your metrics for seed where you might able to get funding without a product, whereas classically, you need to have some revenue? Series A might be one round behind in terms of what targets would be required in the cybersecurity space.

Doerr: I think in -- cyber security is incredibly a hot, specialized field and I do not believe you need a product to get a Series A investment. But you need some measure of credibility. For example, you’ve done it before, or you’re in partnership with customers who’ve got a huge problem. It’s an area that Kleiner has specialized in, Edgeline in particular, and I think you’re very wise to point out that it’s different than consumer internet or enterprise SASS kinds of applications.

I know you’re going to cut us off in just a second. I wish you didn’t and we can have some more time –

Martino: You get the final word.

Doerr: If the speaker gets the final word, I’d say if you have questions on topics we didn’t get to cover, please send them to me and my partners will handle them. My mail is And of course, if you’re looking for funding, I’d love for you to talk to us about it. I’m going to close with one of my favorite things to do which is to recommend books and I wonder how many people have read “The Martian”? A show of hands in the air.

This is like my favorite science fiction book, written by a programmer in Mountain View, now a major motion picture. If you’ll send me mail with your two or three favorite books, I’ll tell you more of mine.

Martino: Well, John, a real pleasure.

Doerr: It’s a pleasure to be here.

Martino: Thank you very much for your time today, I appreciate it.

[audience claps]



Editor's Note: Our annual Vator Splash Health 2016 conference is around the corner on February 23, 2016 at Kaiser Theater in Oakland. Speakers include Helmy Eltoukhy, PhD (Founder & CEO, Guardant Health), Ryan Howard (Founder & Chairman of the Board, Practice Fusion), Sonny Vu (CEO & Founder,Misfit Wearables), Lynne Chou (Partner, Kleiner Perkins) and more. Join us! REGISTER HERE.

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Mitos Suson

I produce Vator Events and enjoy the challenge. I am learning and growing a lot, being involved with Vator and loving every moment of it!

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