Lab Rats, Stealth Companies, & the Merits of Strong Competitors

The SJ Mercury has a full transcript of an interesting interview with John Doerr, Brook Byers and Ray Lane of uber-VC firm Kleiner, Perkins, Caufield & Byers. There are many good bits, including this paean to the joys of stealth companies:

Q: The venture capital survey shows a decline in VC investing (in the third quarter), but some suggest one reason may be artificial: Start-ups are trying to stay under the radar longer and not announcing their VC funding.

Doerr: The entrepreneurs want it that way. Ten years ago, as soon as a venture was funded by a reputable venture capitalist, within six months, two or three clone ventures would be launched like heat-seeking missiles right up their tailpipe. People got wise to that. Why should we say anything about what we’re doing until we have happy customers, and we’re ready to try to expand and grow our market? You see many more entrepreneurs wanting to remain in stealth mode for a long, long time. The smart ones, anyway.

Lane: It’s worse than that. By talking too early, they produce weak competitors. The worst thing you can have is weak competitors. A strong competitor is actually good for you in an early market, because it helps build the market. A weak competitor, it turns off a client. The client says, “”I don’t get it,” because they’re not able to put it across. It’s not good for that original idea.

Q: Wouldn’t announcing to the world draw good employees?

Doerr: They can do that while being in stealth. People like joining stealth projects.

And just in case you thought the billionaires at KPCB sit around and wait for the best deals to come their way, they don’t:

Q: Is there anything else you’re doing differently?

Lane: One of the things we decided to do is invest even more time with research universities. So whether it’s my involvement with Carnegie Mellon, or Brooks’ with UCSF or John’s with Stanford…

Byers: Right after this meeting I’m going up to UCSF and visiting labs, prowling labs, that’s the best part of this job.

Doerr: You’re a lab rat…

Q: Doing what exactly?

Byers: Going to visit principal investigators in different labs. I’ve been doing this for more than 20 years. So I know a lot of them.

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