BusinessWeek has an interview/visit with newly-single (in the partnership sense, not the marital one) venture guy Vinod Khosla. He maintains an office at Kleiner Perkins, but is no longer a partner in the current KP fund. While he is actively managing prior investments from earlier funds, most of his current investing is more eclectic — and early — stuff, the sort of thing that Khosla has always liked to do, but that becomes awfully difficult when you run as much money as KP does.
Anyway, I found the following investment stat interesting:
Over half his investments at KPCB from 1996 to 2001 were infusions of $1 million or less into barely formed startups. That period was a golden era for him, giving rise to such hits as optical networking company Juniper Networks, which returned KPCB’s invested capital over 1,000 times.
That is fascinating, and should be an eye-opener for most GPs who screen too many deals based on not being able to get in enough money on the first round.
Then again, I don’t want to single-handedly convince anyone to start a seed fund, as such stuff is different & difficult. Maybe I have nothing to worry about though: As one GP put it to me recently when I described our seed investment style here in San Diego, “You put as much as work into seed investments as you do into larger ones, but the management fee is lower and you have to make more investments & track more deals. Where’s the incentive?” Absolutely. Agreed. Stay away.