Although it’s recently lost a little bit of its illustrious shine, VC firm Kleiner Perkins (KPCB) remains a top dog among Silicon Valley’s elite financiers.
Its co-founder Eugene Kleiner belongs to Silicon Valley legend, as one of the so-called “Traitorous Eight” famously considered to have launched the whole silicon thing in the first place.
Kleiner is remembered for stellar investment returns (KPCB was an early investor in Compaq, Lotus, Sun Microsystems, and AOL) and his maxims, which are often called Kleiner’s Laws.
You’ve probably heard some of them, such as “There is a time when panic is the appropriate response”, “Risk upfront, out early”, or “The problem with most companies is they don’t know the business they’re in.”
All these maxims could have been picked for this week’s quote, but we went with the one on available money because it’s less quoted and has a rich history. Apparently, Kleiner initially didn’t remember having said it, though he later confirmed he adhered to it.
In his book “The Silicon Boys: And Their Valley Of Dreams “, David Kaplan tells the First Law story, which led to the first biotech IPO in US history.
Genentech, a company in which KPCB had invested a few hundred thousand dollars from its debut $8 million fund, went public with a bang almost 40 years ago to the day, on October 14, 1980. The stock traded so high on the first day that it was called “one of the most spectacular market debuts in recent history.” Genentech was valued at over $500 million, bringing the value of KPCB’s shares to $70 million.
As crazy as it seems today, at the time public markets did not welcome biotech companies. Genentech’s Founder & CEO Bob Swanson was reluctant to go public. It meant more scrutiny from the regulator, potential leaks of the IP, a lot more work for him, and he wasn’t convinced of the timing and potential outcome.
It took a relentless Perkins and – maybe – this quote from Kleiner to convince Swanson to go for it. And the rest is history, as they say.
🗣 What do you think of this maxim? What are the pros and cons of raising equity when it’s available even if you don’t need it?
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🔗 More about Kleiner Perkins and Silicon Valley in David Kaplan’s book; a full account of the Genentech story can also be found here