John Doerr nearly relinquished his crown. The famed king of Silicon Valley's venture capital community led early investments in Netscape, Amazon.com (AMZN), and Google (GOOG), building a global reputation as the oracle of the consumer Internet. Over the last decade, however, Doerr and his firm took a detour into clean technology, loudly warning about the risks of climate change while making huge bets on renewable energy companies. Although Kleiner Perkins Caufield & Byers backed hot social gaming company Zynga and started the $200 million iFund for iPhone developers in late 2008, rival VC firms found Facebook and Twitter, which are quickly becoming the new dominant players on the Valley scene.
Now Doerr is back to fund the next round of consumer Web startups, and perhaps reclaim his legacy. As of press time on Oct. 20, he was scheduled to appear at the offices of Facebook in Palo Alto, Calif., on Oct. 21 to unveil a new $250 million investment fund, called the sFund, aimed at backing the kinds of hot social startups that connect people online to their friends in new ways.
Although Kleiner will provide much of the $250million, Amazon, Facebook, and Zynga are also anchor investors in the fund and promise to work with the entrepreneurs that Kleiner backs, in the same way Apple (AAPL) provides special access to the developers who receive money from the iFund. Jeff Bezos, Mark Zuckerberg, and Zynga CEO Mark Pincus were expected to join Doerr at the event. Comcast (CMCSA) and the investment bank Allen & Co. will also invest.
"Social is obviously already big, but here is a group of people who think they can goose it to a whole new level," says Bing Gordon, a Kleiner Perkins partner and former executive at video game company Electronic Arts (ERTS) who will administer the sFund with help from Doerr and others at Kleiner Perkins. "The primary goal of the sFund is not to create the next Facebook. It's to support companies that make this new user behavior more productive."
Kleiner's return to the world of consumer Internet investing may be a hedge of sorts. Over the last decade, the firm has plunged hundreds of millions into renewable energy companies like MiaSolé, a thin-film solar panel startup, and Bloom Energy, a fuel cell firm. Those companies now look like anything but sure bets. They face uphill battles against heavily subsidized Chinese greentech firms, at the same time the price of oil has retreated from stratospheric highs.
Another cloud looming over Kleiner's cleantech position is California's Proposition 23, which would override a 2006 global warming law and suspend the state's emission reduction targets. The ballot measure, backed by Big Oil, could decimate some of Kleiner's energy startups. Doerr and his wife, Ann, have contributed some $2 million to fighting it, according to campaign finance records. "Kleiner is very long-term focused and they understand politics, so I wouldn't be surprised if [Prop. 23] played a part" in the creation of the sFund, says Mark G. Heesen, president of the National Venture Capital Assn. Heesen adds: "Folks like John Doerr understand social media is no longer a U.S. phenomenon. There is a huge potential market here."
Gordon disputes the notion that the sFund is a hedge, and says that green technology is still "one of the great macro investment categories of the decade, maybe of the century." He also says that with the sFund, Doerr is simply doing what he does best: connecting unlikely allies, like Mark Zuckerberg and Jeff Bezos, and aligning them behind a common goal. "John is the ultimate partnership builder," Gordon says. "If you want to think big, you want to have John Doerr in the room."
The bottom line: As its cleantech investments struggle, Kleiner Perkins is starting a $250 million fund to invest in the social Web.