The Man Who Bankrolled Silicon Valley

Eric Ellis, Palo Alto

10/04/1997

John Doerr says the Net is under-hyped. His view counts because he has raised more money than anyone else to back the high-tech successes that have become pivotal to the US economy

"We have witnessed the biggest legal creation of wealth in history . . . Regrettably, the only thing in recent years that has generated anything equating what has happened here is the recreational narcotics industry in our cities . . . We are building a new economy, there's no doubt about that."

The Man With the Big Vision is John Doerr, a 46-year-old engineer-by-training who is as well known in Silicon Valley as Bill Gates - but not nearly as despised.

Hyperactive Doerr is America's most successful venture capitalist. His dealmaking diary reads like a computer geek magazine, seeding Compaq, Netscape, Intuit, Sun Microsystems, Lotus, Marimba, America Online and Amazon.com.

The total capitalisation of these firms is around $US100 billion ($139 billion) and, according to valley lore, the total investment is probably no more than $680 million to $1 billion over the years. Playing midwife to the industry, Doerr has been responsible for, and collected, a fair share of cash as well, as much as a third of that total capitalisation. Doerr's strength has been to stay ahead of fast-breaking trends. His early success came with Compaq and the development of what now is an industry basic - the personal computer. Then it was software companies like Sun, Intuit and Lotus. Now he is the midst of stage three; the Internet.

"I've been tracking the growth of the new Internet companies and they are already worth three times what the PC companies were at the relative stage. The Internet is way under-hyped. It's going to be at least three times bigger than the PC market."

If you want to gaze into the future, rifle through the papers on Doerr's desk at Kleiner Perkins Caulfield and Byers and see what projects this hotshop is planning to finance. The firm gets about 2,000 business plans a year, of which only about 20 get financed.

At the moment it's the life science sector - biotechnology and its derivatives - that Doerr is focusing on. But their track record almost guarantees success. Indeed, KPCB is a bit like the George Soros of tech. If the word is out that Doerr and partners have committed to a start-up, other people's money tends to roll in.

"We've been lucky - and we've been good," Doerr says. "Four out of five ventures that we back succeed." Sand Hill Rd has been popularly depicted as Silicon Valley's Wall Street, but types like Doerr would probably be put off by that description. If it wasn't the epicentre of the New Technology Universe, sunny Sand Hill Rd could pass for the main boulevard of an outer-suburban "country club estate". A golf club here, a shopping mall there, low-rise brick buildings set neatly in manicured lawns and "soccer moms" in "space wagons" to burn.

White and pleased with itself, Sand Hill Rd could be mistaken as the anchor of the fabled American Dream transported to the 1990s. But appearances are deceptive. Sand Hill Rd is more like the theatre of today's Masters of the Universe, if Tom Wolfe ever visits Silicon Valley.

That's not because of any lame parochialism but because Sand Hill Rd venture capitalists now back more deals and invest more money than their counterparts "back East". A more apt signpost to how money now flows to US entrepreneurs would be that Wall St has become New York's Sand Hill Rd.

"We haven't even begun yet," says Doerr. "Geographical diversification to me is opening an office in San Francisco," some 50km away. Clustered to the side of Sand Hill Rd's gentle undulations, adjacent to Stanford University, are about 50 venture capital firms, which so far this year have invested an estimated $11 billion in high-tech start-ups.

$7.5 billion was raised last year, then a record. Coopers & Lybrand says some 70 per cent of American venture investments this year and last went into technology companies.

Doerr is also making a name for himself as a political player, an arch-networker. He is the de facto front man for the so-called "Gore-Techies", a group of high-powered Silicon Valley players who meet monthly with Vice-President Al Gore and President Clinton to discuss the best way to marry the technological revolution with America's wider social and economic needs. A couple of weeks ago he co-hosted Clinton at the San Francisco home of Halsey Minor, the 32-year-old wunderkind behind Internet media outfit CNET.

Doerr was also the prime mover behind a well funded campaign to defeat a Republican-sponsored "referendum" in California that would have changed the law to enable investors to more easily sue entrepreneurs presiding over slumping share prices. Thanks to Doerr, it was defeated 70-30 last November.

The networking coalesces around Doerr and KPCB, thanks to a tight industry grouping of KPCB-funded companies he calls the "keiretsu", named for the Japanese cross-owned corporate families. KPCB encourages its funded companies to work with each other.

Thus the Netscape browser encourages use of the Excite search engine, both KPCB start-ups. Intuit sells its popular Quicken personal finance software through another KPCB-backed firm, Concentric, including a Netscape Navigator browser with the deal. The Navigator also pops up in another KPCB-funded start-up, Macromedia, which developed programs using the Java language of Sun, another child of KPCB.

Thus the marriages Doerr arranged with another group, called @Home, which enables Internet access through cable over telephone lines. Crucial in @Home's development has been Jim Clark, one of the brains behind Netscape, and John Malone of cable-TV giant TCI, which owns 75 per cent.

Doerr's keiretsu has a distinctly anti-Microsoft look about it - Sun, Netscape, America Online are all in industry standard battle with Bill Gates' software giant. But he dismisses the suggestion. "No-one is going to own the Internet - it's too big - so it's important that companies work together."

Doerr is adamant Silicon Valley is an American phenomenon. "I don't think this could've happened anywhere else. We have a phenomenal university system -Stanford, Berkeley, UCSF, UCLA - with real competition at every level, a tremendous asset and the bedrock of this community. We also have close collaboration with industry: it's OK for professors to have equity stakes in companies. It's a community of role models - entrepreneurship is praised here. It ought to happen in Australia."