One venture capitalist wrote a personal check for $30,000 to invest in Uber and is now looking at a current return worth more than most of us will earn in our lifetimes. Another led early stage funding rounds for 11 technology companies that all became worth over $1 billion. A third made his name by being one of the first backers of two tiny firms named Google and Facebook. All three appeared on stage at a major venture capital conference in San Francisco yesterday and they had plenty to say about the state of the high-risk, high-reward tech startup world these days, including a view of whether there’s a bubble brewing in tech and where the best future investments will be.
The three investors – Alfred Lin (Sequoia Capital), Vinod Khosla (Khosla Ventures), and John Doerr (Kleiner Perkins) – appeared separately during the second annual Post-Seed Conference, a gathering organized by Bullpen Capital, Venture51, and Vator. And the attendees, most of whom were budding tech entrepreneurs seeking to make the more difficult jump from initial seed funding for their companies to larger “Series A” rounds, heard generally positive news.
“It’s easier to start a company than ever before,” said Doerr, who was a very early backer of Facebook and Google. “It takes less capital.”
According to Doerr, Kleiner Perkins has made over 30 early stage or “Series A” investments in the past two years because, as he put it, “That’s where you can make a difference.”
He said that he and his partners look for a set of core hallmarks among any of the companies they fund, including strategic focus on a really large market and a sense of urgency to quickly capture it.
Curiously, when asked by Bullpen Capital’s Paul Martino about which areas he’s especially interested in funding, Doerr declined to name green technology even though he was cited this week in press reports as an investor in the Breakthrough Energy Coalition being spearheaded by Microsoft co-founder Bill Gates.
Instead Doerr said that he is enthusiastic about finding ways to use technology to reform the health care system in the U.S., starting with hospitals who he believes don’t even know what health care truly costs. “The health care system is a monster opportunity,” said Doerr.
Another top venture capitalist who also sounded optimistic was Sequoia Capital’s Lin, who disagreed with recent statements from entrepreneur Mark Cuban that continued investment by the private market will lead to the collapse of a number of technology firms. “People investing in technology today have a longer term view,” said Lin, which he believes will avoid the kind of panic the industry experienced during the “dot com” meltdown nearly fifteen years ago.
The legendary investor was even sanguine when asked about one of the biggest “misses” in venture capital when his firm declined to fund a new company with a plan to disrupt the limousine and taxicab industry. “That was a big failure on our part,” Lin admitted when recalling the pitch to his partners by Uber, although he personally invested $30,000 in the company which today has a current estimated valuation of over $70 billion.
“Uber has been able to go into markets where others have been dominant and out execute them,” said Lin.
The Sequoia Capital partner was cagey about where he saw the potential for future investment, although he did hint that the app world offered potential for a game-changing new model. Lin asked, “How do you create a mobile distribution network that is more powerful than the current system?”
Khosla did not dispute Bambi Francisco of Vator during Post-Seed when she cited a report in her conversation with him that at least 11 of the companies his venture firm has backed achieved valuations over $1 billion. He is the second largest shareholder in the micro-payments company Square that just went public, but he was more interested in talking about the future of machine learning.
“The impact of machine learning will be greater on society than mobile,” said Khosla.
The co-founder of Sun Microsystems created some controversy last year when he wrote in a blog post for Forbes Magazine that if machines can rapidly expand their human-like capabilities, then “many, and even a majority” of human functions will be replaced.
According to Khosla, this is why major players such as Google are making big investments in machine learning. Last month, the search giant announced their own new machine learning system called “TensorFlow.”
He also raised the possibility that advances in autonomous cars may result in a much cheaper form of transportation that could ultimately replace urban mass transit. “We might see the death of most public transportation,” said Khosla.
At one point during yesterday’s event, Doerr told that gathering that he “worshipped at the altar of ideas and innovation.” Later in the day, Khosla described how “investors have only two emotions: fear and greed.” As the second annual Post-Seed Conference showed, the art of the deal in venture capital is to combine the best of both worlds and ultimately make an awful lot of money.