Kleiner Perkins goes big: VC firm raising more than $1 billion
Kleiner Perkins Caufield & Byers got all sorts of attention last week for its $250 million sFund — including from yours truly — but that just scratches the surface of the venture capital firm's fundraising ambitions.
Context & Ripple Effects
Kleiner Perkins spent October 2010 repositioning around the social web before this raise: on October 12 the firm confirmed harvesting over $100 million from DeNA's acquisition of ngmoco, its portfolio company, and by October 21 it had launched the $250 million sFund alongside Amazon, Facebook, Zynga, Comcast and Liberty Media at Facebook's Palo Alto headquarters.
The more-than-$1-billion vehicle now being raised dwarfs that thematic fund and marks a sharp reversal from November 2007, when Kleiner Perkins had halted investments in Web 2.0 startups as the sector fell out of favor with VCs. Three years later the same firm is putting strategic corporate money and a nine-figure fund behind social applications.
First-order effects
- Limited partners face a second Kleiner Perkins commitment window within weeks — the $250 million sFund with its five corporate backers, and now a general fund of more than $1 billion on top of it.
- Kleiner Perkins gains the balance sheet to lead large rounds across both its social-application mandate and its broader early-stage practice, rather than relying on exits like the DeNA acquisition to replenish deployable capital.
Second-order effects
- Rival venture firms competing for social-web deals now bid against a fund whose syndicate includes Facebook, Zynga, Amazon and Comcast — portfolio companies get distribution and platform access alongside capital, raising the bar for plain-money offers.
- The corporate participants in the sFund blur the line between strategic investor and financial backer, pressuring other platforms to attach themselves to branded venture vehicles to keep deal flow visible.
Third-order effects
- If brand-name firms keep layering thematic funds on top of billion-dollar general funds, venture capital consolidates around a small set of mega-platforms with attached corporate syndicates, thinning the field for mid-sized independent funds.
- A firm publicly exiting a sector in 2007 and anchoring a nine-figure social fund by late 2010 shows how quickly VC sector allocation swings — a cyclicality that pushes founders to time raises against fund-formation waves rather than steady-state availability.
The trend: Venture capital is concentrating into ever-larger flagship funds at marquee firms, increasingly paired with corporate-backed thematic vehicles aimed at single platform shifts.