How Kleiner Perkins Almost Blew Its Best Investment Since Google
The investment that could be Kleiner Perkins's greatest success since Google almost never was. — At the Web 2.0 conference in San Francisco last week, KP partner John Doerr said that “Zynga is the largest, most rapidly growing …
Context & Ripple Effects
Kleiner Perkins's return to the consumer web has been fast and deliberate: after the firm famously halted its Web 2.0 investing in late 2007, it came back in October 2010 with a $250 million sFund aimed squarely at social entrepreneurs. John Doerr's remarks at last week's Web 2.0 conference complete that arc — he called Zynga the largest and most rapidly growing company of its kind and framed the firm's stake there as its best investment since Google, while conceding the deal nearly never happened.
That near-miss matters because it shows how narrow the firm's margin of re-entry was: three years after stepping away from the category, its comeback thesis now rests on a deal it almost passed on, validated publicly by the same partner who drove its original franchise bets.
First-order effects
- Doerr's public ranking of Zynga above every Kleiner bet since Google puts the firm's credibility behind social gaming at exactly the moment the sFund needs flagship proof points to attract entrepreneurs and limited partners.
- Zynga gains fundraising leverage: an endorsement this explicit from Kleiner's most famous partner signals that top-tier capital sees the company as a generational asset, strengthening its hand in any future financing.
Second-order effects
- Rival firms reading Doerr's framing will bid harder for the next wave of social-web deals, pushing valuations up across the category the sFund was built to serve — Kleiner's own vehicle may end up paying the inflated prices its endorsement helps create.
- The admission that Kleiner almost passed invites other investors who hesitated on social gaming to re-underwrite the sector rather than cede it, widening competition for the scarce breakout companies in it.
Third-order effects
- If the pattern holds — great franchises nearly missed by firms that once defined their categories — expect more dedicated vehicles like the sFund, built to force conviction in a single theme rather than rely on individual partners spotting the next Google.
- The episode feeds a broader concentration dynamic in which a handful of brand-name firms compete for a small set of winner-take-most social companies, with public partner endorsements becoming part of the contest for deal flow.
The trend: Blue-chip venture firms are rebuilding consumer-web exposure through dedicated thematic funds after their post-2007 retreat, with social gaming as the proving ground.