This is a transcript of the interview of Randy Komisar, partner at Kleiner Perkins, by Nima Adelkhani, on May 14, 2015 at The Startup Conference. You can also watch the video.
Thanks for making time. Appreciate you coming. Do you want to spend a minute just to talk about who is Randy and then we will jump into questions and we’ve had a couple of discussions around what we wanna talk about but want you introduce yourself.
Before coming to Kleiner Perkins I’m a serial entrepreneur.
I started numerous companies going back to Apple 1.0 in the mid 80’s, self founded a software company we span out of Apple called Claris corporation brought back by Apple I then helped, I was the CFO of another start up called GO corporation which we sold AT&T which was in the pen computing business then I was the CEO of Lucas Arts Entertainment with George for a number of years. And then went of run another game company called crystal dynamics and then I kind of stopped. And then I stopped for a while and created a new role in the valley virtual CEO where I would help manage a portfolio of business. Partnering with the founders not displacing them.
Helping to develop the founders as well. Well as the business. I did TiVo, Web Chat, a whole host of companies in the late 90s, wrote a book called The Monk and the Riddle which is a best seller and led me to start teaching at Stanford which I did for eight years. And then I did only Social ventures.
I did global giving and I did Mighty Light and a number of other social ventures, trying to experiment with bringing the venture capital model and mentor capital model into the social mission business. And then in 2005, I joined Kleiner Perkins to bring my virtual CEO model of mentoring and developing early stage talent and companies to the venture capital business.
And there, I’ve done companies like RPX in the patent space, Nest in the internet of thing space and a variety of host of others. Some really interesting man’s coming. So, that’s me.
I know that you left out you’re a lawyer
I was a lawyer. [LAUGH] Yeah, so when I graduated from college, I did a couple of things.
All at the same time. It was kinda fun. I dressed up in a suit in the morning with a tie and jacket and I go off and help run a community program for the city of Providence where I I did that until 5 o’clock at night. I take off the tie, keep the jacket on and go off and teach economic at a small college in the evenings.
And then around 9 o’clock at night, I take off the jacket and I re-promote rock concerts. And I re-promoted rock concerts for many many years which helped to bring Newport jazz back to Newport and And Rhode Island. It was actually a great time. I was having such a good time doing that, that I went to law school because I figured it could not be a profession or career if I was having such a good time.
So I went to law school, did my penance by having a really bad time and eventually worked myself out of law. I was already Litigator trial lawyer for a while eventually I was a lawyer for, I represented George Lukas in the sale big and that’s how I got introduced to the valley I was their and hired by Apple to come in and help and run their legal department and then I become an enterprenuer after that so. My legal career is way in the rearview mirror.
All right. Let’s talk about a couple of different things. Kleiner has been in the news recently, one of the things was around by acquiring the social capital, venture fund from Chamath. It strikes me as kind off odd a big firm acquiring a relatively other big fund. What was the larger goal, was the discussion internally like to spur this interest in acquiring another firm?
Yeah I would say we never really got to a point of thinking about acquiring.
I think we’ve always been fascinated with Chamath and Ted and the work they’re doing at social capital. They’re doing terrific work, they’re very mission driven like we are and they’ve got a fresh view of what’s going on in the industry that we’ve always liked. We co-invested with them in companies like Remind and Slack. And I think, John Doerr and Mary Meeker, partners of mine are also co-investors in their fund, so if we had a dialogue with them a long time.
I think we really admire them and had many discussions about where they thought the industry was going, where we thought the industry was going. But, mergers in the venture capital business, there’s not a lot of passion for them, they’re not easy to do, funds don’t serve acquiring funds, they partner.
And so I think those discussions led us to have a stronger bond as to how we can look at things in the future and join forces, which I think is the encouraging way to go.
Speaking of some of the investments So I looked us up, Google, Zynga, Waze, EA Sports, Snapchat, Spotify, Sun Cloud, Square, UBA, DocuSigns, Slack… I mean that’s pretty much half of the Unicorn Club, right, so your firm must be doing well?
Yes thank you.
And so on the flip side, for a while you guys were doing cleantech and a lot of stuff that didn’t turn out and we talked about this. Do you think it was just too early or was it too big, we talked about these micro-clean text projects, give us your thoughts on those investments and how it’s shifting and changing now.
So, first of all, I think our work in Cleantech/g was exactly what Venture Capital was supposed to do.
Venture Capital is supposed to go out and blaze new trails in areas that need capital to solve big problems. And clearly, there’s probably no bigger problem as on the planet right now. than those that relate to the environment and sustainability. So our interest and our commitment to try to find ways to use our network and our venture capital to come up with the right answers to those questions.
It’s exactly what I think the mission of a great venture capital firm is. I think that it was early in the sense that there’s still, I think it was the first wave. I think right now we’re seeing the second wave, I think we’re starting to see more rational investible opportunities in what I think about sustainability, not just green. I also think that we didn’t necessarily execute well. We started to invest in businesses where commodities were competitors and we weren’t really in the commodity business.
We invested in areas that required huge amounts of capital to take the risk out of the deal. That’s not the way venture capital works, we invest as little capital as possible early on to remove risk. Very long periods of times very large amounts of capital to remove risk in the cleanteach area.
As Nima talked about with Nest and with a number of others in the low power area that we got going, we’ve actually had very good returns to our investments in green. But we’ve done it in areas that I think are much more aligned with the venture capital principles of removing risk, with as little capital as possible, and having a shorter gestation period for the actual product and team, than we were seeing in the green area.
I do think that We’re at a point though, where we’re seeing, we’ve come through that first tide of expectation, disappointment in green, and then the retreat. And now I think we’re seeing a resurgence in a more rational market.
Speaking of big investments and failures, what happened to Fisker? And a cool looking car. I’ll be honest with you. My buddy and I just drove one, and it felt like there’s things that were not right yet, and this was a prototype. But technically Tesla, Fisker, what happened there?
It’s just enough, the Fisker, Henrik Fisker, who was the founder of Fisker, was actually working for Elon at Tesla, as an outside consultant to help design their project X.
So the relationship was actually closer than you might imagine. It’s very hard to build a car company. Talk about the huge amounts of capital, and large amounts of risk that need to be sustained. I think the difference in my mind between Fisker and Tesla is less about design. Because I think the Fisker product is a great product, and there were other great products in their lineup that were coming down the pike that people knew about, that I think people here People here in the audience would really appreciate. I think it’s about having an incredible entrepreneur like Elon. Elon looked into the abyss, and starred it down, and came out the other side with a car company which is world class, and has created huge value for investors, and for their customers. And I have incredible respect for him for doing that.
A lot of times the success of a company doesn’t come down to just technology. It comes down to those amazing people lead them and in that case I think that Elon was clearly the better leader.
Do you think that it was strategic that SolarCity, Tesla, the batteries and now the, what is it called the home battery or whatever. Was that strategic or is he not that smart?
I don’t know. I don’t know. I think he’s damn smart.
I don’t know how conscious he is of all these pieces working together. They might all be desperate pieces that ultimately sort of merge as the the world develops around him, but it’s certainly a very, very powerful portfolio that he’s assembled.
All right. So you mentioned Nest. Do you think that Nest eventually would be kind of a home assistant AI where you can just say hey, Nest turn on my TV and hey Nest, turn on the washing machine. I mean are we getting close? I just watched Ex Machina. I don’t know if any of you have seen it. Really creepy, because it makes me think that it’s already here, if they’re talking about it. But when Google acquired Nest I thought to myself oh they just wanna be in the home and have people say hey Nest or hey Google.
What are your thoughts and how close are we to that actually coming to reality?
We’re probably closer than many people believe, and further away than most of the zealots believe. There’s a lot of pieces that have to come together. But on the other hand, a mere five years ago nobody believed that self driving cars would ever be allowed on the streets, and already we’re seeing them accepted and legislation in place to provide for what I think would be a decade of more and more self driving vehicles.
So yes, when clearly the idea with Nest was way beyond the thermostat when Tony Fedell and Matt Rogers and Erik Charlton came to me with the initial idea, and they showed me the thermostat which was sort of a Steve Jobs build of we’re doing this thing and there’s this little veil and they pull the veil and there’s this sort of carved round thermostat.
Of course it doesn’t work, it’s not built yet. But that’s the big aha.
I was pretty disappointed frankly. Because I’d known Tony a long time. Tony can do anything. And the fact that he was developing that product in that market, and that frankly was a market that we understood. The thermostat market wasn’t a great market. It sort of deflated me a bit.
But when Tony said that his goal was to do for all the unloved products in the home what he was gonna do for the thermostat. Which was to make objects of desire like Ava in the movie, that you bring into the home willingly, without a thought to where it’s going.
Then he was going to unlock the power of those devices with software. But he was gonna make them magical by connecting them. And that magic is the key thing. Those connections are the key thing. That’s what Google bought with this group, was a group that doesn’t just make these wonderful hardware objects of desire. But is a vision for how they all get connected and they share intelligence and they talk to each other.
So we’ll see more of that. I expect we’ll see this from Nest products shortly, sort of unleashing the power of what’s inside Google with, the vision of Tony and Matt and others.
But I don’t think we’re in brave new world yet. I don’t think, these devices are going to take over our lives and second guess us intellectually. I think that the alarm that’s been raised about AI and how AI enters into our lives is premature. We should be cautious.
Is Ava here?
If you haven’t seen the movie, it’s pretty cool. It’s creepy but cool. You lead the deal with Nest and one of the observations I have made about Kleiner is, at least from the outside is that you guys aren’t really in touch with early stage companies anymore and it seems like, a lot of the funds are now focusing on bigger stiff but when we talked earlier, you mentioned that a lot of the companies are actually somewhat incubated.
So tell us a little bit about that and tell us may be the process within that. How long it took or what were the steps involved? And tell us what you mean by incubating companies before you would invest.
So, you know I do think because, we are a diversified fund, so we have a venture group, which invest in life science, it invests in digital, consumer and enterprise and devices and software and services and we also have a life science group which is also doing extremely well in the marketplace right now.
That’s the venture group. We then have a growth group that invests in later stage companies. Companies that have demonstrated success in the market and we invest in their growth and development. And we’ve been getting a lot of pressure on that because those are where the bigger checks are written.
In later stage companies, their are household names. So when I invest in Nest, that’s not news for anybody because nobody knows what Nest is when essentially it’s a car of device in somebody’s hand and nobody is taking interest in Thermostats. But we invest in Uber everybody’s excited because everybody knows what Uber is.
So I think the misconception about where Kleiner Perkins invest their time and money is based a lot around the press and a lot of the news around the well known companies that we do later test investing in I’ve never invested in later states company, I do only venture investing.
I do almost only early stage, A stage investing. In fact I don’t think I’ve ever done a B stage company. And most of the companies I invest in I help incubate. We have a small area next to our offices where we house early stage companies and thinkers, and help them work through their ideas, network and develop relationships, strategically plan their product and their financing.
I have two or three coming out that are still stealth. They’re almost all stealth in the early on, so you wouldn’t know about them. Next year you’ll hear about a couple of others that I’m extremely excited about, I think they’re big markets in food tech and in ad tech. But those are people who came to us with nothing, and we helped to get build their teams, we helped them to raise their money, we helped them to refine their product vision.
That’s the kind of work we do. We have a lot of service people around the organization to help with recruiting, to help with PR by marketing for a companies and it will also help with product, we have a design group run John Mayda, Byn Gordon one of the founders of EA, John Mayda who was at the MIT media lab and then later at the Rhode Island School of Design, and this group does nothing but help our companies build better products and keys off of the design and product.
So we do still run the gambit and the number of us do nothing but early stage investing.
Awesome. So if we can talk about the last few years as far as investment and disruption, I think Angel list kind of changed the game. Do you see any disruption happening in the coming years or shifts as far as what’s gonna happen with especially early stage investing?
I think we’ve already seen a lot of that. I mean our industry like all of the technology industries is not immune to change and competition. And we’ve got to be smart about smart about how we do that all the time, the fact is that in the consumer, digital space, it has gotten a lot cheaper, a lot easier to pass it to the market, and as a result with a lot of capital around in the hands of young people who have had early successes in Silicon Valley, and a lot of discretion capital invest, there’s a robust market.
And the small amount of capital necessary to get products out and the large amount of capital hands of angels with lots of discretional capital without mortgages, without families, means that there’s an early stage investment in the consumer stage that changes my business. Which means that I come in later, usually with higher evaluations but also a lot more risk removed around product and team.
It’s probably a reasonable trade off, but that’s only in the consumer digital space, if you take a look outside of the consumer digital space, it’s still a venture capital business to invest in early stage ideas, help these teams form invest in significant amounts of capital necessary to remove risk and drug therapy or enterprise software, so it’s two worlds.
It’s consumer worlds that gets most of the attention because it’s sexy and it is the focus of the outline rags like the Tech Crunch e.t.c. but there is a much bigger world out there than consumer digital.
Well, you know I just did one. I did experiment with a good friend of mine named Bayard Winthrop who runs a company called American Giant, which if you don’t know American Giant there was an article in Slate two years ago saying they made the best hoodie on the planet, and what they are is an artisanal apparel brand and I really love these guys I’ve known Byron a long time, so I had written an article about artisanal manufacturing and artisanal brands, love brands I call them, and the article got featured in Forbes and Fortune and a couple other places and we decided to sort of make that in to a book but we decided not to go to a publisher.
Self published through Amazon, we wanted to do something that was a faster cycle smaller, like 50 pages, more high design, high concept, but wanted to get in out there and provoke a lot of thinking about artisinal brands by creation of jobs in the community, about love in the relationship with customers and we got a book out called I F-ing Love That Company.
And it’s only available on Amazon. We printed just a few numbers of copies to give to the press but it’s getting a lot of buzz as is sort of raises these concepts of artisinal brands, artisinal manufacturing, jobs in the face after the technology compression of jobs, every time we create a great big company in Silicon Valley we actually destroy jobs than we create and the idea of where we’re gonna create jobs on mainstream, companies that are small but prosperous that are important but not venture capital scale.
That’s what that book’s about. So we just got that out and it’s doing, I like experiment, it was a lot more fun than writing a book for two years and working with a publisher and having to go off out and sell that book, this has been a lot more fun, I think we’ll do more of these.
Awesome. One last question before we talk about the other thing. Investment that you missed or you could have invested other than [INAUDIBLE] What’s the one where you like “damn, I could have had that one”
You know it’s interesting, you may not talk about this ahead of time so I had the time to think about it I’m gonna try and answer the question I wish you’d asked rather than the questions he asked.
Which is a trick I’ve learned over time. And I’ll explain why in a second. The why is, look I’m not a person who suffers from FOMO. I really don’t care what other people are doing. If it’s not a trend that I’m part of starting, I really don’t care about the trend.
And that’s not hubris, that’s just focus. And so I don’t spend a lot of time sort of white-knuckling about what I missed, I really spend a lot of time worrying about what I invested in. And when I think about what I’d miss, it’s really about great people that I miss investing. Cuz I invest in people.
I invest in people in problems in value propositions. I don’t invest in traction and I don’t invest in business models because that’s always too late for me. I’m a early stage. And so when I think about the people that I really wished I would have invested in, if I’d had an opportunity to and I didn’t.
Elon is one of them. I think Elon-
So that’s the easy answer.
Okay I’ll give you another one. Reed Hastings. I think Reed Hastings is an amazing, amazing guy. I mean the fact that what he’s done is disrupted a multi-billion dollar industry. Took real hutzpah to do this. Reinvented his business three times, right? From a DVD business to an online business to a content business.
>> Look- >> I would love to work with that guy. >> I lived in Los Gatos when Netflix was like 20 people, the stock was $3 and- >> And did you predict it to be worth – >> Well the scary thing is I worked on a marketing deal with them to do a nationwide campaign around all these events.
Anyway so back then they had 600,000 subscribers and they were paying $32 per person that you signed up. And so we had done these calculations, anyway so if I had taken 10% of that money, bought some stock- >> See there you go. >> It’d be like $100 million dollars. >> There you go, there you go.
[LAUGH] >> I missed that boat too. And it wasn’t because of Reed Hastings. One other last question. What’s the hottest start-up right now? >> Boy. So the hottest start-up area for me right now that I really like is the re-invention of education. And I really really like concerns one of our investments of destiny is not, I like to boat.
I do think that we are gonna see unicorns in the space, I think we are gonna see great big companies. You see Corinthian just recently went bankrupt in the private education space. You see Starbucks now paying for education for it’s barristers which is fantastic. Education is too expensive for the middle class, certainly too expensive for the poor and we’ve gotta see a reinvention of that on a global basis if we are going to develop the opportunity and potential, the human potential who we want to.
So I’m excited by those that area, and I think we are gonna see more than one uni-cone in the space.
Awesome. So ladies and gentlemen I got a phone call yesterday from the Kleiner Perkins Police Department warning me that I would be sued if I talked about the trial. Because Randy – >> If it were not for me – >> Had said we could talk about it and we had a discussion so I have some insights so you can ask me privately.
So obviously we cant talk about diversity and some of these issues in the valley outside what’s happen with you I’ve seen you lost a little bit of hair in this whole thing. >> [LAUGH] >> So what are your thoughts on as newly – >> Exonerated. >> Exonerated. Please. >> Exonerated. Not guilty.
>>Let’s get that right. >> What are your thought? What’s happening in the valley?
I’m not gonna talk about trial but I’m gonna say how I felt which was I was really sad. I was really sad and very disturbed through this in part I’m the one thing I can say about the trial I think is how much respect I have about that jury.
Cuz the jury did something really important that think all of us need to do. And that is to separate the facts of this case from the really important issue of diversity in the Valley. It was conflated in this case. It was a bad case clearly the jury was decisive in this case they had no trouble finding us to be completely guilty free from this case.
That being said the press had a bigger narrative. A narrative about the valley that they try to pull us into and resisted the real facts of the case. And if none of you I assume were in the courtroom, so if you just read the press, you just read the press and it was easy to convict Kleiner Perkins.
So if you were in the courtroom with jury, very liberal jury, six men, six women, there’s no trouble, no trouble finding that we were not So what’s the problem? The problem is that the narrative is a powerful narrative and is an important one. The case is not part of that narrative.
The narrative is we need more diversity in this Valley. And when I say diversity I’m not just taking about gender diversity, I’m talking about people of color. I’m taking about ethnicity. I’m talking about people who have physical challenges. I’m talking about older people who are being left out of what’s happening in the valley.
And the reason it’s really important. Isn’t simply an issue of what is good for business because diversity is good for business. It’s also an issue of how important the Valley is to inventing the future of social dynamics. If you take a look at what’s being created here in the valley and what licks out to the world.
There’s so much influence around how we interact, how we communicate how we relate to each other that if we do not have representation diverse representation in that dialog in that discussion that is being innovated here everyday in Silicon Valley. We are missing out on a bigger opportunity.
And so diversity is an important issue. Perkins has always been part of that discussion five years before the trial their is a piece you can see that I did online where I talk about this issue five years before the trial. The Kleiner Perkins has the most diverse groups of partners in the entire industry but it’s not enough.
We continue to work everyday to improve that diversity. We continue to lead our industry and setting the standards and best practices for diversity. And I think as a group here at Silicon Valley we cannot rest rest until we are more inclusive of people and points of view that help form the future, so varsity that narrative, that’s the issue, that’s the important issue, and that’s where we need to put our attention.
>> Awesome. All right. One question. >> [APPLAUSE] >> I’m gonna get in trouble because I always do this and we talk too much, do someone have a question? Oh perfect. No questions. All right, one. Let’s do it. But cut them short. >> True. I just have an idea and so I’m just trying to figure out how can I get it to a place where I could, you know find you? Like a group like you, where I could get it going, get it to the next level.
I pitched it to a company and they wanted me to write a business plan so right now I’m at a stage where I’m taking surveys to prove that there is a market for it and what people are willing to pay for it. So I guess my question is what do I do? You know what I mean? >> Yes. I completely understand.
The good news is in the Valley today, there lots of people who help early stage entrepreneurs. Think through and put their ideas in a format that can get in front of people like me. There incubators that are, well known incubators like Combinated/g but they’re all also lots of other smaller incubators in places like Red Wood city, San Matteo, San Francisco, where you can get the help and guidance that you need about putting things in to a format that somebody like I can look at and make sense of.
Coming to somebody like me without having that format really doesn’t do your idea justice because of the, I’m seeing hundreds of ideas all the time and the ones that are, framework that I can understand and relate to are the ones that get the most attention, so it’s really about finding those individuals and finding those groups and those opportunities that sort of mentor you and get your idea into a forum that by the way is a process not just a packaging but also of learning.
So look for those incubators those for those mentors that you can find to help you do that. >> Awesome. We have to cut it off. Randy I wanna thank you so much. >> It’s a real pleasure. >> One more? >> This was fun. >> No more? >> Thank you.