Wednesday, March 05, 2008

Valley Boy...The Education of Me

For the first time in years, say since undergrad, I sat down and consumed an entire book, cover-to-cover in a single sitting. It was Valley Boy: The Education of Tom Perkins that sucked me in on a snowy Sunday.

Tom Perkins helped to pioneer the innovation center that is Silicon Valley, first at Hewlett Packard and soon after by founding the venture goliath that is today Kleiner Perkins Caufield & Byers. KPC&B were truly innovators themselves in a nascent venture industry who firmly established the ground rules for how the process essentially functions the same way today since when they first opened their doors back in 1972.

Sure KPC&B has their unbelievable list of out-of-this-world exits but it is the failures that most interest me, for that is where the greatest lessons learned appear to emerge. Thankfully Mr. Perkins did not refrain from detailing the, seemingly few, crashes in his investing career. In addition, of particular interest was learning more about one of their earliest investments (circa 1976) in a tiny little company you may have heard of called Genentech (NYSE: DNA). I was hoping for a bit more flesh on this bone, for obvious reasons. If there are any case studies on the KPC&B and Genentech relationship out their I sure would appreciate you pointing them my way. One very interesting tid-bit that stands out is how Mr. Perkins reads a business plan: 1st Start at the back of the plan and read the financials, are the markets significant? If YES: proceed to front of business plan, If NO: move on to next business plan.

Finally, let me leave you with some laws from the storied firm:

  • Make sure the dog wants to eat the dog food. No matter how ground-breaking a new technology, how large a potential market, make certain customers actually want it.
  • Build one business at a time. Most business plans are overly ambitious. Concentrate on being successful in one endeavor first.
  • The time to take the tarts is when they're being passed. If an environment is right for funding, go for it. Venture capital goes in cycles.
  • The problem with most companies is they don't know what business they're in.
  • Even turkeys can fly in a high wind. In times of strong economies, even bad companies can look good.
  • It's easier to get a piece of an existing market than to create a new one.
  • It's difficult to see the picture when you're inside the frame.
  • After learning some of the tricks of the trade, some people think they know the trade.
  • Venture capitalists will stop at nothing to copy success.
  • Invest in people, not just products.

***NOTE*** Take a look at the new Boulder Biotech Company Tree (HERE)!
***NOTE*** Read the new eBook CLSDF 2007 - What's In A Year? (HERE)!

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