
Kleiner Perkins has raised two new funds totaling $1.4B - swamp40
https://techcrunch.com/2016/06/29/its-official-kleiner-just-pulled-off-a-1-4-billion-fundraise/amp/
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mmastrac
This isn't as insane as people might believe. Let's look at the larger of the
two funds: $1B. It's a digital growth fund. Raising that $1B doesn't mean that
people wrote a total of $1B in cheques: that money is just "committed" to be
called (ie: a capital call).

A simplified fund's capital call schedule might be something like
25%/25%/25%/25%. So each year, for the first four years, they "call" a quarter
of the capital, or a total of $250M. Years 5-10 are for harvesting, though
they might have one or two more extension years beyond that if the portfolio
isn't ready to reap.

Since this is a growth fund, we can see them deploying it over something like
5-10 companies per year for the first two years, then following on in years
two and three in later rounds pro-rata with some of the winners. That means
that we're only looking at 5-10 companies, $25M-50M each in a series B or C in
each of the first two years.

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lifeisstillgood
That seems at odds with what I assume is hundreds or thousands of companies in
the digital space that could absorb a few million.

If you are limiting yourself to picking ten companies, it seems no one has
learnt the lessons of YC - or is this something I would know if I was
cleverer?

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russell_h
The other $400m is in an early stage fund that will presumably focus on making
more smaller investments.

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dbcurtis
Another big raise. It says to me that the VC's have a seller's market right
now, in that a lot of limiteds are throwing money at the VC's expecting the
Unicorn Ranch to keep producing. I'm not sure where $4B-$8B in recent raises
is going to go. They are going to be hard pressed to find enough rat-holes to
stuff that much money into. Of course, the Unicorn bubble could continue, but
at some point I'm thinking valuations are going to reconnect with revenues,
and then what?

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godzillabrennus
They probably have 10 years to deploy the capital though with any fund they
have to invest some each year to keep up with the IRR they aim to provide for
their LP's.

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JumpCrisscross
> _They probably have 10 years to deploy the capital_

They probably have about that much time to _return_ the capital. 10-year fund
doesn't mean you get to keep 10% of the capital in a box for a decade (apart
from reserving for management fees).

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phamilton
They reserve a chunk for follow on rounds.

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JumpCrisscross
There's heterogeneity in the "they" we're referring to. As a rule, no, funds
do not reserve capital for follow-on rounds. A venture fund's cost of capital
( _i.e._ expected return) is high, making the compounding cost of holding cash
cumbersome.

Instead, a firm will generally raise one fund for early-stage ( _e.g._ seed)
and another, either later or if they have a strong pipeline concurrently, for
later investments ( _e.g._ A), where preference is given by the latter to
companies invested in by the former.

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rlucas
Disagree strongly.

1\. The funds don't "hold cash" for follow ons. They "reserve capital" which
is subsequently called. There's no dead weight uninvested cash drag on irr (or
properly, very little of such).

2\. "Crossover" investments between funds are generally frowned upon, although
the pendulum swings on that practice and more recently it seems they are in
favor again. Still, it is the exception rather than the rule that the same
manager (VC X) is allowed / supposed to put money from two different funds (X
fund I and X fund II) into subsequent series of the same company's stock. If
you think about it, that makes a ton of sense because in downside cases, VC X
may then have to play King Solomon and split the baby between its Fund I and
Fund II investors, both of whom it has a fiduciary duty to, hence a conflict
it's best to avoid altogether. Now, that is a problem that comes up in
downside cases and recent times have been good, so once again people are
overlooking the conflicts in the name of keeping the punchbowl full and
spiked.

3\. Funds do most definitely reserve for and participate in pro rata follow
ons in subsequent rounds. 100% of market early stage A/B/C term sheets will
ask for pro rata rights (for follow ons). If you don't have follow on reserves
you risk facing a "pay to play" or other punitive term in a future round
(again only in the downside cases which people start to neglect in the up
cycle times like the last 2-3 yrs).

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caligarn
I wouldn't be surprised if this results in more investments outside of Silicon
Valley, in new rising American cities and countries in Asia mainly and some in
South America, Europe, and Africa.

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outside1234
What return has KP made on their most recent funds?

(Asked another way, why does anyone invest in these funds given the risk?)

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Arnt
These funds live for a decade. The most recent funds are almost a decade away
from the moment of truth.

To the parenthetical question: You invest something in a few of these funds,
and a decade or so later you learn whether you own 1% of Google, or whether
all of your VC funds picked the likes of Excite. People invest because Google
does exist.

Which reminds me of a classic ah-investment strategy. Say you have €1m of
white money and €10m of black money. Invest in 11 high-risk ventures (coffee
or tomato futures, say). Later (when the new harvest is in) when you see which
one won, go back and fiddle your paperwork so the white money paid for the
winner and the black money paid for all the losers. I've heard about this done
with volatile foodstuffs, but never startups. Perhaps ten-year funds simply
are too slow? Comments, anyone?

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rlucas
The white/black money thing is not in vc land but is super common in
"strategy" focused hedge and even mutual funds. You "incubate" 10 funds with
very small assets and then after a few years pick the best one and trot it out
to the market and pitch it based on its true but misleading performance.

It's p-hacking for funds.

For various reasons this particular shenanigan doesn't happen in venture,
though. (hint: it's super easy to scale down a public markets strategy to
micro or pilot scale of say 1/10,000)

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paragpatelone
I am always curious about who are the LPs are and the slide deck KP used to
raise more money. What was the deciding factor in the LP committing more
money. Is it because there are no other options for LPs to make a decent
return (close to zero interest rates).

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Roritharr
Which of the big US VC Firms also Invest in Europe?

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throwaway6497
KP doesn't have the same cachet anymore. It is one of the top 10 VC firms.
That is all. Nothing special here. Move over.

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icpmacdo
My wild guess would be the top 3 are Benchmark, Andreessen and Sequoia, am I
wrong?

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throwaway6497
Top 5 in Cachet in no particular are probably Benchmark, Andreessen, Sequoia,
Greylock, Accel. KP comes after them. It used to be number one. Not anymore.
There are so many angels, good old/new VCs (YC, LightSpeed, FirstRound, Union
Square, SocialCapital etc) that calling out KP for prestige doesn't make sense
anymore.

Getting funded by KP now means => You raised money from a good VC firm.
Nothing more. Years ago, it was more like - "Wow, you guys raised money from
KP? You must me special"

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Moto7451
So what's the effective difference between raising money with KP and someone
you have more respect for? Connections? Mentors?

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cft
Means that even if the company completely fails, preferred stock will be paid
to some extent, eg. Meebo, Slide, Loopt, etc

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zekevermillion
Pocket change

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homero
Who's that

