Kleiner Perkins Caufield & Byers dominated headlines on VCJ’s online affiliate, peHUB.com, in November.
At the start of the month, VCJ Senior Editor and cleantech guru Mark Boslet wrote about how Kleiner Perkins Partner John Doerr feels that a “Netscape moment” is imminent for the cleantech industry. Such an IPO would capture the world’s imagination and spawn more cleantech offerings and startups.
As the month came to a close, Mark took a look at growing speculation that Kleiner Perkins might be turning away from cleantech and placing a greater emphasis on Internet deals. Fueling that speculation was KP’s late November hiring of star Internet analyst Mary Meeker, which followed the firm’s recent creation of a new fund to focus on social media investments. Senior Editor Constance Loizos weighed in with a peHUB post entitled “Mary Meeker is Good for KP, But Is KP Good for Mary Meeker?”
Scroll down or click on the “jump heads” in the box on the right to see these three posts and lots more. —Alastair Goldfisher
Is Kleiner Turning away from Cleantech? Speculation Abounds
By Mark Boslet, Nov. 30, 2010
I normally don’t blog about other blogs, but today I break the rule to weigh in on speculation that Kleiner Perkins Caufield & Byers is turning away from cleantech.
This shift in focus is suggested in a Fortune piece claiming that the storied VC firm is refocusing on its so-called sweet spot: the Internet. The observation was repeated in a post on GigaOm, where we are reminded of Partner John Doerr’s statement about a year ago:
“If we’d been able to foresee the crash of the market, we wouldn’t probably have launched a green initiative because these ventures really need capital,” Doerr said, according to GigaOm.
So what’s up? Kleiner Perkins did not immediately respond to a request for comment.
The Fortune piece reminds us of KP’s launch of its recent $250 million sFund for social startups and how digital gaming company Zynga could be a runaway financial success. (It already did well with mobile gaming company Ngmoco, which sold to Japan’s DeNA Co. for up to $400 million.)
So far, Kleiner has had just two cleantech exits, neither of which was a major success: Amyris Inc. and Ausra.
Amyris, a biofuels maker, managed to go public in September for $16 per share, and its stock is now trading around $20. But that hasn’t done much for Kleiner, which owns 4.2 million shares currently valued at about $84 million. It isn’t clear if it KP will see a return on its investment, since Amyris raised more than $230 million in venture capital before its IPO.
Ausra, a solar energy company, was sold in February to Areva. Given that the sale price wasn’t disclosed, it is fair to ask if Kleiner and Ausra’s other VC backers saw a return on their $129 million investment in the company.
Still, I think it is too early to claim Kleiner Perkins is turning the page on cleantech. After all, Doerr just last month predicted cleantech’s Netscape moment is likely to come next year as share buyers warm up to IPOs. That hardly sounds like someone whose firm is ready to abandon the push into green energy.
Obviously time will tell. But I find it hard to believe green will be replaced by digital at a time when rewards may be on the way.
John Doerr: Cleantech’s Netscape Moment Could Arrive Next Year
By Mark Boslet, Nov. 4, 2010
The IPO that captures the public imagination and sets off a stampede for freshly issued cleantech stock could arrive next year, says cleantech investor John Doerr.
The so-called Netscape moment is on its way, Doerr said Thursday at the GreenBeat 2010 conference. “I think we’re very likely to see that next year,” said the Kleiner Perkins Caufield & Byers partner.
Cleantech investors have been hoping for such a moment for several years as they poured large sums of money into solar and other companies and have yet to see a financial return.
Netscape’s 1995 IPO proved the starting gun for the Internet era of investor exuberance and, ultimately, the bubble.
The importance of a Netscape-like reception for cleantech in the public markets can’t be understated. Venture capitalists have invested more than $7 billion in cleantech startups over the last three years alone at a time when venture returns have slumped.
In the past quarter, cleantech venture investing was down 30%, partly due to the lack of a payback. Doerr said he was not alarmed by the pull back. “We’re entering one of these rare periods of normalcy,” he said. It should not reflect a dip in the quality of investments or innovation, he said.
IPO Check-up: Massachusetts
By Jeff Bussgang, Nov. 30, 2010
Bill Gurley’s excellent piece on Silicon Valley IPO Anxiety inspired me to take a companion look at the East Coast, particularly Massachusetts and New York, and evaluate the health of the local IPO economy and prospective pipeline. Today I’ll cover Massachusetts—tomorrow New York.
I first came across Bill when he was a Wall Street analyst and covered my company Open Market (IPO 1996). I always admired his perspicacity, even if he didn’t like our stock all the time! For purposes of this blog post, I am only focused on companies involving technology, whether software, Internet, health care or energy – which I’ll define as members of the Innovation Economy. Note also that, for obvious reasons, I leave out any Flybridge Capital portfolio companies in my analysis.
First, let’s look at my home state of Massachusetts. By my count, there are 33 Innovation Economy companies with market capitalizations of greater than $1 billion (see chart here). Some of these are important companies, leaders in their field, and full of great future prospects (EMC, Thermo, Genzyme, Akamai). Others have seen slower growth, are a bit more tired, and may get gobbled up in the years ahead (Parametric, Novell, Progress). A number of them are recent IPOs who are growing nicely and may become multi-billion dollar companies in the years ahead (Acme Packet, VisaPrint, Athenahealth).
Other recent IPOs, like Constant Contact ($720M), A123 ($960M), Insulet ($520M) and EnerNOC ($600M), are sub $1 billion in market cap, so not listed here, but are representative of a number of small market cap players in the community who have > $1 billion potential. The headquarters of each company is within 30-45 minutes of each other, so the degree of talent concentration and social interaction is very high. Further, acquisitions in the last 12 months such as Unica (IBM $480M), ATG (Oracle $1B), Netezza (IBM $1.7B), Phase Forward (IBM $685M) and Starent (Cisco $2.9B) show that there’s a vibrant M&A market for small cap technology companies in 2010 and will likely be a catalyst for talent to be recycled. Yet, when you evaluate the pipeline of IPO candidates, the results in MA are less inspiring.
One interesting ranking comes from Business Insider’s list of the 100 most valuable private digital companies. Although this is only one and skewed towards one industry sector, it contains only one company from MA in its ranks: Brightcove. In an informal survey of a number of Boston VCs and entrepreneurs, the same 10-15 names come up as IPO candidates in the next 2-3 years (the criteria I asked folks in my informal survey was to name companies growing fast, revenue runrate > $30m, profitable or converging on profitable and probably worth > $100M today).
They include (note – all estimates are my own judgment and highly disputable; for obvious reasons, I did not include any Flybridge Capital portfolio companies, so we are not investors in any of these):
Antenna Software (estimated $40-50m revenue in 2010)
CSN Stores ($300-400m)
Glasshouse ($90m) – registered for IPO
ITA ($150-200m) – Google acquiring for $700m
Kayak ($150m) – registered for IPO
Kiva Systems ($80-100m)
Name Media ($50-60m)
Zipcar ($130m) – registered for IPO
There are numerous divisions of public companies that historically resulted from acquisitions – like TripAdvisor/Expedia ($400-500m revenue), Shoebuy/IAC ($200-300m revenue) and Rue La La/GSI Commerce ($150-200m revenue) – but those are not included here as they’re not relevant to this analysis in case they get spun back out.
The conclusion? There is a robust public company ecosystem in MA which should serve as an inspiration and catalyst for other local private companies. Strong public company talent is easily recycled at the most senior levels (see, for example, Akamai’s hiring of former Digitas CEO David Kenny as COO) and when you gather at networking events and see other CEOs who have taken their companies public, it is a wonderful inspiration. But, sadly, the private company ecosystem in MA is less inspiring, with roughly a dozen companies that could possibly be public companies, and only a half dozen with revenues greater than $100 million.Tomorrow, I’ll analyze the New York market, which yields a quite different picture by comparison.
Jeff Bussgang is a general partner at Flybridge Capital Partners and an Entrepreneur-in-Residence at Harvard Business School. He is the author of Mastering the VC Game, writes the blog Seeing Both Sides, and can be followed on Twitter @bussgang.
The Man Who Doesn’t Fear Google: Blekko Backer Sees Room For Search Upstart
By Mark Boslet, Nov. 26, 2010
The Internet is littered with search engines that tried and failed to stand up to Google, but Blekko backer Saad Khan doesn’t expect the same fate for his startup.
“I don’t need to have a $100 billion company to call it a success,” says this CMEA Capital partner, whose firm, along with Marc Andreessen, Ron Conway and U.S. Venture Partners, invested $24 million into the company.
Khan says there is room in the market for smaller search companies — perhaps with a couple hundred million dollars in annual revenue — to coexist with Google. “I think of that as an opportunity,” he says. (Paragraph corrected to say a couple hundred million dollars in revenue, not a couple million.)
It is a tall order. Blekko launched its site about three weeks ago to generally favorable reviews. Its goal is to free Internet search from the clutter of low quality content churned out by so called content farms, which hire writers for next to nothing to produce articles on a variety of topics. It also attempts to customize search by honing in on particular subject areas in the manner of a vertical search engine.
On top of that, it has a crowdsource component. Users can create their own tags, or slashtags, to vertically customize results.
Blekko does not see itself as a Google killer — which is good. Google is by far the dominant player, with 66.3% of the U.S. market in October, according to comScore, followed by Yahoo with 16.5% and Microsoft with 11.5%. It is a hard position to assail.
And “by no means do I expect Blekko to become a Google killer,” wrote search guru Danny Sullivan late last month. Many of the companies that tried have little to show for their efforts — Mahalo, for instance, or Cuill or SearchMe.
Khan says he sees search as a big enough market for several companies. Plus he views the landscape as favorable for investing.
“These guys are really pioneering what I think of as crowdsource search,” he says. There is plenty of engineering talent available to hire from companies, including Google.
And there are few other upstart companies competing in the market, he says.
I hope that last point isn’t an ominous warning.
Mary Meeker is Good for KP, But Is KP Good for Mary Meeker?
By Connie Loizos, Nov. 30, 2010
Yesterday morning, Internet analyst Mary Meeker told colleagues at Morgan Stanley’s Monday meeting that after two decades with the bank, she had decided to leave New York for Silicon Valley and become a venture capitalist at Kleiner Perkins Caufield & Byers.
Given Meeker’s reputation for brilliantly capturing where the Web is headed, the announcement couldn’t come at a better time for Kleiner Perkins. The firm has been working tirelessly to heighten its credibility in the social media world, after missing occasions to back Twitter, Facebook, Groupon and LinkedIn, among others. Just last month, the firm captured the world’s attention when it announced the formation of sFund, a $250 million fund created to invest in social Web companies.
The question isn’t whether Kleiner Perkins will benefit from this marriage; it is what gains Meeker will see.
Numerous analysts have made the switch to venture capital with great success, including Benchmark’s Bill Gurley. And thanks to her work with Kleiner Perkins dating back to its Netscape investment, Meeker has a longstanding professional relationship with John Doerr, which should ease the transition from mining mountains of mature company data to trying to identify the most promising startups.
Still, Meeker seems to be giving up a lot in this exchange. Fortune points out that “this new gig may give Meeker a calmer day-to-day existence.” But as another former sell-side analyst told me: “I don’t think there’s a sell-side analyst who isn’t an adrenaline junkie.” Kleiner Perkins backs plenty of companies every year, but its individual partners tend to back just two to four new companies each year, not the scores that Meeker followed as an analyst.
Meeker is also accustomed to more flexibility in her decision-making. As a star analyst, she could like a stock one month and hate it the next. True, her reputation might suffer if she flitted too quickly between the two, but she could keep track of her standing quite easily by checking the ratings firms that follow top analysts. In venture capital, by contrast, it typically takes years for bets to play out. Great VCs are judged over a much longer period of time.
The biggest challenge for Meeker, though, may simply be that most venture firms are far more bureaucratic than the top-down, command and control structure of investment banks. Meeker’s powers of persuasion are undoubtedly tremendous: she couldn’t have risen to her position in the banking industry without them. But forging a consensus at a venture firm can require some serious brinksmanship, and Kleiner is no exception.
Consider that although the social gaming giant Zynga is now almost universally regarded as a strong IPO candidate, Kleiner turned down the company when it first came knocking. The firm reportedly would have passed a second time, too, had partner Bing Gordon not eventually threatened to invest in Zynga himself.
Fanboy Fascination: Is Andreessen Horowitz Overhyped?
By Connie Loizos, Nov. 10, 2010
Social psychologist Amy Cuddy of Harvard Business School recently produced some interesting research suggesting that people are highly likely to see someone as competent if they’ve demonstrated expertise in just one area, even if they later display incompetence elsewhere. Think of the star attorney who sails his boat into some rocks.
It’s not hard to draw a line from Cuddy’s research to the media frenzy surrounding Andreessen Horowitz, the year-and-a-half old Sand Hill Road firm that almost always garners glowing reviews from the media. When Andreessen Horowitz announced last week that it had just raised a $650 million second fund — in three weeks, no less — dozens of news outlets published splashy features about the young firm, which is now managing nearly one billion dollars. One property, VentureBeat, has already anointed Andreessen “the King of Silicon Valley.”
But there’s not much to praise — yet. It’s wildly enthusiastic by even Silicon Valley standards to place them in the “top ranks of venture capital firms,” as the New York Times did last week.
I’m not arguing that the pair isn’t as brilliant as they’re often portrayed. But great competence as technologists doesn’t always translate into success as investors. Even Andreessen and Horowitz would probably concede that they don’t have enough exits to warrant the kind of fanboy fascination that so many esteemed pubs have afforded them.
Andreessen admits he fumbled the opportunity to invest in Facebook. (As a member of Facebook’s board, which he was asked to join in 2008, he now holds a small ownership position.) While he and Horowitz were able to acquire small stakes in both LinkedIn and Twitter as angel investors, so did a long line of other angels. And of the other 43 startups they backed together, just three have been acquired for modest amounts, including Chai Labs, which sold this year to Facebook for a reported $10 million.
It’s also not yet clear that it was smart of the partnership — which closed its inaugural $300 million fund in July 2009 — to invest it with such breathtaking speed. Earlier this year, the firm was part of a consortium that spun out Skype from eBay, paying $50 million for a roughly 2% stake in the Internet calling service. Andreesen Horowitz also invested $30 million in Kno, a company that’s producing $899 dual-screen tablets for textbooks.
One can debate whether the calling service or an also-ran iPad are good investments, but very few venture firms have succeeded over time by investing nearly a third of their first fund in just two deals.
RockMelt – the recently launched social browser – seems to embody the media’s adoration of Andreessen. Not a few summaries of the product noted that Andreessen Horowitz’s lead investment in the company was tantamount to a blessing by the father of the browser. The fact that Google Chrome, which has been backed to stupefying extremes by its rich parent, still accounts for just 8 percent of the market receives much less attention.
Even Andressen’s uneven track record as an entrepreneur is rarely acknowledged anymore. Yet his next endeavor after Netscape, the infrastructure company LoudCloud, hobbled to a 2001 IPO. (Andreessen credits Horowitz, who was LoudCloud’s CEO, for eventually refocusing the business, renaming it Opsware, and selling it to Hewlett Packard for $1.6 billion six years later.) His third company, the late-to-the-game social networking company Ning, looks like a disastrous investment for VCs, who’ve now poured a stunning $120 million into it.
Cuddy’s research suggests it’s our human nature to think that because Andreessen and Horowitz are famous entrepreneurs, they’re also highly competent investors, but at this point, they’ve done little beyond inject some excitement into a once plodding industry. Though everyone wants to pick “the next king of Silicon Valley,” the reality is that it’s too soon to give away that crown. Maybe it will someday go to Andreessen and Horowitz, but they’ll have to generate cash-on-cash returns first – just like everybody else.
Did You Happen to Notice that the VC-Backed IPO Market Is Kicking Major Butt?
By Lawrence Aragon, Nov. 17, 2010
While we’ve been blathering about Kleiner Perkins’ new sFund, frothy valuations and all things social, many of us failed to notice a stunning occurrence in October: The VC-backed IPO market surged back with a vengeance.
No fewer than 12 VC-backed companies went public in October, raising in excess of $1.2 billion. That is the largest amount raised since November 2007, according to Thomson Reuters.
The momentum has continued this month, with seven VC-backed companies collectively raising just under $700 million as of yesterday.
The “new” development that made October such a big month was a batch of offerings from China. Of the dozen VC-backed companies that went public on U.S. exchanges, seven are based in China and Hong Kong.
In fact, the biggest VC return came from China-based Mecox Lane, an online retailer. Sequoia Capital led a $79.91 million round in Mecox in February 2008 and now owns 62.5% of the company, a stake that was worth $590 million at the end of October.
VCJ subscribers can also see a complete table of all the VC-backed IPOs of the past 12 months and individual profiles of each of the newly public companies.
What’s your opinion? Is this an anomaly or is the IPO window finally opening wide? With today’s filing for Kayak–backed by Accel Partners, Institutional Venture Partners and others–it would seem more VCs are betting the good times will continue.
Social TV Watching Heats Up As TVmoment Prepares to Enter Fray
By Alastair Goldfisher, Nov. 26, 2010
At the NewTeeVee Conference in San Francisco earlier this month, a Twitter exec noted that more people are using Twitter while they watch TV to comment on programs and interact with others doing the same.
That observation is good news for TVmoment, a San Francisco-based startup (located in the pariSoma loft) that is aiming to launch soon. TVmoment, started earlier this year by co-founders Frederik Fleck and Gaylord Zach, is currently in testing mode, but the service allows users to chat online with others about their favorite shows and movies while watching TV.
In some ways, TVmoment is similar to others in the crowded TV social space, such as GetGlue, Miso, Philo and Tunerfish. TVmoment provides chat rooms, social functions and check-ins. But TVmoment has also developed server technology to synch your Internet with your TV, so when you change what channel you’re watching, the audio receiver on your laptop will recognize what show you changed to, and then those in your social network on TVmoment will be notified of the switch, assuming you opted-in to that choice.
“There are all kinds of possibilities with TV and social interaction,” Fleck says. “The early first step was sites that told other users what you were watching. We want to take that a step further. “
Fleck, CEO, says that he has been meeting with potential investors on both coasts, including Felicis Ventures, to raise an “angel-size” round of less than $1 million. He has not yet closed a deal. He and Zach, CTO, are in discussions to launch their service soon, potentially at the same time as a major TV event, such as the Super Bowl or an awards show.
Fleck and Zach say they’re self-funding their operation now and are using the proceeds they made from selling their previous U.K.-based startup, called Ostrich Media, which combined TV production and interactive game shows.
The NewTeeVee conference and the meshing of TV and the Internet is no surprise to TVmoment. Citing statistics from the Nielsen Co., Fleck points out that 60% of Americans are already using TV and the Internet at the same time for about 3.5 hours a month, and that amount is growing. What’s more, Fleck says that 70% of active social networking users are likely to watch a TV show based on a friend’s recommendation.
Without a doubt, the TV and Internet industries have been talking for years about the merging of the two media. With the advent of Google TV and the efforts of startups, such as TVmoment, more and more of us will likely be tuning into a social TV app soon. Stay tuned.
What Is a Facebook App Developer Worth? Wall Street and Sand Hill Road Disagree
By Joanna Glasner, Nov. 30, 2010
Private markets continue to attach soaring valuations to top-ranked Facebook app developers. But public markets, at least in the case of SNAP Interactive, have been quite punishing.
While SNAP is best known for its “Are You Interested?” matchmaking application, the New York-based site has another claim to fame: It also happens to be one of the few publicly traded companies prominent in the app space.
CEO Cliff Lerner took SNAP (OTC BB: STVI) public a couple of years ago in a $350,000 bulletin board stock offering, with the help of his brother, Darrell Lerner, a securities lawyer. Over the past couple years, the company has seen its traffic grow nicely. It’s now the 15th most popular app developer on Facebook, according to AppData, with more than 14 million monthly users and about 800,000 daily users.
What’s that worth on the public market? As of the close of trading Monday, SNAP had a market cap of just $7 million. So, I asked the Lerners: What’s up with that?
“I’d say, in looking at other comps in the space, we’re trading at a significant discount based on certain commonly used valuation metrics,” says Cliff Lerner.
Lerner points to EasyDate, a company traded on London’s AIM exchange, as an interesting comp. It offers a Facebook dating application called “Be Naughty,” several destination sites, and has a market cap of nearly $140 million. EasyDate’s revenue, according to Lerner, totaled a little over $13 million last year.
SNAP, like most Facebook app developers, makes applications that are free to use, but charges for premium features. On “Are You Interested?”, for example, paying subscribers can contact a broader selection of potential dates, send unlimited gifts and access a “hotties” browsing feature that uses an algorithm to pick out photos of people likely to be considered good-looking. Subscriptions cost $10 and up a month and, while the Lerners didn’t specify the portion of total users who pay, they did say the monetization rate isn’t too different from the social gaming industry, in which the vast majority play for free, and a couple percent buy stuff.
Overall, revenue has been growing nicely this year. SNAP reported Q3 revenue of $1.7 million, up from $1.24 million in the prior quarter and $800,000 in the same period a year ago. Gross cash receipts for the third quarter were actually higher — around $2.3 million — but since revenue is recognized over the term of a subscription period, some of that has to be accounted for in the next quarter. As for profits, at $87,000 in Q3, they’re not exactly reminiscent of the next Google. But the Lerners say they’re doing what most companies a few years old would do in their shoes: investing in growth and scaling up their staff of about 17 full-timers.
As for private market comps, the closest I could come up with was Zoosk, the dating app developer that has raised about $40 million since 2008 from ATA Ventures, Bessemer Venture Partners and Canaan Partners, according to Thomson Reuters (publisher of this blog). Zoosk has about 6.5 million unique monthly users on Facebook, according to AppData.
Lerner mused that SNAP may be discounted because it’s out of the Silicon Valley loop, being on the opposite coast and never having taken venture funding. The Lerners declined to disclose whether, since going public, SNAP has entertained serious M&A offers or potential PIPE investments. Currently, insiders own around 75% of the company.
The market cap is rather puzzling when one considers generous valuations attached to others in the app space. Generally, I like to assume that when a well-regarded investor attaches an enormous worth to a Facebook app developer, they’ve done some serious number crunching to justify that valuation.
Certainly, I wouldn’t have paid $563 million plus a possible $200 million earnout for Playdom, the No. 6-ranked Facebook Apps developer based on monthly unique users, according to Appdata.com. But I figure Disney had some reason to think the price worthwhile.
And I questioned whether Electronic Arts did well buying then No. 2-ranked (now No. 5-ranked) Playfish last year for up to $400 million. One would think a company with one of the largest talent pools in the gaming industry would be able to come up with its own app play. But hey, EA needed a foothold in the fast-growing space ASAP, and one would assume they’d done their homework to determine that a fast, albeit pricey, M&A move beat out relying solely on in-house expertise.
This past week, however, I’m increasingly questioning valuations. If public markets are too be seen as efficient means to set value, then SNAP’s $7 million market cap ought to be causing more than a few deep-pocketed acquirers to reconsider what they’re willing to pay for an app company.
Peter Thiel: I’m Really Not Crazy; I Just Want to Help Some Kids
By Connie Loizos, Nov. 3, 2010
Two weeks ago, billionaire Peter Thiel was savaged in a widely read Slate story that called him a “hyper-Libertarian” with an “appalling plan to pay students to quit college.”
It wasn’t the first time that Thiel has been dumped on by media observers. The 42-year old—who made his first fortune as a PayPal cofounder and now oversees a New York-based hedge fund, a San Francisco-based venture capital firm, and sits on several startups’ boards, including Facebook—has numerous interests that make him an easy target.
The newest of these, and the overwhelming focus of Slate’s scorn, is the Thiel Fellowship, a program that plans to give $100,000 to 20 applicants under age 20 to “stop out of school” and pursue any entrepreneurial ambitions they might harbor.
Slate called the idea “nasty,” and an effort for Thiel to “clone” himself, and though it seemed that Slate grossly overstated its case, I didn’t particularly understand the need for the program, either. Thiel tried to explain it to me yesterday. Our conversation, edited for length, follows.
Q: Slate wrote a surprisingly hostile piece about you. Did you talk with the author, Jacob Weisberg?
A: I didn’t. He didn’t reach out to me in any way. I Googled him and saw that he went to Yale and was a Rhodes Scholar, so it’s possible that as [someone with Weisberg’s academic credentials], he took particular issue with the suggestion that college isn’t for everyone. But I really don’t know.
Q: Among the ominous-sounding observations in Weisberg’s piece is that you see Facebook “as a way to form voluntary supra-national communities.” Is that really what you had in mind when you wrote Mark Zuckerberg his first check for $500,000?
[As a board member and investor] I can’t really comment much about Facebook except to say that I don’t see a problem with people forming voluntary groups on Facebook, and of course, they’re not hampered by national boundaries. It’s sort of odd that there would be something wrong or controversial about that.
Q: What of his characterization that you’re the lead backer of Seasteading, which aims to create permanent, autonomous communities on the ocean, or that you’re way involved in the Methuselah Foundation, which is researching how to extend human life by hundreds of years?
A: Seasteading was started by a friend of mine, Patri Friedman, who’s the grandson of [Nobel Prize-winning economist] Milton Friedman. Patri is a smart guy who used to be an engineer at Google and [one of the institute’s first ideas] is called Ephemerisle, which is intended to be more like Burning Man on the ocean. Whatever you think of Burning Man, you don’t think of it as this sinister crazy plot. And I’m probably the largest single donor to it, but the whole thing has been [operating] on a modest shoestring-type budget. It’s still just getting started.
About the Methuselah Foundation, I’ve been very interested in biomedical research, and one area that’s been very underfunded is research on the causes of aging and what to do to slow down the aging process. It’s sort of odd to me why people find it so controversial. It seems to me that in general, it’s something that people would be very supportive of – that people could live longer and healthier lives. Meanwhile, Methuselah has done an incredible amount of good work on a very modest budget, including organize conferences to get people together on the topic and inspire a lot of people involved. Transhumanism has all kinds of weird connotations [but] I think it’s worth supporting the research even if it’s unlikely that I’ll personally benefit from it. I’d still be supporting it if I were 90 years old and expected to die in six months.
Q: Do you mind being characterized as so eccentric, with strange interests and rented homes that are “totally devoid of any family or friend photos” and so forth?
A: Well, I don’t spend a lot of time decorating my places, but I do have books, chess sets, and some photos. “Eccentric” always sounds slightly negative, so I’d never describe myself as eccentric. I’d sort of describe myself as independent. Whenever there’s a piece of conventional wisdom that everyone believes, my gut instinct is to ask questions about it. It doesn’t mean that it’s wrong, but I’m viscerally skeptical of what the crowd thinks.
Q: Including the importance of a college education, seemingly. You went to Stanford University as an undergrad and a law student, yet you’re advocating for some students to “stop out of school.” How would you rank the value of your own education?
A: I’m very positive on Stanford. I’ve been on Stanford Law School Board of Visitors. I’ve taught [at the law school] and will teach there again in 2011. It was a great undergraduate and graduate learning experience, and I think it probably was very helpful, but you can’t run the experience twice. It’s hard to know [where I’d be] if I didn’t go to Stanford or to school at all.
I do think it’s striking that there are a lot of talented entrepreneurs who didn’t finish even their undergraduate schooling and I question how closely education links with entrepreneurship. At the end of my education, I was applying to become a corporate attorney in Manhattan. Becoming an entrepreneur was very far from my mind even though it was Silicon Valley in the ‘90s.
A second thing that’s very important and that has changed from the ‘80s, when I went to school, is that it costs so much more. I was fortunate that my parents were middle to upper middle class, so they could pay for my school, and I got out without loans, and it freed me to do a number of things, including becoming an entrepreneur, which is riskier and you can only really do if you don’t have a lot of debt. But it’s hard to do a startup if you own a house, for example, because you typically have to have a job to service the debt. And when college education becomes as expensive as buying a home and impacts people’s freedom over the rest of their careers, it’s a problem that we need to think more about as a society.
Q: College costs are clearly a huge burden, but what of the many other benefits of going beyond educational, including the friendships schools foster, along with the networks?
A: On that score, I think some colleges are better than others. The counter question is: are cultivating those networks worth a quarter million in debt? It’s something like $180,000 in loans for business school. I sort of agree with your point, but I think it’s a problem when networking becomes the main reason that people go to school, which is sometimes the case. I think you could do networking for a lot less [cost].
Q: There’s also the question of why you’re rewarding people under age 20. Why is that number meaningful to you?
A: The idea behind the fellowship program isn’t just for people to start companies. We’d be open to having them start a business, but we’re also looking at helping connect them with the various businesses that we’re familiar with and know in Silicon Valley, and to give them the opportunity to see what goes on in a startup.
Q: Then are we really talking about well-paid internships?
A: Sort of. You don’t typically have internships at startups, but that would certainly be one option. We just want people to start thinking hard about various things, and we’re asking for a bit more of a commitment than a 10-week or a 3-month-long summer program. My sense is that you don’t learn that much in three months, which is why we thought this should be a somewhat more sustained effort.
Q: What about logistics, including how recipients will be paid?
A: We’re still figuring everything out. We might give them [one check] at the beginning of the first year and another at the start of the second. We might do it quarterly. We’re looking at accepting a first batch by the end of this year and the rest on a rolling basis. But we’ve gotten a decent amount of interest. I think people are very open to this kind of program because there’s some agreement that we need to rethink things that are tracked. You can think of this as an anti-tracked thing, because being an entrepreneur is fundamentally not tracked.
Q: And what do you say to parents who think there’s enough time for both?
A: The thing is, it’s only 20 people. There’s something like 10 million people in college in the U.S. I can grant you that for most of those 10 million people, college is the right thing. But are there 20 people for whom it’s not the right thing — who should think about it more? These debates always get framed in binary ways, but the nuance is always: it may be good for some people, maybe even the vast majority. But [college] may not be right everybody.
We just had a crazy housing bubble and people didn’t think enough about, and it’s a mess. But if you don’t pay your loans, the bank will take back your house. I think it’s even more important to stop and think about education. If you don’t think it through and you make a mistake, you really can’t get out of it.