Kleiner Launches sFund with Amazon, Facebook, Zynga

Kleiner Perkins Caufield & Byers announced it will team up with Facebook, Zynga Game Network, Amazon.com and other media corporations to set up a $250 million fund to invest in social media startups.

The so-called sFund, which will also have Comcast, Liberty Media and boutique investment bank Allen & Co. as investors and strategic partners, will be led by Amazon and Zynga board member Bing Gordon, formerly with Electronic Arts and now a partner at the Menlo Park, Calif.-based venture firm.

The fund was announced in late October at Facebook’s headquarters in Palo Alto, Calif. In addition to Gordon and Facebook CEO Mark Zuckerberg, the press conference also featured Kleiner Partner John Doerr, Zynga founder and CEO Mark Pincus and Amazon founder and CEO Jeff Bezos.

“If you don’t have a social strategy, you better go get one,” said Doerr, who was dressed in black jeans, a gray T-shirt and a black hoodie, the standard attire of Zuckerberg.

Despite all the assembled firepower, some wonder if Kleiner is too late to the social media game. “The sFund in 2004 would have been ballsy,” says Paul Kedrosky, author of the Infectious Greed blog. “Unfortunately [for KP], it’s 2010.”

Kedrosky adds that he “gets” why Kleiner made the move, noting: “The returns from their current fund are likely to come from Zynga. But it looks like a big fund that’s surprisingly late in a sector that looks overheated.”

Doerr was asked at the press conference what had taken Kleiner so long to focus on social media. Doerr replied: “With the arrival of Zynga—and it exploded about a year and a half ago—we realized the applications opportunity was going to be enormous, and that’s when we set out to organize the fund.”

Exact details of the $250 million fund are unknown. Kleiner did not disclose how much money was raised from each of the participating companies, but the firm acknowledged that each one is a contributor to the fund.

If you don’t have a social strategy, you better go get one.

John Doerr

At the press conference, Zuckerberg told reporters that there was an unprecedented opportunity to invest in the social-media evolution of industries from online retail to music in coming years. “There’s going to be an opportunity over the next five years or so to pick any industry and rethink it,” he said.

The games industry was the first example of a business transformed by the social Web, with social gaming—playing among a community like Farmville or Mafia Wars—now among the most popular activities on the Internet.

Others primed for a similar transformation included e-commerce, music and other sectors that will increasingly build social Web applications to take advantage of the networking phenomenon, Zuckerberg said.

“We’re at the beginning of a new era for social Internet innovators who are re-imagining and reinventing a Web of people and places, looking beyond documents and websites,” Doerr said in a statement. “There’s never been a better time than now to start a new social venture.”

Specialized applications like games are popular on Facebook. According to the world’s largest social network, more than 70% of its users interact with such applications every month.

Applications startups have become some of the hottest Internet properties. For instance, Walt Disney Co. and Electronic Arts are among the media players that bought social gaming companies in the past year.

The first new investment from the sFund includes stealth social networking startup CafeBots, which raised a $5 million round from the sFund. The Palo Alto, Calif.-based company was founded by Stanford University Professor Yoav Shohamin. As part of the funding, Gordon has joined the board of CafeBots. —Alexei Oreskovic, Reuters, with Constance Loizos of VCJ