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.