Link to podcast. Link to transcript (organised by me). 1st November 2023.

Sajith: Mamoon Hamid covers the turnaround at Kleiner Perkins which drifted off course from the mid-2000s to the latter part of last decade, as it bloated into a multi-geography, multistage firm. He came in early 2018, and along with Ilya Fushman, reworked the firm into a smaller, focused firm, recalling its roots and origins, and its past history, when it was the pre-eminent venture firm of the ‘70s-90s. What I found especially interesting was the OKRs they use at Kleiner Perkins to track whether they are seeing the companies their peers have invested in and reflecting on why they didn’t see those. Mamoon elaborates on the processes enabling the OKRs such as their weekly meeting reviewing what they missed seeing in the previous week’s investments, as well the five year antiportfolio review they do (i.e., of the ones they passed on that went on to do well). All great firms and leaders are paranoid, and that is reflected in Kleiner’s obsession in increasing coverage. The processes also remind of sales reviews, and it tells you that VC is actually sell-side, where VCs are selling their brand of capital to elite founders for equity in their firms. Recommended for venture nerds and venture enthusiasts.


Kleiner’s values

Mamoon: “Our mission is to be the first call for founders who want to make history and partner with them as company builders in pursuit of that goal. And we want to invest in these founders with an ethos. And that ethos involves a strong moral compass, a north star, which is to serve humanity with the tools that are at our disposal, that’s people, that’s technology, that’s capital. We want to work with folks who share that compass. We want to do it with humility, we want to do it with empathy. Last but not least is we want to win and win big at it for our values these are internal values that we have for each other and expectations we have for each other. And they’re used very commonly, freely on a regular daily, weekly basis amongst team members and in terms of people just sign off their emails with them.

…the first value is one team, one dream. I would say, just to give you a sense of one team, one dream, we have one set of meetings at the firm, there’s a Monday morning meeting, it’s an all hands, all the different functional groups are there from the investment team to the finance team, the ops team, the go to market team, our talent team, our IT team, everyone’s there, all the leaders and folks from those teams are there. And we start off our week with aligning ourselves and then we go into an investment team meeting. But it is like we don’t have many investment team meetings. We have one investment team meeting. We don’t break up the investment team by consumer or enterprise, it’s just one meeting.

Our second value is pride and excellence. Take immense pride in your work. We are in the excellence business. We are in the 1% of the 1%, the business backing those types of people who truly change the course of humankind. Not everyone can do that, but exceptional and excellent people can do that. So, if we want to back those kinds of people, we have to be excellent as well and we have to take a lot of pride in being excellent and not just as an investment team, but everybody on the team. 

The third value is operating in real-time. We’re here to serve founders and founders operate on a short clock at all times for everything. If we’re going to serve them well, we have to operate on founder time, which is real-time. There’s a sense of urgency that comes with it amongst every single person who works at Kleiner Perkins. And that stems back from who our customer is. Our customer is a founder, is the CEO, the founder that we’re working with their team members, everyone around us is trying to do their best and is doing everything with the positive view in mind and it is assuming the best intention in the other person who may have done something which may have you think may have slighted you, but you know what? Assume that they didn’t intend on doing that. And it was completely a mishap of sorts and that keeps people to think positively around the firm. “

OKRs at Kleiner

Mamoon: “…on the OKR front, we track religiously all series A’s that get done by our peer set and our peer sets tends to evolve, but it’s about 40 to 50 firms just to have enough of an N on the company on the firms. We look at every Monday series As that the group of 40 or 50 firms had announced the week prior and we’d look at seed, series A and series B actually and we just mark it as do we see it or do we not see it?

And then we talk about if we saw it then we usually know why we didn’t, move on, why we didn’t invest in a company, whether we didn’t see it, if it’s an interesting looking company, we talk about it for a bit. It’s like, well, what happened there? Why did we not see it? And we have a little brief dialogue about it and this happens every Monday. And then we tally it up over the course of a quarter. So, the internal OKR for the last five, almost six years has been, let’s see, 60% of that series A cohort of companies that gets done by our peer set at some point we moved that up to 65% because we were overshooting it and then I think we may have peaked at like 70%, but we break it down by sector as well, like consumer, enterprise, FinTech, digital health.

And we also, if our coverage is too low, we’re like, okay, should we be adding some coverage here if we’re missing out on a lot of digital health businesses or something else? So, that’s part of the iteration around team composition where we’re missing skipping a beat or if it’s in a given quarter we see a dip below the 60, what’s going on? We don’t overreact to it, but if there’s a pattern where our new normal is like 55%, we want to understand what’s going on. That’s our first OKR is seeing in order to be a top-tier venture firm and in order to be the first call or say you’re the first call for founders, you have to see the right companies then to your point, you have to have incredible judgement, but it’s hard to judge judgement until many years later. So we don’t make that an OKR.

We do a five-year look back on judgement and we did one at our last offsite looking at all the companies that have become successful and the ones that we actively decided not to invest in at those rounds that we saw them at. Then we talk about what were the failure modes we had around each of them. So, literally the list is not that long and you can go through that list in less than an hour. If you do a detailed discussion about every single company to identify failure modes and those failure modes inform us how in terms of how different people have different failure modes. Some peoples’ failure mode is people, other people have a failure mode around pricing a deal, other may have around overemphasis on go-to-market execution and passing based on what they saw. Some people take the false positive of good data, so everyone has different failure modes.

Going deep on it allows you to see your strengths and your weaknesses and we don’t make judging an OKR because it’s not real-time enough for us, but what we do make an OKR is winning and having a hundred percent win rate on an investment that we want to do. And we track every single loss and fortunately not too long of a list, but if it’s a loss, we assess what the failure modes were in losses.“

Kleiner’s best channel for sourcing

Mamoon: “And we did the analysis a couple of years ago. It’s been a while, but about 80% of all investments that we do are through founder referrals, whether they are founders or they’re founders that we’ve spoken with who we didn’t partner with, but we left them with an impression of having some competence and where there’s just a really positive relationship even though we didn’t invest.

That’s our biggest source of deals that we invest in. And that’s the strongest loop that you can be in is that founder referral loop. We want to be the first, second or third call. If you think about fundraising as a series A or seed stage company, you’re creating lists, every smart company’s going to create a list. Are we on that first list of firms that you want to go talk to? And that’s our aim and goal and we’re that in a number of areas and we’re not in some other areas and we constantly think about is it the addition of a certain skillset or partner that allows us to be the first, second or third call in that sub-sector? Is it some other sourcing mechanism? Is it more thought leadership? What is it that allows us to solve for being that first, second or third call?”

Biggest learning in Mamoon Hamid’s career as a VC

Mamoon: “We need to go play our game, play on our turf and create our own turf, our own field and play on that field and so that we can play to win. 

Samir: “what we found is one of the toughest things for fund managers is staying in that strike zone where they have the biggest asymmetric edges. And a lot of it’s just because there’s so much externalities out there that can push people out of that strike zone, whether it be the promise of more capital, more AUM, the ability to maybe expand into a passion area and all of those things, of course, are challenging when they distract from not only the core mission, but where the manager is best suited.”