Russ Siegelman, Partner, Kleiner, Perkins, Caufield & Byers

Russ led an open and informative discussion about the current state of the VC world. Much of what he discussed follows what I've been reading in various VC blogs, but it was good to hear it directly from a Partner at one of the premier VC firms.

Russ Siegelman's bio

Notes:

KPCB has 10 professional investors

Focuses on seed and A rounds

Looking for companies that want to do something big

Proactive in seeking out certain areas (have to be proactive with the increased competition)

We are having a second smaller bubble; a lot of enthusiasm; lot of activity in Web 2.0, mobile, and China/India

It is a good time to be a entrepreneur in the Valley and a good time to be an investor

However, there are some ominous signs because some VCs are raising huge funds ($2B)

Starting to see some really good teams

He's not particularly interested in traditional enterprise software requiring big purchases ($250K+). Sales cost is too high. Friction within companies to do these purchases is high

Not excited with companies selling big equipment to carriers

They are investing in some companies selling equipment to corporations for things like data center consolidation

What is he interested in?

Likes the whole consumer Web 2.0 space

It is confounding because they go from no users to a lot in a very short period of time

Cheap to start

A lot of questions on the business models

Not a lot of seasoned teams

Competitive risk with Google, MS, Yahoo

It is a little bit like rolling the dice

Really likes the ASP model (now dubbed software-as-a-service)

salesforce.com is just scratching the surface

ASP is attractive because you don't need a huge sales force

Downside is it requires a lot of upfront capital

A lot of other VCs are looking at this area too

Security writ large

Probably the 1 area companies are willing to write big checks

Great area

Dabbled in Energy

Better batteries

Distributed power generation

BioTech and Medical Devices is obviously a hot area

Dabbling in Open Software

The proprietary software models are breaking down

May not know for a few years how this will work out

Very bullish on the whole mobile area

Cell phone is a computing platform

Q/A

From Ken Morse: Is New England an afterthought to Valley VCs? Response: Honestly, you aren't at the top of mind. China however is top of mind.

What's different with the ASP model now than in 1999? Response: ASPs have to add value above just making the software available online. Some quasi successful ASP companies ran into the recession and ran out of cash. WebEx doesn't get a lot of press, but they had a great model and are doing very well now

Are hardware deals going away? Response: Hardware investments make up about 25-30% of the total. SW is so attractive because it is so cheap to start

Will you only do large deals? Response: Recently invested $200,000 in a $800,000 round for a Web 2.0 company

Does location play a role in your decision to invest? Response: It is a stretch to invest outside of CA, but will do it if the deal/team is good.

Outside US, it is a real stretch. Outside of China/India, extremely difficult

What does he like in a business plan? Response: Simple, concise, on point, what problem are you trying to solve, why is it economically interesting. Not as interested in distribution channels, etc.

After 15 minutes into many presos he listens to, he doesn't have an idea what problem they are trying to solve

Should your numbers be conservative or error on the high side? Response: Doesn't really matter as long as the rest of the business plan is consistent with those numbers

What does KPCB do after it invests in a company? Response: He views KPCB as a service company. When you get funded they become trusted advisor, make introductions, help with recruiting, will contact customers, get experts for product reviews, help picking lawyers, accounting firms, etc.