This is not a social media post — as I have recently quit Facebook and Twitter — but some summary points on startup investments that I found interesting. I remember many of them as they happened, and added few of my own.
Looking back over time, the long arc of venture terms have tilted toward more founder-favorable economics and governance. Overall, the book is pretty good, and accurate for the data points I know personally, and I especially liked the footnotes and chapter 13 on Sequoia’s strategy.
It was originally called Adventure Capital.
Over time, 70% VC stakes -> 50% -> 33% -> 10-25%
Year Startup $M pre-money, First Funding Terms
1957 DEC 0.03, $70K for 70%
1968 Intel 2.5, $2.5M for 50%
1975 Atari 0.5, $62.5K for 11% est
1975 Tandem 1.5, $1M for 40%
1976 Genentech 0.3, $100K for 25%
1976 Apple 0.26, $91K for 26%
1981 3Com 2.2, $1.1M for 33%
1987 Cisco 2.5 + 2.5 pool, $2.5M for 33%
1994 Netscape 3, $3M for 50%
1995 Yahoo 2, $975K for 32%
1996 Hotmail 1.7, $300K for 15%
1996 Amazon 54, $8M for 13%
1997 eBay 13, $6.7M for 33%
1998 Google 9, $1M for 10%
1999 PayPal (Confinity) 8, $4.5M for 36%
1999 Alibaba 5, $5M for 50%
2000 Baidu 24, $8M for 25%
2004 Facebook 4.3, $600K for 12%
2004 Tesla 11, $7.5M for 40%
2006 JD.com 15, $10M for 40%
2008 SpaceX 400, $20M for 4%
2009 Uber 48, $12M for 20%
It took Don Valentine 1.5 years to raise Sequoia’s first $5M fund. Tandem was the first home run for Kleiner Perkins, producing 94% of the return for their first fund at the time they raised their second fund. (I bought the Tandem CEO’s house when he moved back to Texas). Sequoia sold off their Apple position in 1979, before the IPO, for a 13x return. They learned from this mistake, and held onto their Yahoo position post-IPO. “Yahoo generated more gains than all its prior investments, combined, and more than 10x as much as Sequoia earned from Cisco.” (161)
And sadly, we were the underbidder on Yahoo, PayPal and Facebook!
Similar Fund 1,2,3 sizes for early-stage VCs (in $M):
• Sequoia: 5, 21, 44
• Kleiner Perkins: 8, 15, 55
• Draper Fisher Jurvetson: 6, 20, 50
The first three VC websites went up in 1995: Accel, Hummer Winblad, and the one I built for DFJ. 🙂
Low CEO stakes in the 90’s:
Cisco John Morgridge 6%
UUNET John Sidgemore 6%
Silicon Graphics Jim Clark 3%
Netscape Marc Andreessen 3%
19 of 22 decacorns (startups worth > $10B) are in Silicon Valley.
Europe: “From the beginning of the industry through the end of 2007, the average European venture fund generated a return of minus 4%” (396) and “relative to their European peers, employees at U.S. startups own twice as much of the companies they work for.” (398)
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