Kleiner said yesterday that it led a $200 million investment in Twitter Inc

Kleiner Perkins Caufield & Byers, a venture capital firm that shunned social-media startups in favor of green technology, is spending hundreds of millions of dollars to make up for lost time.

After hiring Internet analyst Mary Meeker from Morgan Stanley last month, Kleiner said yesterday that it led a $200 million investment in Twitter Inc. In October, the Menlo Park, California-based firm also introduced a $250 million fund for entrepreneurs who are building social applications and services.

Kleiner, which along with Sequoia Capital made billions from an early investment in Google Inc., is getting a piece of Twitter at a later stage. The startup, with more than 175 million users, has already quadrupled in value over the past year. Kleiner also missed out on investments in Facebook Inc., Groupon Inc. and LinkedIn Corp., which are all valued in the billions of dollars on private exchanges.

“Are they late? Of course, they’re late,” said Eric Risley, founder of Architect Partners, a technology merger-and- acquisition advisory firm based in Menlo Park. “But I can’t imagine that means they missed the boat, because there’s a heck of a lot more innovation to play itself out.”

Founded in 1972, Kleiner has been one of the most successful Silicon Valley firms, mostly because of 1990s investments in Internet companies such as Google, Amazon.com Inc. and Netscape Communications Corp.

Green Technology

In the past decade, the focus shifted. Starting in 2006, Kleiner partner John Doerr began investing in alternative energy. He said in February of that year that “green tech could be the largest economic opportunity of the 21st century.” In 2008, Kleiner introduced the $500 million Green Growth Fund. During that stretch, rival firms Sequoia, Accel Partners and Greylock Partners stuck with the Web.

While Doerr continues to invest in alternative energy, he’s come back to the Internet, now that social-media companies have taken off. Until the Twitter funding, Kleiner’s biggest social- networking deal was struck by former Electronic Arts Inc. executive Bing Gordon, who was hired by Kleiner in 2008. Soon after joining, Gordon led a $29 million investment in Zynga Game Network Inc., the most popular maker of games on Facebook. Zynga is now worth more on private exchanges than Electronic Arts is on the Nasdaq Stock Market.

Chegg, Ngmoco

Kleiner also invested in online book-rental company Chegg Inc. in late 2008, and made multiple investments in mobile- gaming company Ngmoco. Chegg has since raised more than $180 million, while Ngmoco was acquired in October for $400 million.

Twitter marks a late-stage deal for Kleiner. Prior to yesterday, San Francisco-based Twitter had raised four venture rounds from about 20 investors, including everyone from angel investor Ron Conway to Wall Street securities firm Morgan Stanley. The latest financing round values Twitter at $3.7 billion.

“We are privileged and excited to be the lead investor in Twitter’s latest investment round,” Kleiner said in an e-mailed statement. “We look forward to helping the company become the next great Internet treasure.”

To find future Internet companies, Kleiner will be looking to Meeker, the former Morgan Stanley analyst. She gained fame in the 1990s for her bullish calls on Web companies such as Amazon and America Online Inc., and predicted last month that there will be a $50 billion online advertising boom.

Kleiner also is looking for early stage social startups in its $250 million sFund. Facebook, Zynga and Amazon are investors in the fund, similar to Apple Inc.’s role in Kleiner’s iFund, which opened in 2008 to back mobile-app companies.

“They’ve demonstrated they can move the ball when they need to and focus,” said Jerome Engel, founder of the entrepreneurship program at the University of California, Berkeley’s Haas School of Business and a partner at Monitor Venture Associates LLC. “Social media is a great space and we’d be fools not to pay attention to it.”

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December 2010

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