Venture Round: Kleiner: You want solar power with that?

Is Kleiner Perkins Caufield & Byers (KPCB) evolving into a franchise? Over the past few years, the venture firm has attached its venerable name to a series of funds or investment initiatives targeting very specific niches: Java technology, vaccines, green technologies, even the iPhone.

Just this week KPCB announced the raising of a $500 million Green Growth fund. (The good news is KPCB still plays in the generalist space as well as it also announced the closing of $700 million for its 13th fund this week. More on that below.)

It’s a strategy that’s uniquely KPCB and leads one—okay us—to wonder whether all the specialization is really necessary. After all, we’re talking about Kleiner Perkins. Clearly, the firm could invest in green technologies just fine without the pomp and publicity that goes with industry-specific initiatives. (Personally, we do applaud KPCB for emphasizing green technologies and hope it bears fruit.)

Partner Dana Mead, who joined the firm in 2005 from Guidant, says the specialization strategy just plain works, insisting it has opened more doors and established networks more quickly than investing from a traditional venture fund would. The dedicated capital draws luminaries like Al Gore to Kleiner’s table while serving as bright green neon Open-for-Business sign for entrepreneurs and companies looking for capital. “The way you make money is to predict the next big thing and invest heavily in that area,” Mead says. “We did it with biotech with Genentech, semiconductors, Netscape, Google. We think we’re doing it with personalized medicine and we see green tech as that next big opportunity”

Again, KPCB was a first mover in all those areas without the benefit of specialty funds. But who are we to argue. The firm’s limited partners appear to be satisfied with the strategy (although what institutional investor would pass up the opportunity to invest in a KPCB-anything fund?) Plus, Tom Perkins must know what he's doing to afford a boat this big.

Time will tell whether it will produce solid returns as Kleiner’s green tech investments haven’t produced any exits yet. Mead, however, says green technology companies are very much like biotechnology companies: they require significant capital and time to mature.

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KPCB will be pulling back on the specialization strategy in at least one case. Mead says Kleiner isn’t likely to raise a follow up to the $200 million KPCB Pandemic Preparedness and BioDefense Fund, which is fully invested in 10 companies. Mead says Kleiner raised that fund for two reasons. “Number one to make a difference and number two to create a fund that makes good investments for our LPs,” he says. The jury remains out on number two, but Mead is comfortable saying that the pandemic fund helped to drum up support from the federal government, the pharmaceutical industry and not-for-profit entities like the Gates Foundation. He acknowledges that no other venture capital firm followed suit, “but in every one of our investments we have other venture firms as investors.” You can view the portfolio here. One intriguing company not mentioned is Breathe Technologies Inc.

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Now, as far as investing the $700 million KPCB XIII Fund, Mead says KPCB will invest equally among green tech, information technology and life sciences. In the life sciences space, “We do love personalized medicine and you’ll see us doing more diagnostics. We really like medical devices and continue to do significant investments there. We like orthopedics (except for overheated areas like dynamic stabilization) right now, imaging and the opportunities in consumer medicine,” Mead says. KPCB is also looking heavily at cancer companies including those employing epigenetics as well as companies trying to stem cancer metastasis. Mead says KPCB will continue to incubate companies inside its own walls, and that the firm incubated five of the 10 life sciences companies in the portfolio of its prior fund.

Abingworth's Growth

IN VIVO Blog was happy to see the news this week David Mayer joined Abingworth to help manage the firm's growth equity stage investments. Mayer brings a wealth of private equity investment experience from his time at Thoma Cressey Equity Partners including a role in some high profile investments like ESP Pharma Inc. and Jazz Pharmaceuticals Inc. Check out the press release for more information.

What you won't see in the press release is new that Abingworth is in the process of raising $100 million to $200 million for a small fund that will supplement the firm's growth equity investments. In the case of larger deals, Abingworth might draw capital from its new growth equity fund as well as its $587 million main fund.

Mayer says Abingworth Growth Equity fund would give the firm enough powder to in larger deals--up to $80 million--without syndication. It may still want to syndicate such deals, but co-investors wouldn't be necessary.

Mayer says Abingworth's flow of growth equity deals is already strong. He expects to invest in pharmaceutical and device companies. Abingworth might also invest in services companies if they work within the life sciences field.

Mayer says the fund target is intentionally small. Abingworth wants to sync any future fund-raising campaign with its main fund. Abingworth could raise a second growth-equity fund or just raise a larger single fund.

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