20VC Kleiner Perkins GP, Eric Feng on How The Best Funds Use Tech and Data To Find Companies, Why Entrepreneurs Start The Fire and VCs Add The Rocket Fuel & Why Consumer Is Harder Than Ever Today

In this episode of 20 minutes VC, Harry Stebbings interviews Eric Feng, a general partner at Kleiner Perkins and former CTO of Flipboard. Feng shares his unconventional journey into venture capital, starting as an engineer and product builder before joining Kleiner Perkins to work alongside Al Gore. He discusses the current challenges in consumer tech, such as distribution difficulties, powerful incumbents like Facebook and Google, and the maturity of the mobile platform. Despite these obstacles, Feng remains optimistic, highlighting the potential in commerce and transactional business models, as well as the promise of emerging technologies like VR and autonomous vehicles. He also advocates for a barbell investment strategy that focuses on very early or proven companies, emphasizing that in consumer tech, the entry price matters less once a product is successful. Feng's insights reveal a nuanced understanding of the venture landscape, balancing pragmatism with a forward-looking perspective on innovation and investment opportunities.

• Harry Stebbings hosts the "20 minutes VC" podcast, focusing on the venture capital industry.
• He invites listeners to suggest guests and questions for future episodes via Snapchat.
• Harry introduces the episode's focus on Kleiner Perkins, a leading VC fund.

We are back with the 20 minutes VC. Another week in the world of venture with me, Harry Stebings at H stebbings with two b's on Snapchat and it.

Harry Stebbings is the host of the "20 minutes VC" podcast and uses Snapchat to interact with his audience.

• Kleiner Perkins has a notable portfolio including Google, Amazon, Uber, Snapchat, and Twitter.
• Eric Feng is a general partner at Kleiner Perkins and a cofounder of Packaged, a startup focused on mobile shopping.
• Packaged secured a $6 million Series A funding led by Forerunner and Google Ventures (GV).
• Eric's background includes being CTO at Flipboard, which has over 100 million users and $200 million in funding.
• Mike Abbot of Kleiner Perkins facilitated the introduction to Eric Feng for the podcast.

Yes, we're at Kleiner Perkins, where we're joined by Eric Feng, general partner and most recently cofounder packaged the startup, building a family of apps offering a new mobile shopping experience.

Eric Feng is a guest on the podcast due to his role at Kleiner Perkins and his recent entrepreneurial efforts with the startup Packaged.

• EShares is a cap table management platform used by many venture capitalists.
• It assists with equity management, 409A valuations, and liquidity for companies of various sizes.
• Squarespace, Kickstarter, and Doordash are mentioned as customers of EShares.
• Fond is an employee engagement suite with rewards, perks, and an engagement survey to measure organizational health.

EShares is the number one cap table management platform, allowing for equity management 409 a valuations and liquidity all in one place.

EShares is a widely used software in the VC industry for managing company equity and related financial assessments.

• Eric Feng did not initially plan to enter venture capital, considering himself an engineer focused on building products.
• His career included roles at Trilogy Software, Microsoft, and Hulu.
• Eric's journey into venture capital was influenced by his network and interactions with Kleiner Perkins.
• His interest in climate change led to an introduction to Al Gore through Kleiner Perkins, which eventually resulted in Eric joining the firm.

But my background is one that actually I didn't expect to end up in venture. I've always considered myself an engineer, and I continue to build products to this very day.

Eric Feng describes his unexpected path into venture capital, emphasizing his engineering and product development background.

• Eric joined Kleiner Perkins in 2010 to work with Al Gore, driven by a personal admiration for Gore's work on climate change.
• He contributed to Kleiner's clean tech practice and digital investments, including Twitter.
• Eric sought to experience building products and companies in Silicon Valley, leading to a hiatus from Kleiner Perkins.
• He incubated and sold a company within Kleiner's portfolio and ran engineering at Flipboard before being called back to Kleiner Perkins in 2015.

I got to meet the fine folks at Kleiner back in 2007 and ended up just becoming friendly with them and helping them occasionally look at companies and offering feedback on technologies and maybe occasionally helping them interview a VP of edge candidate and just got to know the partnership and had no ambitions at that point to be an investor.

Eric Feng explains his initial interactions with Kleiner Perkins, which were informal and not driven by a desire to become an investor at the time.

• Eric Feng returned to Kleiner Perkins in 2015 after being approached to help with exciting opportunities.
• His focus at Kleiner Perkins is on early-stage consumer investment practice, looking for the next big early-stage consumer company.

"So I rejoined in 2015 and have been investing here at Kleiner for about a year and a half now. And here at Kleiner, I focus on our early stage consumer investment practice."

This quote explains Eric Feng's role at Kleiner Perkins and his focus on identifying and investing in early-stage consumer companies.

• Venture capitalists are viewed in two ways: as mere financiers or as integral team members.
• Eric Feng initially saw VCs as less helpful but now appreciates their potential to transform companies.
• VCs can provide network resources and long-term partnership, aiding in company building and key hires.
• John Doer, a board member, exemplified hands-on involvement by answering customer support emails and writing apology messages during Flipboard's early challenges.

"I have a tremendous now appreciation for the great work that investors can really do to fundamentally transform a company and put it on a very, very different trajectory."

The quote highlights Eric Feng's revised opinion on the value that venture capitalists can add to a company, beyond just financial investment.

• Eric Feng agrees there is a lull in consumer tech breakthroughs since Snapchat, the last major success in 2011.
• Previous generations saw frequent breakthroughs such as WhatsApp, Pinterest, Uber, and Airbnb.
• The lull is attributed to the difficulty of distribution, strong incumbents, and the maturation of the mobile platform.

"It's been almost six years since we had that level of success on the consumer side."

This quote indicates the time elapsed since the last significant consumer tech success, suggesting a slowdown in the sector.

• Distribution channels are now optimized and mostly pay-to-play, making it hard for startups to scale.
• Incumbents like Facebook, Uber, and Google are savvy and unlikely to be caught off-guard by new entrants.
• The current generation of incumbents grew up in the digital era and are adept at responding to disruptive forces, including through acquisitions.

"I just can't imagine anyone sneaking up on Facebook or anyone sneaking up on Uber or sneaking up on Google these days."

This quote emphasizes the difficulty for startups to compete with established tech giants who are well-versed in innovation and market dynamics.

• The current tech giants are proactive in the M&A space, acquiring potential disruptors early.
• They understand the innovator's dilemma and are not hesitant to acquire, compete with, or copy emerging companies.
• This proactive approach is a strength that previous tech titans like Yahoo did not exhibit to the same extent.

"They are the savviest, strongest, most nimble, fast moving group of incumbents that I think the world has ever seen."

Eric Feng describes the current incumbents as the most adept and agile in history, making it challenging for startups to establish themselves.

• The mobile platform has matured, and most low-hanging problems have been solved.
• The bar for creating value in the consumer space is much higher, requiring advanced features and innovation right from the start.
• Startups must offer sophisticated services with features like machine learning and augmented reality to compete.

"You can't just launch a service that shares a photo. You got to launch a service that has unlimited storage and machine learning and visual search and video and filters and augmented filters."

The quote captures the high expectations for new consumer services, reflecting the advanced state of the mobile platform and consumer demands.

• There has been a noticeable slowdown in consumer technology.
• A logjam in the ecosystem is waiting to be resolved.

I think that's a huge contributor to why there's been a slowdown on the consumer side. And it's going to be interesting to see how that log jam gets unbroken.

The quote points to a current challenge in the consumer technology sector, where progress has stalled, and the speaker anticipates a need to address this issue to move forward.

• Despite a pragmatic view, there is optimism for future technology.
• Emerging technologies like VR, autonomous vehicles, machine learning, and IoT are expected to be transformative.
• The industry has shifted from skepticism to a belief in the inevitable impact of these technologies.

But I still think there's a lot of room for optimism. I'll start out by saying first that there is so much exciting stuff on the horizon that I've rarely seen a moment in time where there's nothing but optimism for those next generation technologies.

Eric Feng expresses a positive outlook on the potential of upcoming technologies, contrasting current optimism with past skepticism about innovations like mobile and the internet.

• Timing is crucial for investments to yield meaningful returns.
• There is a belief that transformative technologies will eventually succeed, but the right investment timing is uncertain.
• Current investment focus is on iterative rather than transformative changes.

But unfortunately, in our business, in investing, timing matters so much because it is just as damaging to be too early to the party as it is to be too late.

Eric Feng emphasizes the significance of timing in investment, acknowledging that both premature and delayed investments can be detrimental to achieving returns.

• E-commerce is experiencing a merge with content, affecting consumer behavior.
• Commercial content is becoming as engaging as entertainment content.
• Startups like OfferUp demonstrate substantial user engagement with commercial content.

One category that I'm really interested in is around, is around ecommerce. What we've seen is this combination, this kind of combination effect of commerce and content, where content is becoming commerce and commerce is becoming content, and they're becoming intertwined.

Eric Feng discusses the convergence of commerce and content, suggesting that this blend is creating new consumer behaviors and investment opportunities.

• There is a shift back to transactional business models over ad-based models.
• Payment platforms like Apple Pay and Venmo have lowered payment friction, making consumers more willing to pay for services.
• Startups can benefit from transactional models, as they can generate revenue without requiring massive scale.

But now with the rise of transactional business models, I think that that actually suits startups much better.

Eric Feng argues that the resurgence of transactional business models is advantageous for startups, allowing them to generate revenue and grow without the need for large user bases required by ad models.

• Investment firms use technology to gain an edge in identifying promising companies.
• Tools and data analytics help to detect early signals of company or category success.
• Kleiner and other firms develop in-house technology to support investment decisions.

And one of the ways that we've been doing it here at Kleiner, and I think this is pretty common amongst a lot of firms, is to actually develop a lot of technology.

Eric Feng reveals that Kleiner, among other investment firms, leverages technology to enhance their investment strategies by identifying early indicators of success in companies and market categories.

• Consumer companies are binary in their success; they either work or they don't.
• Entry price is less relevant in successful consumer companies due to their binary nature.
• A Barbell investment strategy is utilized: invest super early for reasonable valuations and high ownership, and invest at any price once product market fit is established.
• Confidence in a company's success is more important than valuation in investment decisions.

"And that's consumer companies are binary. They work or they don't work. And when they work, it just really doesn't matter what your entry price is."

This quote emphasizes the binary outcome of consumer companies and the irrelevance of entry price if the company is successful.

"So in a binary opportunity, what we try to do is pursue more of a Barbell investment strategy, which was let's go super, super early... And then the other strategy is on the other side of the barbell is that once there's product market fit and the company has clearly worked, let's just invest in the company regardless of price because it's proven to work."

The quote describes the Barbell investment strategy, focusing on early investments for better valuations and investing at any stage post product-market fit due to proven success.

• Favorite book is "Adventures in the Screen Trade" by William Goldman for its raw look at the media industry.
• Autonomous technology is considered the most hyped sector, while climate change tech is underhyped.
• Wishes for shorter feedback cycles in VC to improve decision-making and learning opportunities.
• Uses Techme as a key source for industry news and updates.
• Advocates for an electric toothbrush as a productivity hack, allowing for two minutes of contemplative time daily.

"Adventures in the screen trade by William Goldman. I love the media industry. Bill Goldman is one of my favorite writers."

This quote shares Eric Feng's favorite book and his passion for the media industry and the work of William Goldman.

"Most hyped, I would say autonomous. Autonomous everything... under heights, climate change."

Eric Feng identifies autonomous technology as overhyped and expresses a desire for more focus on climate change tech.

"I would love in the world of VC to get feedback faster on decisions that we make and have more opportunities to learn."

The quote reflects Eric Feng's wish for a more responsive feedback system in the VC industry to enhance learning and decision-making processes.

• Investing in early-stage companies and those with proven product-market fit are key strategies.
• Recent investment in Holler, an online dollar store, was driven by unique customer engagement metrics.
• The decision to invest was influenced by the high percentage of orders from browsing and significant user time spent on the platform, indicating a unique shopping experience.

"So back in October, invested in a company called Holler, which is trying to bring the dollar store online."

This quote introduces Holler, an online dollar store, as Eric Feng's recent investment.

"But the two stats that I was blown away by is first is the percentage of orders that came from browse not search... And then the second was time spent."

Eric Feng explains the compelling statistics that influenced his investment in Holler, highlighting the unique customer engagement and shopping experience.

• Thanks to Michael Abbott at Kleiner for facilitating the podcast episode.
• EShares is recognized as a must-have cap table management platform for VC firms.
• Fond is presented as an essential employee engagement suite offering rewards, perks, and engagement surveys.

"And again, I'd like to say a big thank you to Eric for giving up his time today to join us on the show."

Harry Stebbings expresses gratitude to Eric Feng for participating in the podcast.

"EShares is the number one cap table management platform, allowing for equity management 409 a valuations and liquidity all in one place."

The quote describes EShares as a critical tool for VC firms, highlighting its comprehensive features for equity management.

"Fond is the employee engagement suite with three core products rewards, a recognition platform for rewarding achievements and milestones."

Fond is introduced as an important resource for employee engagement, offering various tools to recognize and reward employees.