Russ Siegelman

       Most folks, if they have any idea about what venture capitalists do, probably hold at least two incorrect assumptions: that VCs spend most of their time chasing new investments, and the rest of the time they do financial engineering. The truth is that as a Kleiner Perkins partner I spend more than 70 percent of my time with companies that we have already invested in, and I spend no time doing financial engineering. The logic of these outcomes is clear when you think about the nature of the VC business. We stand to lose, and make, money only where we have already invested, so we have a natural incentive to make sure those companies succeed. As an early stage venture investor there are typically no revenues or assets when we first get involved–not much raw material for financial engineering. So we go about doing the only thing we can at this phase of a startup’s life–help build companies.
       This entails a lot of recruiting, advising senior management, helping raise money, and networking–introducing senior management to potential investors, employees, customers, partners, press contacts, prospective board members, or anyone else who might help the company. As the saying goes, you can to a large degree measure the value of a VC by the quality and depth of her Rolodex.
       Today revolved around a series of intertwined calls and e-mails regarding five of my companies, each involving a separate set of recruiting, fund raising, or strategic issues. The calls and e-mails came in–sometimes more than one at the same time–and out throughout the day. First thing I received a voice mail from a prospective investor for AdKnowledge. The message indicated that the investor was quite interested in participating in the upcoming financing but, because his parent company’s operating unit had some hesitation, he was passing. I immediately called the CEO of AdKnowledge, and we devised a “diving catch” plan. I was going to call back the investor and get him to schedule a meeting between AdKnowledge and the head of the operating unit to see if we could turn him around.
       While I was still on the phone, I read an e-mail from the CEO of one of my other companies, Resonate. I had been helping him recruit a new vice president of marketing, and the leading candidate, whom I had interviewed last week, was on the fence. I immediately picked up the phone and tried to reach him. In the meantime I realized that I had a call scheduled to talk to a senior executive of a publishing company that is in talks with a third company of mine, Academic Systems. After that call I realized that I had not got back to the prospective AdKnowledge investor, which I then did. After getting a commitment to meet, I called the AdKnowledge CEO back to discuss our tactics for the pending meeting.
       The day continued in this fashion: several calls between me and various possible recruits for Resonate, including a cold call on a person I had talked to several months before as part of a due diligence process for a different company; a voice mail exchange with the CEO of Vertical Networks on recruiting; e-mail to update the CEO of Academic Systems regarding my call with the senior exec of the publishing company; a call with the CEO of Impresse regarding that company’s impending financing and the agenda for Thursday’s board meeting; a phone call with another of my companies about possible strategic alternatives for the company; a meeting with another prospective investor for AdKnowledge. And so on.
       At the end of the day I stopped and pondered: What did I accomplish today except for filling up the e-mail in-boxes of my CEOs and running up my bill on several long-distance and cellular phone carriers? But it is the nature of the beast. Building companies from scratch requires forging little chunks of progress, bit by bit.