By Alex Vieux.
When historians look over the past fifty years, they will remind the world of David Packard, Bill Gates, Steve Jobs, Nolan Bushnell, Sergey Brin and Mark Zuckerberg. But they might pass over the man who has made technology an integral part of modern economies.
If Joseph Schumpeter, the Austrian born economist, enlightened and warned public leaders about how innovation would disrupt and transform industries with his creative destruction theory, Tom Perkins, alongside a few pioneers (Bill Draper, Pitch Johnson), epitomized that trend as a masterful and insightful sculptor of Silicon Valley’s future.
A small group of individuals scaled venture capital and nurtured it to its early triumphs. Although Tom Perkins did not create any gear which could bear his name, he served as a catalyst to the phenomenon which has led to the prominence and ubiquity of technology industries. Working closely with him at the tail end of his career, from 1996 to 2004, represented not only a fantastic privilege but brought insights on how great minds shaped the 21st century.
Tom James Perkins was born in 1932 and grew up in White Plains, New York in a middle class family. He joked at times about how he envisioned, as an early teen, becoming a TV repairman, as TV was invading American homes for he was fascinated by technology. This was long before his MIT graduation in 1953. He would stay on the East Coast until after his Harvard MBA.
Shortly after this, Bill Hewlett and David Packard wooed Perkins to move to California and eventually run HP’s computer division. Hewlett and Packard had built an impressive electronics conglomerate around testing equipment and calculators, but figured out early that the world was changing. Digital Equipment Corporation had, in 1957 launched the first mini computer and IBM was following suit with the 360, which disseminated business computers in the workplace. It helped that Tom Perkins knew DEC well, and its founder Ken Olsen (an MIT contemporary graduate), since Olsen had been financed by his mentor, an early French venture capitalist, General Doriot, who managed the ARD fund in Boston. The young MBA (he was barely 33 years old) engineered to build a $50 million business (the equivalent of creating a Unicorn today) shouldered by Dave Packard’s network.
His achievements did not go unnoticed. When David Packard and Bill Hewlett were aging and succession became a thorny issue, Tom Perkins made the contenders’ short list with John Young. He also launched a startup while remaining at HP in the 1960s, University Laboratories, which was later acquired by Spectra Physics. But the founders did not pass the torch to Perkins. Had they done so, Perkins would have become HP’s CEO and would not have crossed the line and become a venture capitalist.
Nevertheless, the lessons taught by General Doriot at Harvard Business School were bearing fruit. At the turn of the sixties, venture capital was a club with a handful of entrepreneurs and even fewer firms: Tommy Davis, Arthur Rock, Bill Draper, Pitch Johnson successively create Mayfield, Sutter Hill, and Asset Management between 1965 and 1969. Most studied at Harvard and attended General Doriot’s classes. Modern icons such as Sequoia Capital and Accel only raised their first funds twenty years later.
As Tom Perkins and his co-founder Gene Kleiner assembled their initial fund in 1972 of a mere $8 million, half of which came from Pittsburgh billionaire Henry Hillman, they surely couldn’t fathom that the industry would swell to 5,000 professionals in America, raise annually over $63 billion (in 2015) and spread across the world.
Tom Perkins and Eugene Kleiner could not have been more different. The former was eloquent and social, the latter the ultimate engineer, and a Fairchild Semiconductor founder. One understood systems and was curious about any innovation. The second was methodical, with his Austrian roots and semiconductor-focused. But the chemistry could not have worked better and their agenda more aligned. Gene Kleiner summarized their philosophy late in his life: “We build great companies in markets where there is demand.”
Many successes took place in the first decade – they funded four different billion-dollar companies in the seventies, a record by any standard, putting Kleiner Perkins in a league on its own. But two deserve a special mention in the industry’s history. Tandem, because Tom Perkins seeded the idea with a former HP colleague, a young Stanford MBA, Jimmy Treybig, feeling intuitively that financial markets needed more robust, fault tolerant systems, beyond the mainframes. Tom Perkins served as Chairman from 1995 until its sales to Compaq, the PC company in 1997.
The second one deserves even more kudos: Genentech held a special place in Tom Perkins’ heart for he not only financed it, alongside Robert Swanson, but also because it capitalized on breakthroughs in DNA research. Both Swanson and Perkins fathered the biotech sector and proved the viability of such investments leading to thousands of startups in medical research and millions of saved lives since. Genentech’s stock was acquired in tranches by Roche, the Swiss pharmaceutical giant for an aggregated $46.8 billion. For Perkins, who had continued to buy stock in the companies he co-founded long after they went public, and remained Chairman for over two decades, the financial rewards set him in the billionaire’s club.
In venture capital, it remains extremely difficult to fairly allocate credit where credit is due. Does Applied Materials or Acuson, two Kleiner Perkins triumphs, owe more to its founders or to its financiers? Should the market pay respect to the jockey or to the horse? It goes without saying that Perkins’ string of IPOs (14 in which he was the Series A investor) is the best answer. But his legacy extends beyond.
In fact, from the early days to his retirement, Tom Perkins borrowed a page from the successes and failures at HP and established the foundations for a firm which would endure the passage of time. Early, the two founders added the talent of Frank Caufield and Brook Beyers (who spearheaded the life sciences practice after 1984). In the eighties they added a throng of talent with John Doerr, Vinod Khosla and Bernie Lacroute. The team would follow their path and create a brand in the venture capital industry, investing in the likes Sun Microsystems and Google. Even more remarkable, Kleiner and Perkins hired the first non-white partner in Silicon Valley at KPCB when Vinod Khosla left Sun, breaking the invisible glass door.
The nineties brought a new set of challenges. Tom Perkins’s wife passes away in 1994, a trauma that he did not overcome. That accelerated his progressive handing over the reins to the new generation. Simultaneously, Tandem, after twenty years of success and presence in all major banks and financial institutions (NYSE, NIKKEI) stuttered. Perkins struggled to replace Treybig whom he considered and treated as a son. He trusted the leadership to a Dutch CEO, Roel Pieper, rejuvenated the board and merged Tandem into Compaq in 1997. In spite of the rich sale, Perkins recalled that Sunday afternoon in New York for the Compaq -Tandem merger as a turning point in his career.
In fact, his life was already morphing by that time. He was courting Danielle Steel, the famous novelist and married her in 1998. Celebrity and the Genentech sale also transformed his priorities. In a ride in his Bentley after a Tandem board meeting, in his customarily short sentences, he described that period: “death reshuffles everything.”
For the next decade, Perkins dedicated more time to his hobbies and personal investments. His boating passion was unrivaled and he spent thousands of hours (and over $200 million) designing his yacht, the Maltese Falcon. He authored a couple of books, without a ghostwriter. But behind the public role, Tom Perkins was an utterly private man.
Some would describe him as aloof, some remember him for his flamboyant artwork, his boats, others as a provocateur, and everyone as a complex character. But the same goes for most people who know they are influencing the future. Consensus was that, as an engineer, he aimed at perfection and studied relentlessly before making decisions. His faith in entrepreneurs remained unabated and his loyalty towards them made public. He cornered the famous saying: There are three things which are important in startups: number 1: people, number 2: people, and number 3: people. Facts born out in his anguish and heartbreaking decision to let Jimmy Treybig go when Tandem dearly needed new blood.
As importantly, the untold story was his openness towards talent of all shapes, colors and sizes. Jimmy Treybig gladly highlights that Tom Perkins supported a new trend in Silicon Valley, rewarding employees and management with substantial stock options which was not fashionable then. Although elitist he noticed that the world was changing for the better and he fully accompanied that change. Highly underscored was his backing of Vinod Khosla joining the KPCB partnership at a juncture when Sand Hill Road looked more like a country club than like Corporate America of the eighties. I can vouch for that, being the first black man on Tandem’s board, a decision he encouraged after he and Pitch Johnson interviewed me.
Tom Perkins is gone and prostate cancer managed to win. Discreetly. In today’s Silicon Valley, few people may realize how this legendary visionary wrote an indelible page of the world’s innovation economy.