John Doerr's Startup Manual

Often the founding CEO -- Marimba's Kim Polese, Amazon's Jeff Bezos, or Lightspan's John Kernan -- will go the distance. Which brings us back to the team. The biggest problem you are going to face is attracting and retaining the people that will build your business. You are competing in a world-wide scramble for talent. The very best people in technology and marketing want to work in the best organizations.

Let's say that our team from the House of Pancakes has contacted you and gotten its chance to make a presentation to you here in the Kleiner Perkins conference room. What are you evaluating?

The team thinks it's selling us on the technology and the product or service. But actually we're thinking about them -- the team members. We want to understand who they are, how they will work together.

For example, I'll ask them to sell me their product. I'll ask them to recruit me to join your team. I'll ask practical questions about how they'll live and breathe the business: "If I were on your team, I might qualify to be your vice president of business development, or sales. How will you manage me and the other team members? How will we agree on priorities? How will we measure whether or not we're getting the right job done? What's your instinct about process versus results? How will you stay ahead of competition? What will you do when someone isn't working out?"

I'm checking your instincts, your navigation system, your values -- the hygiene that's vital to healthy, growing, winning teams.

You've read the business plan, and you've met with the team. What are the chances you'll invest?

We receive and read 2,500 plans per year. We meet with at least a hundred teams a year. We invest in about 25.

So the odds are 100-to-1 against this team?

No, for those teams that actually make it to the meeting, the odds are maybe 4-to-1. Most of those 2,500 plans that we receive are unsolicited junk, mailed with the same cover letter to as many as 100 venture investors.

Look, this is not a matter of odds, like a lottery. It's a matter of quality. Here's a key: KPCB has invested in over 250 ventures. In almost every case, the project was referred to the partnership by someone -- a CEO, an engineer, a lawyer, friend, or another venture capitalist -- known to both the founders and our partnership.

The odds are not against you. In fact, they're with you. There's never been a better time than now to start a new business. America honors, supports, and encourages new business. Not that it's easy. But part of the American dream is building a new business that creates jobs and financial independence.

How worried does the team need to be about failure? If this startup craters, do their careers go down with it?

A San Jose State survey found that across the nation, 4 of 5 new businesses fail. But, when backed by professional venture capital within 20 miles of this office, 4 of 5 new ventures succeed. Think of Silicon Valley as an incredibly effective system for getting people, projects and capital together. You can change your job without changing where you park your car.

Later this morning I have a meeting to wind up a failed venture. Investors put $15 million in four rounds. We're writing off our investment. There were 40 employees. Other companies in our portfolio have already offered jobs to over half the team. The investors are circulating resumes to help all of the employees get great jobs. As long as you work hard with the team and don't lie, the venture industry doesn't penalize failure.

But realistically, if members of the team already have one failure on their records, is it a deal-killer when they come looking for venture capital?

It's a caution. I can't remember a team which failed, stayed together, and was backed together in a second venture. Typically the founders regroup into other efforts. In a well-publicized failure, Jerry Kaplan and I lost a ton of money at GO, trying to do something revolutionary in pen computing. Now we're backing Jerry again as the CEO of OnSale, a really hot Web "presence" innovating in online auctions. It's a venture we're thrilled to be involved in. The other founders of GO haven't fared badly either: Mike Homer is vice president marketing at Netscape. Bill Campbell is President and CEO at Intuit. Stratton Sclavos is Verisign's CEO. Randy Komisar ran Lucas Interactive. Robert Carr is Autodesk's chief technology officer. Great people are so hard to find that even if one particular startup fails, you're not tainted for life.

Let's go back to our startup team in the pancake place. Now at last, we get to the matter of money. They want to do their startup, but at the same time they've got families to feed and bills to pay. Are they all going to have to mortgage their homes to start their company?