Just like the Internet changed the business world, venture capital firm Kleiner Perkins Caufield & Byers is betting social networking will be just as disruptive, which is why it recently launched the $250 million SFund.
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The SFund investments will range from $100,000 to $100 million, with a total of $250 million invested over the course of three to four years. KPCB is looking for startup companies and entrepreneurs that are creating social-based applications.
“We’re looking for companies that are building their application from the ground up around social [interactions],” said Chi-Hua Chien, partner at KPCB. “That means social networking and social features are at the very core of what they have built, not something added after the fact.”
Social networking has been an expanding arena thanks to the likes of Facebook, YouTube and Twitter. Beyond the incumbents, Chien said there’s room for a host of companies in travel, health and wellness, personal finance and education in the social networking world.
Take the travel industry as one example. According to Chien, travel will benefit from social networks by providing insight into experiences of friends and family on vacations and in hotels. “Today it is around price optimization and some anonymous third-party information,” said Chien. “Why shouldn’t I be able to make a good decision based on my friends and their preferences.”
According to Chien, social lends itself to the health and wellness market because people tend to have healthier habits or reach goals when they are part of a group.
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The social aspects surrounding personal finance will be focused on how to help people spend money more wisely and invest better.
As for education, he envisions online education that looks more like a community or virtual classroom. “Education is inherently social,” said Chien, noting that today Internet-based educations is based on individual learning.
“We think the market for new companies built on social will be hundreds of billions of dollars,” he said. “Think about e-commerce, think about travel, think about financial services and health and wellness. These are $100 billion and in some cases trillion dollar markets. A significant portion will be impacted by the social relationship through technology.”
So far the SFund has only invested in one company, CafeBots, which was founded by a Stanford professor and two PhD students. The team is building a platform to manage all the social relationships online.
While many VC firms are looking to invest in social networking startups, Chien said what sets the SFund apart is the other investors in the fund, which include Facebook, Comcast, Zynga,Amazon.com and Liberty Media.
These companies aren’t acting as silent investors, but will provide support to the startups that get funded. For example, Facebook will give the companies access to its engineers while Comcast will meet quarterly with the companies focused on media and Amazon.com will provide technical support.
Competition to get in front of KPCB’s VCs is fierce. The SFund has already received hundreds of business plans and has a full-time employee dedicated to reviewing each one. But in order for startup companies to quickly get access to KPCB’s SFund, Chien said to get referred.
“The way to get in touch with us is to get referred by an executive or entrepreneur that has worked with Kliener Perkins or is working with Kliener Perkins now,” he said. “That will ensure the fastest response.”
If a referral is not an option, Chien said to submit a five-page document (maximum) or a 15-page power point presentation that covers the market, the management team, technology, product and business model.
“We’re looking for great entrepreneurs tackling large market opportunities with really excellent products,” Chien said.