How I Bought 12% of Google for $12M; How VC is Fixing Climate Change | John Doerr Full Interview

1. 0:00 – 0:40

   Intro

   1. JDJohn Doerr0:00

      (beeping) Three, two, one, zero. You have now arrived at your destination.

   2. HSHarry Stebbings0:09

      John, this is such a pleasure to do. I've wanted to do this for a long, long time. As I've said, heard so many good things from Bing, from Juliet, from many more. So thank you so much for joining me today.

   3. JDJohn Doerr0:19

      I- i- it's a privilege to be here. Let's do it.

   4. HSHarry Stebbings0:21

      -- about it. That is very kind of you. But I do wanna start, and I always normally start with context on getting into Venture, but bluntly, we're focusing on Climate today and the most important thing, so I wanna start there. You backed Google, you backed Amazon, some of the most legendary backs in Venture, and then you made the move to invest in energy, climate pandemics. Tell me, take me back

2. 0:40 – 2:05

   Climate investing

   1. HSHarry Stebbings0:40

      to that moment. What first gave you that inspiration and transition to focus on energy and climate back then?

   2. JDJohn Doerr0:48

      So it was Energy and Climate, and also interestingly, the mobile application store, the App Store, and the cloud. All of those came together in 2006 and in 2007.

   3. HSHarry Stebbings1:02

      Mm-hmm.

   4. JDJohn Doerr1:02

      And so, yes, we made a major commitment to climate investing, but we also formed the iPhone with Steve Jobs, and did the crazy thing of backing entrepreneurs who were selling games for a dollar a copy on the iPhone.

   5. HSHarry Stebbings1:16

      (laughs)

   6. JDJohn Doerr1:16

      And it's good that we made both of those bets because the climate investments took a lot longer and more money to produce returns. But over the course of three or four funds, we invested about a billion dollars in 70 or so climate-related investments. Those investments, on an as-it held basis today, are worth about $3 billion. It was hard, but it was not a financial failure, and it set the stage for, uh, a great deal of learning and a, a boom, really, of investment in Climate 2.0, a second wave, if you will, of innovations around electric vehicles, batteries, wind, solar. Well, that's the story and, and the basis for this conversation today.

   7. HSHarry Stebbings2:04

      Of cou-

3. 2:05 – 4:15

   Climate funds

   1. HSHarry Stebbings2:05

      of course it is. I do have to ask you, I'm a Venture nerd, why the separate funds, and do you think for funds investing in climate today, we should have the same dedicated climate fund, you know, energy fund strategy in terms of the segregation of funds?

   2. JDJohn Doerr2:19

      Well, I, I, I don't have an answer for the industry at large. In the case of Kleiner, we set up a separate fund to focus on pandemic preparedness, and the science told us there'd be a pandemic, simple observation said we're not well-prepared. We invested in nearly 20 companies, I think, one of which, Novavax, produced in- s- better vaccines, and other better ventilators. Others pivoted away from that initial mission. Uh, and overall, the returns for the fund were not really very good. Uh, we were hoping there wouldn't be a pandemic. That might have increased the returns, but it would have not been the point. Uh, I, I think that focus is a really powerful advantage when you're trying to serve entrepreneurs and help them succeed in their businesses. It's gonna be a lot better if you know more about what they're trying to do and can assist them. B- but the other force at work here is building a portfolio, and so the risk of a climate fund in early climate days is that all of the upside of the fund could be decimated by the actions of a nation state like China, which is what happened to the Kleiner Solar portfolio. We invested in seven solar companies. The Chinese crushed six of them, all six of which made solar panels. The seventh one made micro inverters. Its name is Enphase, and the gains from Enphase made up for the losses across all the rest of the solar investments. So it reminds me of a maxim from Tom Perkins which said, "You know, you can only lose one times your money in venture capital."

   3. HSHarry Stebbings4:09

      Ah.

   4. JDJohn Doerr4:09

      "You can make many times that over." And, uh, and, and, and...

4. 4:15 – 5:23

   Market timing risk

   1. JDJohn Doerr4:16

   2. HSHarry Stebbings4:17

      (sighs) It's, it's a brilliant lesson to remember. The, the question that I'd just love to ask you here is, you know, I always say market timing risk, honestly, John, I'm not smart enough to predict market timing. Bluntly, how do you think about market timing risk, having continuously been so far ahead of markets and so ahead of where things move to?

   3. JDJohn Doerr4:38

      S- s- so, uh, you can be too early. I'd rather be too early than too late. By the time it's too late, there's th- there's, there's seldom a point in pursuing a market. But there's counterexamples for all of these maxims. Uh, Google was the 18th search engine. Who would have thought that after 17 search engine, two Stanford dropouts would c- come up with an innovation that would organize all the world's information and be the best investment of all time? At least for me and my partnership. Uh, $12 million bought 12% of Google, which is today, as a company, worth several trillion dollars. So, um, you can only lose-

   4. HSHarry Stebbings5:21

      Yeah.

   5. JDJohn Doerr5:21

      ... one times your money. (laughs)

5. 5:23 – 8:54

   Google investment

   1. JDJohn Doerr5:23

   2. HSHarry Stebbings5:23

      I, I, I spoke to Julia ... W- we're kind of hopping around the schedule, but I ... This is great. I spoke to Juliet before the show, and she mentioned, you know, her joining client back in those very early days, um, and you making the Google investment, and she said, "That was not obvious, Harry. It looks it now, but it was the 12th search engine, Larry and Sergey, w- well, it wasn't as obvious as it looks now." Ask John what he saw in Larry and Sergey that gave him the confidence to actually write a big check in quite an expensive round at the time.

   3. JDJohn Doerr5:54

      Well, uh-Great question, and I vividly recall my first meeting with Larry and Sergey in the conference room next to my office, and they went through their slide deck. I still have a copy of it. Uh, it was some 20 pages or so. Only three of the pages had numbers on them. They added cartoons to try to beef up the story, but they were very circumspect about how much they wanted to disclose. At the end of the presentation, I turned to Larry and I asked him, "So how big can this vision of yours be?" And he said without missing a beat, "10 billion." (laughs) And I said, "Surely you mean market cap?" And he said, "No, I mean revenue." And he said back in 1999, "John, you have no idea how crummy search is today and how much better it will get over time, and how important a contribution that is for every phase of human activity to get all the world's information immediately, instantly available and organized." And he, he was more than right. He understated the case at the time, but that together with his and my love for computers and technology, and shared educational background interests, um, made it, for me, an easy but controversial decision. We had a big, long debate in the partnership.

   4. HSHarry Stebbings7:23

      Okay. Did you? How did that go?

   5. JDJohn Doerr7:25

      How, how did it go? Well, people complained that the price for the investment was too high. It was effectively $100 million dollar valuation. Uh, the entrepreneurs had never built a business before, and in fact they weren't interested in building a business. We had no way to make revenue from it. What we had was a, a, a dramatically superior relevance engine, PageRank was the name of it, called Backrub, that ranked the relevance of pages based not on their keywords or content, but based on other pages that pointed to those pages. So laboriously over several days, we crawled the entire web to update and refresh the index, and, uh, then we hit upon the business model which was you would, uh, sell ads separate from the content. You'd use the same kind of ranking technology to establish relevance of ads as well as content, and, and then the ads were sold in an open auction. So the winning bidder for a keyword like Hawaii would pay the second-highest price of modified Queen's Auction, it's called. And this, in economic theory, will ensure that, uh, markets don't get overheated and they're liquid and they, uh, work well in the long run. Google brought those innovations to the business, and as they say, the rest is history.

6. 8:54 – 10:16

   Mental plasticity

   1. JDJohn Doerr8:54

   2. HSHarry Stebbings8:54

      Can I ask you, uh, something, which is, you know, you've invested in climate change across many different decades, well, a couple of different decades. You saw many different search engines, I'm sure. How do you keep the mental plasticity to see every opportunity as a new opportunity and not be tainted by, ugh, we lost money in solar before, so all solar loses money? Which is very hard in venture, 'cause you do have a tainted mind from the past. How do you keep that fresh mind?

   3. JDJohn Doerr9:22

      Well, Mamoon Hamid, who you know is one of the leaders of the Kleiner Partnership, i- is fond of saying, "You must bring a prepared mind to these decisions." And so I th- I think it's important to read and learn and bring, uh, curiosity and, and energy, w- w- work to, uh, staying abreast of what's important and, and, and, and, and why. So it's, it's, it's not enough to know that, um, Bitcoin is, uh, a n- new means of, of conveying value. You oughta know how Bitcoin works and what the physics are behind it and the technology, because that gives you a better opportunity to understand what the innovators and entrepreneurs are saying-

   4. HSHarry Stebbings10:13

      Totally agree with you in terms of that reading and prepared mind.

7. 10:16 – 16:49

   Climate justice

   1. HSHarry Stebbings10:16

   2. JDJohn Doerr10:16

      ... and figure out how you might assist them.

   3. HSHarry Stebbings10:16

      Speaking of the reading, I, I spent the last few weeks reading Speed & Scale. I loved it. As I told you, it made my COVID recovery incredibly, uh, informative, educating, and so thank you for that. But I wanna start, though, with the question of, like, how does, bluntly, the innovation and the climate ecosystem today, how does that compare to 2006, 2007, when we had those dedicated KP funds?

   4. JDJohn Doerr10:42

      They're dramatically different. Uh, the problem now is evident. It was the subject of some debate in 2006, but you just look around the world, the wildfires, the devastating floods, the hurricanes, the drought, the number of climate refugees, 10 million estimated today, and w- we're just beginning to feel the effects. This is not a new normal. This is a new abnormal, and it's going to get worse in the best of all possible cases. The planet will never be cooler tomorrow than it is today. And so what's happened from an investing point of view is investors have realized that most of them missed Tesla. Most of them haven't invested in Rivian or Beyond Meat. And so we're seeing big deca-billion valued enterprises make real measurable contributions to moving to a new clean energy economy. And I do think that this climate crisis is, uh, the greatest opportunity of our lifetimes. It'll be the greatest opportunity of, of the coming century, and that's the wholesale transition of every human activity...... how we produce things, how we consume things, how we move about, how we organize from a fossil fuel-based system to a clean energy renewable based system. And so, it's, it's, it's both an imperative and an obligation. I think the notion of climate justice, I've tried to weave through this book, uh, the US is historically the world's greatest emitter of greenhouse gases. China is the largest, you know, today, but climate change really amplifies inequities in the world. That's to say that those that are suffering the most have had the least to do with creating this problem, and they're least capable of dealing with it. So, the US has an obligation as the largest historic emitter to go first, to prove to the world that you can decarbonize your economy successfully. We have a second obligation, and that's to drive down the costs for others because you've probably heard of Bill Gates-

   5. HSHarry Stebbings13:16

      Of course.

   6. JDJohn Doerr13:16

      ... as references to the green premium. Th- this job will not be done until we drive the green premium for every good and service below zero. That's to say that... Well, let me pick the key result around vehicles. We call for electric vehicles, this is key result 1.1, to achieve price performance parity with internal combustion engine vehicles in the US by 2024, that means they cost $35,000, and in India and China importantly by 2030, where the cost target has to be $11,000. That's what it would mean to have no green premium. Now, I went into that detail because it illustrates, I think, the book, and the book is more than a book, it's a plan. There are six objectives, large scale things we must accomplish. We've got to electrify transportation, we've got to decarbonize our grid, which means shift to wind and solar, safe nuclear. We've got to fix our food systems, which means reduce, not eliminate, but reduce the amount of meat and dairy we consume, change how we grow plants and reduce food waste. Fourth, we've got to protect nature, that means stopping deforestations and protecting vast areas of the ocean for regenerative, uh, uh, natural growth. The fifth thing we've got to do is clean up industry, principally change how we make steel and cement, which are tremendous sources of greenhouse gas emissions. And finally, Harry, after we've cut as much as we can in those first five areas, we've got to remove the stubborn carbon that remains, and this is in many ways the hardest of all. This means, uh, natural base means like planting more trees, or making direct air capture and sequestration of carbon economic. Today it's wildly expensive and uneconomic. These six things are the great big objectives, and so for every one of them, an OKR system has three to five very specific time bound measurable key results. The climate world has the benefit today of lots of goals, and they're really great goals, but the difference between a set of goals and a plan is whether or not you have measurable key results, date and time specific ways to judge if we're on track, making progress, falling behind, do we have to shift our course? And I had the great good fortune when I first came to Silicon Valley to work at Intel to have Andy Grove be a mentor, and he invented this amazing system called OKRs, which I've since taken to every organization I can get to listen to me about it. From the startup Gates Foundation-

   7. HSHarry Stebbings16:24

      (laughs)

   8. JDJohn Doerr16:25

      ... to, to the Google guys. There you are.

   9. HSHarry Stebbings16:27

      What a, what a (overlapping dialogue) ... what a hero that was.

   10. JDJohn Doerr16:34

       Well, I, we, the truth is two thirds of it was written by entrepreneurs. I'm an engineer and I have a very, very hard time with words, and so I cheated. I decided instead, like you do, to interview people-

   11. HSHarry Stebbings16:46

       Much better.

   12. JDJohn Doerr16:46

       ... and let them tell-

   13. HSHarry Stebbings16:47

       Mu-

   14. JDJohn Doerr16:48

       ... their stories.

8. 16:49 – 17:59

   Accelerators

   1. JDJohn Doerr16:49

      And so this, this book Speed and Scale, allow me to finish, isn't just six big objectives for emissions, or four more ways to get it done in time, the so-called accelerators, it is 55 key results all on one page that can help you answer the question, "Is there a way?" Here's one way to reduce warming to no more than one and a half degrees Celsius if we get on track.

   2. HSHarry Stebbings17:19

      Could-

   3. JDJohn Doerr17:19

      We're not on track today. Now, you will know this, I have one more thing to say and then I'll turn it back to you. If the book was just objectives and key results, it would be a snore. That part is for the head, the book is also written for the heart, and so we have 35 stories of impassioned youth and indigenous leaders of tribes in the Amazon, and policymakers and entrepreneurs. Uh, Ethan Brown founding Beyond Meat to make a better plant-based McDonald's burger. These stories are what's memorable, and they're what inspire me to believe that we can get this job done.

   4. HSHarry Stebbings17:58

      Listen,

9. 17:59 – 20:13

   Governments

   1. HSHarry Stebbings17:59

      I, I loved... I thought the combination of the anecdotes and stories combined with the OKRs was fantastic. My question to you, John, is, like, the world knows it, the consumer feels it, we all want to make a change, and we all want this to happen. My question to you is...What about the governments? What about, you know, Russia, China, (laughs) um, Brazil, um, some of the less climate-friendly governments? What happens if they don't adopt our same mindset, and how do we think about controlling the uncontrollable?

   2. JDJohn Doerr18:32

      Uh, the governments are the biggest problem, and if the governments don't change, if they don't up the level of ambition and urgency, simply put, we're screwed. We will not succeed. And we need all the governments of the world to work on this, and I've especially focused the book on the 20 largest emitters. One of the hard facts about this problem is we are fast running out of time, and so the book is not written to exhort people to take individual action. And in fact, the book warns against being distracted by what I call bright, shiny climate objects. We've gotta go for the gigatons. There's 59 gigatons per year of greenhouse gas emissions. That's the UN report from 2019, and that number is growing. It's not declining. We have to drive that number, Harry, to net zero by 2050, and we have to get halfway there by 2030, which is just eight years from now. In the face of growing human activity, that means this coming year, in 2022, to be on track, we need to reduce planetary carbon emissions by 8%, and then another 8% in 2023, in 2024, in 2025, to get to a cumulative 50% reduction by 2030. Do you know how many times we've reduced carbon emissions on the planet to date? Never. Never. So what do you think are the odds we're gonna pull this off?

   3. HSHarry Stebbings20:12

      I didn't wanna say it, but, uh-

   4. JDJohn Doerr20:12

      How can we

10. 20:13 – 24:18

    How can we get this done

    1. JDJohn Doerr20:13

       get this done?

    2. HSHarry Stebbings20:13

       ... y- you know, this is an investment. This is more than a bridge round, John. This is, uh, (laughs) this- this seems... Are you hopeful? And I don't mean that negatively, but, like, when you listen to that, and then you look at the stances of some of the governments we mentioned, how is this gonna work, John?

    3. JDJohn Doerr20:30

       I'm gonna directly answer your questions. Yes, I am hopeful. I may not be optimistic, but I'm hopeful. And what gives me great hope are the movements which we declare, and this is a subtle point-

    4. HSHarry Stebbings20:48

       Yeah.

    5. JDJohn Doerr20:48

       ... need to become action. You see objective number eight? Greta Thunberg, in 2018, was a lone Swedish teenager striking from school on Fridays out in front of the Swedish Parliament. By 2019, her school strikes had spread around the world, and four million youth in a hundred cities staged the largest climate strike that we'd ever seen on the planet. And measurably, it resulted in the following change in action. Climate in the Europe, the crisis became a top two voting issue for European nations. Key result 8.1 says that, for voters, we must make the climate crisis a top two voting issue in the 20 top emitting countries by 2025. We have no more time than that to waste. So it's an excellent key result. It's measurable, it's specific, it's time-bound, and if we achieve that, we'll find that not only Europe, where she has made it a top two voting issue, but India, the US, and China can develop that public sentiment. But I wanna see a detailed plan with the steps that will get us there. That's what we need to get that part of this job done. And it may surprise you, but in this book-

    6. HSHarry Stebbings22:08

       Yeah.

    7. JDJohn Doerr22:08

       ... I have Doug McMillon, the CEO of Walmart, not as an investor, not as an innovator, but as an activist, because he's leading a movement throughout his supply chain. When Walmart, the Fortune 1 company, stands up and says to all their suppliers, "We want you to drive f- for net zero in our supply chains by 2040," and you see the concerted action of Walmart against this problem, it gives you hope. It gives you a belief that the businesses are ahead of the governments, the youth are ahead of the governments, the entrepreneurs and innovators are ahead of the governments, the investors are well ahead of the governments. And that's not because the governments are bad. They respond to their body politic. The US is divided like a knife edge on this issue, and so it's the same old story. What we're doing is not enough. We need more youths speaking up. We need more climate officials elected. Uh, I- I s- I set a goal that says a majority of government officials, globally, either elected or supported, need to support the drive to net zero.

    8. HSHarry Stebbings23:26

       And when I spoke to many of our mutual friends, they said that you were one of the best listeners they've ever worked with and been lucky enough to know. What does great listening mean to you, John?

    9. JDJohn Doerr23:41

       Uh, somehow along the way, I- I learned that great listening is active listening, and that you'll have a deeper conversation and a better level of communications if you can, in the form of a question, play back what the communicator, in- in my case, I worship at the altar of entrepreneurs, what the innovator i- i- is trying to say. So I'm an active listener, and I try to listen a...... by repeating what I've been, what I've heard.

11. 24:18 – 26:32

    The weight of your words

    1. JDJohn Doerr24:18

    2. HSHarry Stebbings24:18

       One thing that's striking and challenging for you in many ways is your words have a lot of weight, bluntly, a lot more weight than other people's, especially at a board or in meetings in particular. Do you kind of watch the weight of your words and are careful? Because they can have such large impact on a company's direction, a strategy. How do you think about the weight of your words?

    3. JDJohn Doerr24:43

       Well, I, I think ho- honestly, you overrate the impact of those words, and certainly when you extend it to direction. Uh, w- what I've, uh, long believed is that the best thing a good board member can do is bring three to five questions for a, a meeting, have maybe half of those be questions that the team hasn't thought about, and have one of them be truly useful. So I think being a goor- good board member is not about telling people what needs to be done, but asking them questions that they've not yet thought of.

    4. HSHarry Stebbings25:18

       In terms of sort of being a good board member, another important aspect is, like, recruitment, recruiting the best talent. I mean, Jim Barksdale, uh, I mean, th- uh, you know, no one is better than you at recruitment, as I heard from (inaudible) . But what makes you so good at it? 'Cause everyone says that you're the best in the world. (laughs)

    5. JDJohn Doerr25:39

       I th- I think it s- starts with I truly love people and I love being with people. And, um, m- finding the right fit for a new recruit to a team or an organization is, i- is, is an exhilarating bit of magic. It, it's, um ... These, these, these ventures are not transactions. They're not deals. Uh, they are the hopes and dreams of an impassioned group, a growing group, to change the world. And w- when you can help them do that by adding credibility, or an affirmation, or, or, or a commitment that, "This is the way I see the Netscape venture, Jim Barksdale, and it won't run out of money, and it could well change

12. 26:32 – 30:42

    What is your most proud of

    1. JDJohn Doerr26:32

       the world."

    2. HSHarry Stebbings26:32

       Speaking of that impact, we mentioned earlier the Google and the Amazon. Um, they're the chosen children that everyone likes to mention. One suggestion that someone that we both know asked was, what investment are you most proud of that few people have heard of or that few people cite, but you're most proud of it?

    3. JDJohn Doerr26:52

       Well, it, it's an investment that my partnership made, not that I singly sponsored, because I think groups make better decisions than individuals. It may surprise you, but it's in this book, and it's called Enphase. And we invested, Kleiner did, $29 million in Enphase. Ben Kortlang led the investment for our partnership. That $29 million investment today is worth a billion dollars, and it is, uh, the leading maker of microinverters. So out of our eight solar ventures, seven were solar panels, but one of them made the smarts, the intelligent, so that rooftop solar, residential solar, would be economic and effective. And that company went through some very difficult times. It almost ran out of cash, even after it was public. That, by the way, was true also of Amazon. Amazon almost ran out of cash after it was public as well. But, uh, Enphase today is, uh, a, a member of the S&P 500 and, I think, an investment that I'm proud of because it's enabled a whole new solution for the climate crisis, and it shows that if you stand by entrepreneurs and help them through the struggles, then y- you can be well rewarded.

    4. HSHarry Stebbings28:23

       You know, that's one thing that I've been thinking about as I've been listening to you today, is every fund should be investing in climate. Every fund should be investing in innovation within the climate space. And then, honestly, John, and I'm just being very transparent with you here, I get enterprise SaaS like no one e- like many other people do, but I know it well. I know product-led growth. I know it well. Honestly, I do not know climate well. I read your book. I read th- the MIT Press, uh, bo- What We Don't Know About Climate Change. But I'm not well-versed like I am in enterprise SaaS. (laughs) And when I think about it, I'm going, "Whoa, I'm not as confident investing (laughs) in climate change as I am enterprise SaaS." Should every fund just be investing in climate? Is there wasted dollars going into climate? Advise me, John, from an investment strategy.

    5. JDJohn Doerr29:15

       So, uh, e- every fund should not be a climate fund. That's my first piece of advice. But let me speak to your situation as a SaaS investor. There will be SaaS climate accounting, marketing, marketplace transactions that will depend very heavily, I think, on your insights and success in SaaS space investing. I believe I've made-

    6. HSHarry Stebbings29:39

       Yeah.

    7. JDJohn Doerr29:39

       ... one of the best of them. I describe it in this book called Watershed, which is setting out to help people with supply chains manage their carbon equation. Everyone will do carbon accounting. Governments will do carbon accounting. They will score legislation for carbon. It's a new currency, a more important currency, I daresay, than, than Bitcoin is. So, take your area of expertise, it might be in materials, or robotics, or enterprise, or consumer applications, and develop a prepared mind. Have a point of view about how this once-in-a-century transition is gonna affect that field of human activity.

    8. HSHarry Stebbings30:23

       I'm by the way, totally agreeing. And ...

Episode duration: 30:42