Web 2.0 Summit...Mary Meeker, analyst with Morgan Stanley, speaks during the Web 2.0 Summit in San Francisco, California, U.S., on Tuesday, Nov. 16, 2010. This year's conference, which runs through Nov. 17, is titled "Points of Control: The Battle for the Network Economy." Photographer: Tony Avelar/Bloomberg
Mary Meeker moved to the West Coast eight years ago from Morgan Stanley, where she had been dubbed 'the queen of the internet' © Bloomberg

Mary Meeker, the former star internet analyst, is leading a breakaway from Kleiner Perkins, completing an upheaval at what was once one of Silicon Valley’s most influential venture capital firms.

Ms Meeker and three other Kleiner partners are splitting from the firm to create a new venture outfit focused on investments in later-stage companies, rather than the very early businesses Kleiner has specialised in for much of its 46-year history.

“We want to make sure we have the flexibility to move really quickly and go where the opportunities are,” she said. Ms Meeker and three others — Mood Rowghani, Noah Knauf and Juliet de Baubigny — will leave Kleiner later this year to set up a new firm. Ms Meeker refused to say how much money she would be raising or how well her investments at Kleiner had performed, though she said: “We’re happy with the investments we made.”

Kleiner has been in retreat for several years, after turning its back on consumer internet investments after the dotcom bust to make a failed bet on technologies designed to lower carbon use and help the environment, a field known as “green tech”. Many of those investments failed, prompting a belated return to internet investing. However, the firm was unable to recover the early lead it had gained through investments in internet browser company Netscape, as well as Amazon and Google. 

More recently, Kleiner was rocked by accusations of sexual discrimination from one of its investment staff, Ellen Pao. The firm successfully defended itself in a trial over Ms Pao’s claims that she had been unfairly overlooked for promotion, though not before the case became a lightning rod for the simmering tensions over gender discrimination in Silicon Valley.

The break-up announced on Friday reflects a new fracture that has opened across the venture capital landscape, caused partly by the massive amounts of money being poured into private tech companies by SoftBank’s $100bn Vision Fund.

By making much bigger investments than are typical from venture investors and being willing to pay higher valuations, the Vision Fund has been able to muscle its way into some of the most prominent private tech companies, including Uber, Slack and Flipkart.

Along with the much longer time many tech companies are staying private, that has forced some venture firms to add to their own firepower by raising larger “growth” funds. They include Sequoia, which, with Kleiner Perkins, led Silicon Valley’s venture capital industry during the first phase of the internet.

Others, such as Benchmark Capital, have chosen to stay as small partnerships with a narrow focus on making very early-stage investments — the path that the rump of the Kleiner Perkins firm, with five partners, now plans to take.

Ms Meeker moved to the West Coast eight years ago from Morgan Stanley, where she had been Wall Street’s most prominent internet analyst. Dubbed “the queen of the internet”, she was seen as a one of the early promoters of the “dotcoms” and gained a strong following among private investors. That led to accusations that she had over-hyped the early internet companies, though she was not tarnished by any of the investigations that followed the bust and had always maintained that most of the companies would fail.

She moved to Kleiner to set up a fund making later-stage investments, going on to back companies such as Uber, Spotify and Stripe. Speaking in an interview, she said the decision to break away reflected changes in the investment landscape, as well as the attraction of working in a smaller partnership.

In another internal fracture at the firm, Beth Seidenberg, the partner who led Kleiner’s investments in the healthcare industry, quit earlier this year to set up her own fund, ending an involvement in health-related investments that had been been led by Brook Byers, one of the firm’s early partners and a pioneer in biotech investing. The departure of Ms Meeker and Ms Seidenberg leaves the reduced Kleiner Perkins without any female partners, at a time when other venture firms have been racing to add to their diversity.

Ted Schlein, who will head the reduced Kleiner Perkins, said building up a growth investment arm after hiring Ms Meeker had not led to the “synergies” the firm had been hoping for, and that early and late-stage investing had since evolved into very different styles of investing that required different organisations behind them. “Who could predict the investment landscape would change the way it has — it’s changed pretty dramatically,” he said.

*This article has been corrected to remove an erroneous “Mr”.

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