Deliberately scruffy in his red socks and jeans, Bing Gordon is nonetheless a powerbroker in Silicon Valley. He co-founded gaming giant Electronic Arts (EA) and now is a partner in Kleiner Perkins, the world’s largest venture capital firm, where he currently heads up the company’s US$250-million sFund, focused on social applications and services. His past seed investments include gaming startups Zynga and Ngmoco. After appearing with former EA colleagues Don Mattrick, Paul Lee and Neil Young on a panel at the Canada’s Venture Capital & Private Equity Association annual conference on May 26
in Vancouver, Gordon spoke with Canadian Business western editor Michael McCullough.
CB: LinkedIn just went public and is valued at US$9 billion. We’re hearing similarly huge valuations for Zynga and Groupon. Are we in the midst of another tech bubble?
BG: Some of the companies that are highly valued to me seem overvalued and some seem undervalued. But my sense of value mostly has to do with my expectations of their ability to execute into the future. Every one of the big companies that we hear about, with good execution, I think will be worth a lot more three years from now.
Internet 2.0 is reinventing all business right now and we’re quickly heading toward a global Internet audience of four billion people online twice as often, using the reinvention of fixed assets in the cloud, away from the floor, with people-to-people relationships as the new relevancy signal, and with always-online in your pocket connected to a server and a GPS. So we’re entering a period of enormous change. My partner Mary Meeker has a graph and it shows the peak of valuation creation in each wave of technology is bigger than the last. I think out of this generation we’re going to see a company invented that will surpass the previous heights reached by Microsoft and then Apple and then Google.
So on average I think it’s fine. The question I think is of the no. 2 companies in various categories. [They] always have trouble keeping up with the valuation of the first company, so one of the reasons to invest is if you think they have odds of becoming No. 1. But in general the No. 2 company ends up being less valuable, relative to No. 1, than anybody thinks. So on average I think there’s likely to be some froth or overvaluation in companies that are going to be No. 2 in an economic-ecological niche.
I don’t know if you’ve ever lived in a real-estate bubble. One of the things that happens with real estate is that when things are going up, people emotionally tend to think that what’s going up will keep going up. They just can’t help themselves. So they start overvaluing real estate because they take away the downside risk in their minds. This has happened a number of times in California where a house is appreciating 15% a year so you pay a price as if it’s already appreciated by 15% for three years. And it doesn’t. This is like a hot streak in sports. Things are going well so you think they’re going to keep going well. So it’s good for confidence and optimism, which has a high correlation with entrepreneurial success. But it’s not great for investing.
CB: How do you see the Canadian tech scene as a place to invest?
BG: I think British Columbia has a lot of advantages: the university system, willing government support, natural resources and the ability to attract talented young people. Right now it’s a better place to invest than exit because, seen from the outside, Canadians are more modest than they should be. People set their sights a little too low.
CB: What are some things you look for in new games and digital media?
BG: The digital generation has new habits that they want in media. They want multitasking, they want short sessions, they want clickable depth, they certainly want social and they like free, but even moreso they like paying for quality as they discover it, not before. And so anybody who’s trying to do media that has to be long session, uninterruptible or front-loaded, you’re doing it at huge risk, basically limiting your audience.
CB: What’s the most important skill for a leader to have?
BG: Probably the ability to attract and galvanize a lot of great people. Some of it is just charisma. Being able to get people aligned around a narrow strategy seems really important. I’ve found that entrepreneurs, unlike smart people, get focused on working with whatever they have at hand and doing one important thing at a time. Smart people tend to enjoy thinking about a lot of things at once. I’d say entrepreneurs should be serial monogamists; do one thing at a time until you make sufficient progress and then move on. One skill of a great entrepreneur is to get a whole complicated discussion and then say, ‘We’re going to do this one and we’re only going to do this one.’ Managers are good at prioritizing. Entrepreneurs know what is the one thing.
CB: What mistake taught you the most in life?
BG: There’s two kinds of mistakes I make too often. One is promoting people a step too far. And then the second mistake I make is being a smartass and not convincing people at the right time. There’ve been times when I talked to people and I’ve said, ‘Here’s where things are going. Here’s what we should do.’ And they’ll say, ‘Bing, you’re always right but maybe not this time.’ And I can’t convince them. So I have insufficient sales ability. The nice thing about being an adviser is if I don’t convince someone, sometimes it has the effect of getting them to rethink their strategy and have a better idea on their own.
CB: What’s the biggest challenge facing your business today?
BG: It’s always about finding the next hit. It’s probably easier now because there’s more companies going to massive valuations. But the problem with venture is when you exit a company, it has no staying power for you, as opposed to the video game business. [When] you make a Madden Football or a Call of Duty or a Farmville, it can yield long-term franchise benefits. It’s brutal when you’ve got to keep reinventing. Any business where success has no future effect is hard. Success also creates its own set of dangers because you don’t ever want to stop taking big risks.
CB: What quality do you value most in an employee?
BG: I only work with people who are highly motivated. I don’t like having to motivate people. As a VC, I only want to work with CEOs who are committed to meritocracy, analytics and kids. I do not like organizations that hold 20-somethings back. It just bugs me.
CB: What was the last book you read?
BG: I just started a book called The Information: Inside the ’Plex, about Google. I read a book about being a professional chef, a vacation book. I’ve got about four books open right now. But I’m traveling right now with The Information.