Last week we invited Greylock’s David Sze and Reid Hoffman into the studio for a chat about the state of the venture market, with its odd mix of soaring valuations and horrible returns. As it turned out, these two might be the worst guys in Silicon Valley to ask. I don’t say that because they refuse to pay up to be in good companies. (See Sze’s 2006 investment in Facebook—considered shocking at the time due to the company’s $500 million valuation, now considered one of the top trades in Web 2.0 history.) I say that because their portfolio doesn’t seem to be hurting.
We’ll be posting the full interview soon, but first here’s a sneak peak, including this bold statement from Sze about the funds the firm has been investing over the last five-to-seven years: “We think those will be our best funds ever.” Ever? That’s a claim I can’t imagine many Silicon Valley firms making—especially those that were in business during the late 1990s when nearly anything could go public.
Later in the video below, Sze noted that Greylock had three of the five potential blockbuster Web IPO candidates on most bankers’ and analysts’ short list: Facebook, LinkedIn and Pandora. As you can see in the video that last one caught Arrington by surprise and with good reason: A little more than a year ago Pandora was still on deathwatch. We knew it was profitable but, if it’s being bandied about as an IPO-hopeful, things may be even better than people realize. The good thing about being the only online music company to live long enough to go public is you don’t have a ton of competition.
And, of course, if you count Reid Hoffman’s personal investment and seat on Zynga’s board, Greylock has tentacles in four of the top five Web IPO candidates, Twitter being the one missing. Note: We’re talking about potential billion-dollar-market-cap-and-up-style IPOs that tend to make or break a firm’s returns, not the smaller-sized issues in registration now.
Is there another firm that can boast the same hat trick? Sequoia Capital—usually the firm that owns every big Web hit—has LinkedIn and had YouTube, but missed Facebook, Zynga and Twitter. Kleiner Perkins has just Zynga. Founders Fund was the firs institutional investor in Facebook, and Peter Thiel personally is an investor in LinkedIn. Fred Wilson’s Union Square Ventures comes close with early investments in Twitter and Zynga.
Of course we’re just speculating until those IPOs actually price, but if things go according to plan Greylock could be the new top dog in the consumer Web game.
One final note: We asked Hoffman which of the three companies he’s involved in, Zynga, Facebook and LinkedIn, would likely go public first. It the past, he’s speculated away when I asked that. This time Mike got a terse, “Unfortunately, being on the LinkedIn board and the Zynga board, it’s something I have knowledge about, so, I cannot comment on.” Do I smell a LinkedIn S-1?
Update: full interview here.