[EAS] Eugene Kleiner (1923-2003)

pjk pjk at design.eng.yale.edu
Sat Dec 13 15:46:38 EST 2003

Subject:   Eugene Kleiner (1923-2003)

Eugene Kleiner, pioneer of Silicon Valley venture capitalism,
principal of Kleiner, Perkins, Caufield & Byers, died on November
20th, aged 80

Kleiner, an electrical engineer, was the prime mover in founding
Fairchild Semiconductor, where the first commercially successful
integrated circuits were developed, based on Jean Hoerni's silicon
planar process. See
A couple of links are broken there. Hoerni's obituary is now at
and the semiconductor industry piece by Tom Wolfe is at <http://www.stanford.edu/class/e140/e140a/content/noyce.html>.


Eugene Kleiner
Dec 4th 2003 
>From The Economist print edition
HAD you visited the Valley of Heart's Delight, south of San
Francisco, in the 1930s, you would have found a pretty place of plum
and walnut orchards. Radio hams liked to go there, attracted by the
clarity of signals near the ocean. Seventy years later, the valley
contained 7,000-odd companies working in electronics, biotech and
their offshoots, with 11 more springing up every week. Yet this most
recent industrial revolution, like earlier ones, depended on the
chance combination of three elements: the scientist with his
invention, an entrepreneur to market it, and an investor willing to
risk his money.

Eugene Kleiner was each of these, at different times. But he began
with no thought of revolution. When he came to California in 1956, a
nerdy young engineer in flannel suit and tie, his only desire was to
make a perfect transistor. His job was at the Shockley Labs, where
he and seven others were employed to turn William Shockley's
Nobel-winning invention into what was to become an integrated
circuit. The volatile and brilliant Shockley wanted to fit as many
transistors as possible on a single wafer of germanium. Mr Kleiner
and his colleagues preferred silicon, which could take heat better;
they fell out with the boss, and went off on their own.

But what then? Starting up a company, and getting seed capital, were
still rare activities in 1957. The "Traitorous Eight", as Shockley
called them, managed to scrape together $3,500 between them. But
they needed a backer, and only Mr Kleiner had the slightest contact
with anyone with serious money. He wrote a letter, now famous in
Silicon Valley history, to his father's stockbroker in New York; the
letter was passed to Arthur Rock, a budding venture capitalist; Mr
Rock went out to California, approved of the project, and persuaded
Sherman Fairchild, the inventor of the aerial camera, to make Mr.
Kleiner's little group a subsidiary of his company. 

Somewhat to his surprise, Mr Kleiner was now an entrepreneur. Unlike
Shockley, he was good at it. The new-fledged Fairchild Semiconductor
dispensed with titles and went for informality, a style that was to
typify the Silicon Valley revolution. The scientists had an equity
stake of 10% and stock options, both extraordinary at the time. But
the formula worked. Within six months, the subsidiary was making
money; within ten years, it accounted for every penny of Fairchild's

By 1972, Mr Kleiner had plenty of cash. He also wanted to become a
venture capitalist himself. The breed was still rare, and even rarer
in the guise Mr Kleiner had in mind: a ÒtechnologistÓ who was
involved and got his hands dirty, as well as simply writing cheques.
He was never interested in enterprises that did not relish this
approach. But in partnership with Thomas Perkins, and later in the
firm of Kleiner, Perkins, Caufield & Byers, he gave the starting
push to more than 350 companies. Some were duds, of course, like the
snowmobile company that ran into the drifts with the 1973 oil
embargo; but they also included Compaq, Genentech and Amazon. By
1997, KPCB had backed firms with a combined stockmarket valuation of
more than $100 billion. 

A slice of luck

What exactly Mr Kleiner said in his letter to New York is lost to
history. Later, however, when he had acquired the mantle of a father
of venture capitalism, he laid out some basic rules for ideas-men
begging for money. First, get the facts straight. Second, don't lie.
Third, leave nothing out. Fourth, seize cash as soon as it is
offered. As he put it, in what became known as Kleiner's Law of
Appetisers, ÒThe time to eat the hors d'oeuvres is when they're
being passed round.Ó (This was later adapted, by himself or others,
to ÒWhen the hors d'oeuvres are passing, take two.Ó)

Also, since he knew the other side, he laid out rules for venture
capitalists. They should look less at ideas, he said, than at the
soundness and energy of the people peddling them. Great ideas could
easily fall apart on paper or, worse still, in the marketplace.
ÒMake sureÓ, he insisted, Òthat the dog wants to eat the dog food.Ó
Metaphors of eating always loomed large in Mr Kleiner's laws. It
was, after all, a four-hour breakfast with Mr Perkins at the Hyatt
Rickey's in Palo Alto that had made him a venture capitalist in the
first place.

Opportunism, with a slice of luck, always played a large part in his
life. In 1938 he escaped Vienna, with his family, just before the
Nazis arrived. At Brooklyn Polytechnic, walking home one night after
the opera, his pretty companion said she wanted to be a social
worker; Mr Kleiner immediately asked her if she would help him by
becoming his wife. She agreed. It was sheer good fortune, he always
thought, that brought both Mr Rock and Mr Perkins into his life, and
the luck of the business cycle that put him in the thick of the
wildest industrial growth in modern American history. ÒIn a high
wind,Ó he once said, Òeven turkeys can fly.Ó

A shy man, he tended to efface himself in teams and collaborations.
His letter may have been the spark that brought silicon to Silicon
Valley and led, indirectly, to the hundreds of start-ups that
established the age of the computer and the semiconductor. Yet his
greatest pride was to be not just an enabler, but an inventor. To
the end of his life, he called himself an engineer. 

Copyright © 2003 The Economist Newspaper and The Economist Group.

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