How Entrepreneurs Can Get Rest—and Have Fun
STANFORD GRADUATE SCHOOL OF BUSINESS — Chi-Hua Chien, MBA ’06, is an investment partner at venture capital firm Kleiner Perkins Caufield & Byers, where he specializes in mobile web and internet ventures. He’s also the founder of MyListo, a company created to provide product reviews from friends. At the Future of Media Conference held at the Stanford Graduate School of Business on February 15, he discussed Facebook’s big challenge, investment trends, and how entrepreneurs can make sure to have fun. Here are excerpts from his remarks:
Stanford GSB Facebook recently filed for its initial public offering, and some estimates have put the company’s value at $75 billion to $100 billion. A $100 billion valuation for Facebook — what do you think?
Chi-Hua Chien I think $100 billion is a fair value for the company today — maybe priced a little ahead of what it’s worth. Facebook needs to do a pivot now from being a media company to being an operating system identity company. People are using Facebook.com less and less, and Facebook.com makes money by selling advertisements. The more you go to Facebook.com, the more money they make, and the less you go, the less they make. It’s going to be one of the greatest pivots in internet history if they pull it off, and it’s going to be one of the greatest fails if they don’t.
Stanford GSB What trends are shaping your investment decisions?
Chi-Hua Chien It really is a function of the entrepreneur, the market that they’re playing in, and the macro forces that are at work. The macro forces are that we are going to go from a couple hundred million devices out there today to over one billion in under three years. There will be more smartphones in China than there are citizens in North American in a three- to four-year period. So, in looking at investment opportunities, it really is: What are those macro forces, and does the entrepreneur have the ability — and vision — to build something that’s really big and disruptive inside of that market?
Stanford GSB Where are you seeing the strongest opportunities?
Chi-Hua Chien We’ve mostly turned our attention toward applications. We’ve made a total of 31 investments in mobile with the belief that every major category of information and service is going to be mobilized. We’ve invested in what I believe to be the leader in mobile payments, a company called Square; in mobile music, a company called Spotify; in mobile information distribution, Twitter; in mobile advertising, InMobi; and mobile games, ngmoco. As you look at each of the major categories that are emerging in mobile, my belief is that these companies can be larger than internet companies. The reason is because there were about 1 billion internet users in 2005. We’re going to go from a billion nominal internet users to 3 to 4 billion extremely intense, 16- to 18-hour-a-day, mobile internet users. So, a general investment hypothesis is: The amount of use of the mobile internet will be roughly 100 times the amount of use of the original internet 1.0, and the opportunities will be larger.
Stanford GSB If you were an entrepreneur today, what kind of company would you start?
Chi-Hua Chien The only reason you should start a company is if there is a problem you have encountered and it just makes you so frustrated that there isn’t a solution to the problem. And, you can’t sleep because you want to see a solution to the problem, and you feel like your life would not be meaningful unless you took a shot at solving the problem, because startups are really, really hard. If you don’t believe deeply that there needs to be a solution to the problem you’re targeting, you might succeed, but you just won’t have a lot of fun.