Greylock Partners’ stake in Groupon lands it in an exclusive Silicon Valley club. It’s one of two venture capital firms whose partners own stakes in at least four of the top multibillion-dollar Web startups.
Before investing in Groupon, Greylock was among the first institutional investors in Facebook and LinkedIn. Greylock partner Reid Hoffman was an early investor in Zynga Game Network and remains a director. Among venture capitalists, only Andreessen Horowitz’s Marc Andreessen has a comparable stake in the leading Internet companies.
Founded in 1965 by Bill Elfers and Dan Gregory, Greylock was based on the East Coast until moving its headquarters to Silicon Valley from Boston in 2009. The firm, now based in Menlo Park, missed out on the hottest Internet companies of the 1990s. That’s when Sequoia Capital, Kleiner Perkins Caufield & Byers and Benchmark Capital were funding Google, Yahoo, Amazon.com and eBay. Greylock has more recently emerged as the leader.
“Greylock has pivoted from the traditional, old-school VC on the East Coast to the cool, new kid on the West Coast,” said Jeff Clavier, founder of SoftTech VC, an early-stage venture firm in Palo Alto. It’s now the “Internet bellwether that has positions in a lot of hot companies,” he said.
Joining the ranks of investors in promising startups such as Groupon isn’t easy, even for established venture capital firms. That’s because there’s heavy demand for a stake in businesses with a proven growth record. New companies also are discerning about adding investors that can influence strategy through their ownership.
Unlike Greylock’s earlier targets, Groupon was already worth billions before the firm got involved. The provider of Internet daily-deal coupons is valued at about $4.75 billion after Greylock joined firms including Andreessen Horowitz and Kleiner Perkins in a $950 million round of financing this week.
Greylock’s investment in Groupon was in the tens of millions of dollars, said a person familiar with the matter, who declined to be named because the amount isn’t public.
“Commerce is a particularly interesting area that’s being reinvented by social now, and Groupon is a leading breakout player in that,” said David Sze, who joined Greylock as a partner in 2000. The business “will only continue to accelerate to a place that is far bigger than anyone can imagine,” he said.
There are five Internet startups with valuations of more than $1 billion, according to Nyppex, which specializes in so-called secondary transactions. They are Facebook, Zynga, Groupon, Twitter and LinkedIn.
In addition to consumer startups, Greylock is expanding its portfolio of companies focused on technology for businesses. The firm said in a statement Wednesday that Frank Slootman, former CEO of Data Domain, has joined as a partner to “invest in data center startups, particularly in the virtualization, networking, storage, cloud and enterprise-application sectors.”
Slootman joins Greylock after running a company that was backed by the venture firm. Data Domain first sold shares to the public in 2007 and was bought by EMC for $2.1 billion two years later.
“I dealt with Greylock for many years from the other side of the table,” said Slootman, 52. “I had the opportunity to take the experience I gained in our company and more broadly make it available to companies that have similar aspirations.”
