The Top Internet VC Firms

Paul Graham
November 2006

It's hard to figure out who the top VC firms are. As their next-door neighbor in the funding process, we're supposed to know things like that, and we're uncomfortably aware how incomplete our knowledge is. Everyone involved with startups knows who the famous VCs are. But are these really the best? Could the famous ones be more famous simply because they're better at marketing themselves, or because they invested in popular consumer applications rather than the solid, submerged two thirds of the technology iceberg? Are some who are famous for past successes now losing their edge?

The test of a VC firm is whether its investments succeed. That's what the VCs themselves care about, what their investors care about, and also, I would argue, what founders should care about. Some might say founders should care about which VCs are best to work with. But for most founders what makes a VC good to work with is a high likelihood that a startup they fund will succeed. Except to the extent VCs succeed by screwing the founders, of course—but this seems rare among the top firms.

So which VCs have the best records? It would be convenient if they all published their numbers on the front pages of their web sites, but they don't. One firm told me their overall success rate last winter. It was surprisingly high, which may be why they were willing to talk about it. But I asked a senior partner at another big VC firm a couple weeks ago, and he wouldn't say. (He claimed not to know, but I'll give him the benefit of the doubt and assume this was a polite way of dodging the question.)

So I decided to try to create as good a ranking as I could, by polling the people I know who understand venture capital best. Fortunately I know a lot of people plugged into this world: not just VCs, but also founders, lawyers, journalists, investment bankers, and people involved with acquisitions at bigger tech companies. I asked them to name the top 5 VCs for Internet startups, based on the following test:

If you could get some free stock in a random startup, but you knew nothing about the startup except the name of their VC, whose companies would you want stock in?
Here's the list of all the firms mentioned at least twice, counting each mention as one point:
1. Sequoia23
2. Kleiner Perkins12
Benchmark12
4. Greylock7
5. First Round5
DFJ5
August5
Accel5
9. NEA4
10. Redpoint3
11. Ram Shriram2
Mayfield2
Matrix2
Index2
Ron Conway2
General Catalyst2
Bessemer2
The first thing one notices is what a huge lead Sequoia has. I would probably have put them first. So, it turns out, did practically everyone I asked. I was surprised by the gap between them and the second-place firms, Benchmark and Kleiner Perkins. I was also surprised to find two angel investors among the leaders: Ron Conway and Ram Shriram.

There may be a bias here toward firms that do a lot of deals, because they touch more people. And while asking for only 5 names is a good way to generate an unambiguous ranking, it tends to exaggerate the spread between firms. No one is claiming that Sequoia is ten times better than Matrix.

Remember, this is a list of the very top tier of many hundreds of VC firms. The difference between any two on this list is probably much smaller than the variation between startups.


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