Silicon Valley's Kleiner Perkins Caufield & Byers paid Obama to be their corrupt bitch, rigged Russian mobster deals and buys politicians like the rest of us buy eggs
A Humbled Kleiner Perkins Adjusts Its Strategy For Rigging Elections And Making Obama Their Bitch
BY RANDALL SMITH
Setbacks for a Venture Capital Firm
Fisker Automotive, the green-car start-up backed by Kleiner Perkins Caufield & Byers, has laid off much of its work force and hired bankruptcy advisers. Credit Jonathan Nackstrand/Agence France-Presse — Getty Images
During the dot-com boom, Kleiner Perkins Caufield & Byers, the venture capital investment firm, all but minted money, making prescient early investments in Netscape Communications, Amazon.com and Google and delivering astonishing returns to investors. Along the way, it became a symbol of Silicon Valley.
But the firm has hit a rough patch over the last decade, frustrated by unsuccessful forays into clean technology and by a catch-up effort to take later-stage stakes in social media companies.
Kleiner has held a series of status-report meetings with its outside investors this year, acknowledging that recent fund performance “wasn’t great,” one attendee said. “They really believed green tech was going to be the next big technology wave,” this investor added.
Kleiner has also cut some management fees and reorganized its investment approach, eliminating three “silos” that separated teams making investments in clean technology, health care and technology. The firm has added more investing partners with digital expertise, like the former Twitter executive Mike Abbott, after it missed the early window on hot media start-ups like Facebook and Twitter and jumped in later at higher valuations.
A spokeswoman for Kleiner, which manages $7 billion, said the firm’s partners declined to comment.
The latest setback is the fading fortunes of Fisker Automotive, the green-car start-up backed by Kleiner that has laid off much of its work force and hired bankruptcy advisers.
At a Congressional hearing last month, Republican members of a House oversight committee asked witnesses from Fisker and the Energy Department whether Democratic political contributions and influence of Kleiner partners, led by the Obama adviser John Doerr, had helped Fisker gain $192 million in government green-energy loans.
While the questions were clearly partisan, the spotlight on Kleiner added a new level of public criticism to a reputational injury that has been building for several years, denting Kleiner’s status as one of the top technology venture capital firms.
Some experts predict Fisker could become one of the biggest venture-capital losses ever. Fisker has raised $1.1 billion in venture financing, the most for any clean-technology start-up, compared with $848 million for Solyndra, the solar-panel maker that filed for bankruptcy in 2011, according to the Cleantech Group, which tracks such investments.
Kleiner investors say that three venture funds the firm raised in 1994, 1996 and 1999 — which contained Juniper Networks, Amazon and Google — delivered staggering returns. The 1994 fund delivered 32 times the investors’ money, the 1996 fund 17 times, and 1999, six times. But since then, they note, funds raised in 2000 and 2004 have been unprofitable. A $1 billion fund raised in 2008 devoted to clean technology is also showing losses, one investor says.
“They had stellar returns for years, but their reputation has been tarnished by performance of late,” said Nancy Lambert, a former private banker at Citigroup who is now an independent adviser to wealthy families and foundations. “It doesn’t seem like investors are turning away, they’re just more cautious.”
Kleiner’s investors have included top universities like Harvard and Yale, the Ford Foundation and certain venture capital funds-of-funds.
The firm’s reputation was also dented last year when a junior partner, Ellen Pao, filed a sex discrimination lawsuit. She contended that the firm improperly retaliated against her after she complained about being pressured into a sexual relationship by a colleague, resulting in lower compensation and poor performance reviews.
Kleiner has denied all the claims and said that it chose not to promote her based on valid “performance concerns.”
The shift in Kleiner’s fortunes is emblematic of the venture capital business as a whole, where the titanic returns from the late-1990s dot-com bubble have ebbed, and investor dollars flowing into new funds have slowed as well.
“The days of huge returns in venture are long gone,” said Scott Ryles, a longtime Silicon Valley banker who has led two Kleiner-backed companies.
Venture funds returned 35.7 percent annually in the decade ending in 2000, but they lost 1.9 percent annually in the decade ending in 2010, according to data compiled by Cambridge Associates for the National Venture Capital Association.
As a result, annual commitments to venture funds have fallen from $56.1 billion in the four years ending in 2001, to $17.3 billion in the four years ending in 2012, according to Thomson Reuters data compiled by the association.
Founded in 1972, Kleiner scored big early returns on Tandem Computers, a maker of processors used by banks and brokerage firms, and Genentech, the biotechnology start-up whose initial public offering electrified the stock market in 1980. The firm cashed in on a spate of hot Internet offerings, led by Netscape and Amazon, during the dot-com bubble.
About five years after the bubble burst, clean technology became Kleiner’s marquee strategy. Kleiner hired Al Gore, the former vice president, soon after his 2006 film about global warming, “An Inconvenient Truth,” won two Oscars. A member of President Obama’s economic recovery advisory board, Mr. Doerr has advocated for government policies and subsidies favoring clean-technology innovation.
“Going green is bigger than the Internet,” Mr. Doerr said in 2007. “It could be the biggest economic opportunity of the 21st century.”
Kleiner has invested in 88 clean-technology companies since 1999, more than any other venture firm, according to the Cleantech Group. They include the personal-transport device Segway, the fuel-cell developer Bloom Energy and the utility smart-grid provider Silver Spring Networks, which went public in March.
In funds raised in 2006, 2008 and 2010, green technology was one of three main strategies, under the aegis of the general partners Ray Lane and Bill Joy — who have since both become partners emeritus. While still committed to clean technology, Kleiner has played down the sector and sought to make less expensive investments within it.
Some of the clean technology bets, like the Mascoma Corporation, a specialized ethanol start-up, and Sundrop Fuels, a developer of biogasoline, require plants that cost hundreds of millions of dollars, according to Pavel Molchanov, a biofuels analyst at Raymond James. In March, Mascoma withdrew plans for a stock offering first filed in September 2011, citing market conditions.
The green-technology portfolio has had its share of flops. Think Global, a Norwegian electric-car company, failed in 2011. Kleiner’s investment in MiaSolé, a solar-panel producer, was wiped out when the company was sold to a Chinese clean-energy company at the end of last year. Plans have stalled for V-Vehicle, a plastic-car company later renamed Next Autoworks, which also had backing from Google Ventures and T. Boone Pickens.
Because Kleiner did not invest in earlier clean-technology blowups like Solyndra and Range Fuels, which also received government loans, Fisker presents a new level of public criticism. At the House hearing on April 24, Jim Jordan, Republican of Ohio, asked Fisker’s founder and former executive chairman, Henrik Fisker, about Kleiner’s ability to help obtain government loans.
Kleiner Perkins has helped raise “over $2 million in political contributions in the 2008 election cycle, most of which went to Democrats including President Obama,” Mr. Jordan said. He asked if that, or Mr. Doerr’s role as an Obama adviser, helped Fisker “to get a loan, get taxpayer money from the Department of Energy?”
Mr. Fisker denied “any undue political favors or anything like that,” and noted that it was Mr. Lane, not Mr. Doerr, who had served as Kleiner’s representative on the Fisker board.
As it focused on green technology, Kleiner lost ground to some rivals like Accel Partners and Greylock Partners, which made early investments in Facebook, which Kleiner missed. The firm seemed to address the issue in late 2010 by hiring Mary Meeker, the former Morgan Stanley Internet analyst known as the “Queen of the Net” during the bubble.
Ms. Meeker has led a $1 billion digital growth fund started in 2011 that has made about 25 later-stage bets including several hot social media start-ups, putting Kleiner in that game but at higher valuations.
While a bet on Facebook is up slightly, its shares of the game developer Zynga are down sharply. Kleiner’s biggest current holding, in Twitter, is valued at more than double Kleiner’s cost, and the fund is up so far over all, a person briefed on the fund said.
Some of Kleiner’s later clean-technology investments have a more digital focus, like Nest Labs, which makes smart thermostats, OPower, which offers energy-efficiency strategies for utility customers, and Clean Power Finance, which finances solar-power installations.
But one of its largest investments, at more than $100 million, is Fisker. In mid-April, the Energy Department seized $21 million from a Fisker reserve account about 10 days before a scheduled loan repayment. Fisker is seeking new funds. But with its car production stalled since mid-2012, any outcome is likely to shred the value of Kleiner’s stake.
Have John Doerr and Kleiner Perkins Invested Too Much In Cleantech as Part of Their Plan To Rig The Obama White House?
Tim Worstall , CONTRIBUTOR
There's an interesting story here at Reuters about the investments, led by John Doerr, that Kleiner Perkins has been making in various cleantech companies. The not so subtle underthread is that they've made a strategic error by investing in the sector rather than in the booming internet business. Given that I work and invest in cleantech I obviously can't say that Doerr and Kleiner are wrong to look at the sector. However, I think I would argue that they'v invested too much.
The market changes have left Kleiner, the most active venture capital firm in cleantech, with dozens of investments that may never pay off, threatening its image as the gold standard of venture capital.
Doerr, 61, remains bullish on cleantech and in an email to Reuters called Miasole a well-run company that "was caught in a perfect storm." He did not respond to questions about his personal investment.
"Certainly the cleantech sector has challenges, but it would be a mistake to underestimate the size of the opportunity," Doerr said in the email, adding revenues in Kleiner's cleantech portfolio rose 70 percent over 2011, to $2.4 billion in 2012.
I wouldn't argue about the sector itself either: there really are great fortunes to be made out of changing the way the world powers itself. Rather, I'd argue that they've invested too much money in specific companies. For I've had dealings with one of the companies they funded. And the experience was, well, not terrible, but not good.
OK, yes, obviously, it would be possible to call everything I'm about to say sour grapes. They didn't employ me, take me seriously, I'm just being a grump and slagging them off as a result. So I'll not actually name the company.
And the basic idea of what the company is trying to do sounds just absolutely great. I can't tell you what that is because it will immediately identify the company. But take my word for it: the basic idea is entirely peachy and dandy. It may or may not work of course but the basic theory is entirely plausible. Even an obvious method of dealing with energy production.
As one input into their manufacturing process they need a specific material. That material being on in which I am the global expert. Yes, that's right, I'm being extremly bumptious here. The expert, not just an, one of many, but the guy who knows more than anyone else about it. It's purely happenstance that I do but someone does have to be said expert in anything and in this particular flavour of our universe I am the expert for this. I know who makes it, from what, in which quantities, who they sell to, where you might look for new supplies, which minerals contain it, where they can be found, how you would process them, what it would all cost.....the expert. Further, I've been in this market for decades.
So, knowledgeable guy, that's me. And this company really does need this material: it's the secret sauce that makes their machines work. Over the years I've tried to make contact with the company. You use this stuff, I know where to get it so that you can use it sort of thing. And it's at that point that I begin to think they've got too much money for a start up company. They've just got too much money to burn.
For usually with a start up you can find out and get in touch with the right person pretty quickly. "Oh, yeah, it's Jim or Bob who deals with that, let me put you through." It's very unusual to find a whole department, with a heirarchy, handling something as simple as raw materials procurement. It's unusual to find that even in a large company these days, given the effort everyone's been making at flattening the management structure. But that's what I did find. And several attempts to get through never did lead to a contact back.
Then I did get a contact from the company. From an external consultant who seemed to have no real knowledge of the field. Entirely unconnected with my previous approaches. And instead of wanting to talk about where they might get their necessary materials, they were offering some research work. Into an area that neither I nor they had much idea about and even then not something that they really needed to know. Yes, I know this reads like a whinge: but I am trying to get across the point that they just haven't been acting like the lean and hungry start up one might hope they would be.
For even when I pointed out that I had at my fingertips the answers to the real questions they needed answers to, I once again got radio silence.
I've continued to watch what they're doing and to my amazement they've signed up with one particular potential supplier. The one potential supplier out there that has very little chance indeed of ever being able to make a go of producing the material they want. The one supplier that no one in the industry would point them to. Indeed, would generally advise people to avoid. Again, I can't give the technical reasons why, for this would reveal who it is again. But the essential point is that if this mooted production method can actually be made to work then there are three extant plants that you could bolt it onto: instead of building an entirely new, from scratch, plant as is being suggested.
Agreed this is only personal experience, anecdata if you like. And I'm sure you can construct an argument that this is just me angry at not being listened to: or paid perhaps. But my takeaway impression of this company is simply that they've got too much money. Too much to be cute and quick as a start up needs to be.
And that's why I think that Doerr and Kleiner have invested too much in cleantech. Not that the total amount of money is too large, nor that the sector isn't worth investing in. Rather, that they've put too much into this one company I know about. So much that it just isn't acting like the nimble and new company it needs to be to succeed.
Yes, it's an entirely personal view: but that's still what the view is. At least one of their investments just seems to have too much capital.