Business Insider Editor-in-Chief Henry Blodget wrote an article on Kleiner Perkins that I actually agree with, pointing out how the once dominant VC firm has misstepped when it comes to its web investments — particularly its later stage investments in Groupon, Zynga and Facebook. But Blodget missed a big chunk of Kleiner’s fall from grace story: the firm’s investing struggles include a really aggressive bet on capital intensive cleantech companies several years ago, which has yet to pay off and from which Kleiner seems to be moving away.
Blodget focuses his article on how in the early 2000′s “Kleiner lost its edge,” and missed investments the first time around in the next generation Internet companies like Facebook, Twitter, Zynga, LinkedIn, and Groupon. Then in 2011, seemingly to make up for those missed investments, Kleiner launched its digital growth fund and tried to associate itself with hot web companies by buying stock in these companies from existing investors. Subsequently those later stage investments in Facebook, Groupon, and Zynga have been disasters, says Blodget.
So what exactly was Kleiner doing while it missed those early next-gen web deals? A big chunk of the firm’s attention and finances were going to greentech startups. A third of its 12th, 13th and 14th funds went to greentech, Kleiner Partner Ray Lane told me in an interview in the Summer of 2011, and the firm at that point had 14 active greentech investing partners. (It still lists 20 execs under the greentech section).
Cleantech hasn’t delivered the returns expected on the timeline expected for most venture capitalists. A few VC’s are still positive on the sector (like Nancy Pfund), but many are not and a good portion of the generalist investors have moved away from it. Kleiner’s Lane said last year that Kleiner wasn’t moving away from investing in cleantech — but that was last year.
Since then, both greentech focused partners Ray Lane and Bill Joy have moved away from making new investments for Kleiner. And many of Kleiner’s greentech portfolio companies are struggling to scale up. Thin film solar company Miasole recently did layoffs, electric vehicle maker Fisker Automotive has hit financing and scaling problems, smart grid company Silver Spring Networks never made it to its planned public debut, solar company Amonix shuttered it factory and V-Vehicle has basically gone kaput. Other Kleiner portfolio companies have been more successful, like Opower, Nest and Clean Power Finance, but those companies have yet to find exits, and make Kleiner money (and those firms are also all IT based).
Back in 2009, Kleiner’s John Doerr even noted that if Kleiner had seen how bad the market was going to crash, it probably wouldn’t have started it’s green initiative. Lane has expressed similar sentiments to me about how difficult the recession has been on greentech startups trying to raise money and scale up.
Kleiner could still make some money in greentech over the long term, but it’s clearly not meeting the traditional VC timetable of returns that Kleiner’s been used to. I’ve noted before that some of the major web home runs could have made up for these longer horizon greentech companies, but if those web investments aren’t their either, then that’s a big problem. There’s clearly a point when a firm has to return its funds, particularly when younger upstart firms like Andreesen Horowitz seem to be making the fund back in spades.
Is it the end of an era for Kleiner and did greentech play a large part? What do you think?