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Summary:

Is it the end of an era for the former rock star venture capital firm Kleiner Perkins and did greentech play a large part in that fall from grace?

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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?

  1. Kleiner’s woes in greentech could be a result from the lack of real disruption in the field. Alternative renewable cheap and highly efficient energy sources should be much more disruptive than optimizing on the present paradigm.

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  2. I think they will bounce back. KPCB is still comprised of very accomplished and smart professionals who provide a lot of forward-looking insights. This feels like it’s just a bump in the road.

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    1. Definitely a possibility. There are a lot of smart people over there.

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      1. No matter how smart you are, you can’t do brain surgery or plumbing without the proper background. Everyone thought that CleanTech was so easy. If they could make billions on investing in companies that wrote code, how hard could the energy sector be. Pure hubris.

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  3. Saw this coming years ago – chasing rainbows. VC firms come and go. But this one did it up really big – placed a stupid bet.

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  4. Well, in part you have to blame the enormous tangent was (I guess still kinda is) the search for a better solar conversion technology. Instead of acknowledging what was always going to happen, that the cheapest oldest technology would get incrementally improved and then massively scaled up in China, VCs poured hundreds of millions into capital-intensive, headed for the valley of death technologies that if they maybe ever got to scale offered marginally better efficiency or cost per watt. The graveyard is large: Solyndra, Evergreen, Abound, Amonix, Miasole (ok not yet but come on). Maybe FSLR is to blame for giving everyone false hope.

    VCs who lean in hard right now into innovation in business models and IT in clean renewable predictable energy (while KPCB sits in the corner) are going to kill it.

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  5. KPCB can’t be too bright. They invested in EESTOR’s fraud.

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  6. Also why did GigaOm ditch Disqus? Comments section looks like crap now. No offense.

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    1. Not sure, I’ll ask our dev peeps. No offense taken.

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    2. +1 to that. pls bring back disqus

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    3. Hey Tyler, I talked with our devs and turns out we’ve never used Disqus at GigaOM. Something to consider in the long term though. Thanks for the feedback.

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  7. some very smart minds failed to figure out:

    – how much money most (not some) of greentech startups will take to get to exit (100s of MM, not <100MM as with IT)
    – how much time most (not some) of greentech startups will take to get to exit (7-12 years, not 3-7 years)

    this made the 'J' curve much much deeper + wider than investors realized. Add to that the '09 slowdown in capital flow and customer-take and there was a near perfect storm for greentech startups.

    finally, the pincer move of @500's moneyball at seed stage and a16z's no holds barred assault at the high end of A/B/C/D demands faster + smarter moves of kpcb in consumer and enterprise IT spaces.

    i wouldn't count them out though just yet. opportunities in the next ten years of IT infrastructure/enterprise investing promise to be as big as the 90s and most likely bigger. for all the talk of cloud in the past five years, enterprise CIOs are barely spending real money on it. add to that mix mobile and big-data and greentech (and perhaps Lifesciences) may just end up being flesh wounds that causes them to focus on, not fritter away investment opportunities.

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  8. Katie, his name is Perkins, not Perkin. The headline has a typo.

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    1. Oh yeah. thanks for that, will fix

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  9. Before trying to analyze this too deeply, I’d suggest you engage in a discussion with these folks from the perspective of a customer (ie: a prospective new technology ). The degree to which they tower over the normal level of VC hubris is shocking (i cant imagine anyone with a “hot technology” even consider dealing with them?)

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  10. I think the problem is that none of the partners at Kliener Perkins have been tech entrepreneurs (and NO having a senior management position in a tech company doesnt automatically qualify you). If you look at guys like John Doerr , Ray lane, Wen Hsieh etc..it is obvious that they dont have the background to understand deep technology; a lot of which involves physics and materials science.

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  11. So here is a story that may mentore shared with me recently.

    A father gives his son $1 and asks him to double the money. The sons goes out and tries his luck. Son can be interchanged with daughter, for political correctness. Son comes back empty handed. Father asks what happened? Son say another kids with $10 ended up taking his $1.

    The VCs forgot that to compete with big boys, with trillions already invested in infrastructure, and most of it amortized, one needs to spend much more to win the game. US lost of to China because US built its infrasructure long ago, while China is building out and was willing to go all out. While our (US) political system, weighed down by sharp polarization, did not have the balls to play the game with China.

    Cheers

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  12. In this climate is it not time to move from the Zero to a billion in a nano second.

    Use old fashion business methods grow organically zero dept firm foundations.

    These Cavalier business practices have murdered at birth brilliant technologies that needed time to mature before roll out.
    They are run but money guys trying to sell moon beams not good old fashion commerce .

    We need these brilliant technical minds and need to rethink the business models.
    The focus should be on technical excellence
    Not to dump shares when the other guy is not looking
    Perhaps this is a little boreing

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  13. Goof article. Not sure what’s wrong with this sentence though:
    “but if those web investments aren’t their either, then that’s a big problem.”

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  14. I don’t know whether this is just a bump in the road, but KP has survived other big bets that went wrong. Remember pen computing? The hard-drive stampede? The early 2000’s biotech bust? These were gigantic holes in the portfolio, for both KP and lots of other VC’s. It comes with the territory- big wins come from placing big bets on things that have a lot of uncertainty. Some of the people here can gloat over KP’s current troubles, but as a fellow VC all I can say is it sounds like sour grapes.

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  15. It is just luck and the right time for John Doerr, Ray Lane etc to make fortune in the past.
    However, investors in them lost the money not them, so who cares !
    None of them understand the physical science, its future, and the limitation/time
    to make profits. In the past, luck, and timing are what made them succeed !
    Not any more as the future is not easy to predict.

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  16. KP committed 3 VC no-no’s. It tried to finance basic research which is best left to big companies and governments, it invested in an area which, as a business, can only exist economically with political support, and they bet the farm in that one area instead of sprinkling the money over a number of technologies. a venture fund’s success is highly dependent on the 10% of the portfolio that contains the big winners. this means that there needs to be adequate diversification to make sure the net is wide enough to capture them.

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  17. Kleiner is continuing their trend of late stage tech investing with deals like Twitter and Spotify. I see a lot of hot deals going on in Silicon Valley and Kleiner’s name isn’t on them. So much of Kleiner’s success in the current era was due to John Doerr and Vinod Khosla during the late 90s and early 2000s. I’m not super impressed with their folks over there. They miss out on a lot of stuff and they seem to prefer very late stage deals, which indicates they are risk-adverse.

    I just don’t think they have the horsepower like they used to. Look at AH and then look at KPCB. There’s really no comparison.

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  18. Stop chasing manufacturing deals! America can’t compete in manufacturing in the long run.
    $500 million could have been invested in 100 other IT or non-manufacturing clean tech startups and
    get a few winners, more quickly.

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