San
Francisco, Jan 26 : In the spring of last year, John Doerr received
some bad news: Miasole, the solar-panel maker backed by his famed venture
capital firm, Kleiner Perkins Caufield & Byers, was on the verge of
bankruptcy.
If Miasole went under, it would be a dramatic collapse for a
once-promising startup that in its heyday had been valued at $1 billion. It
would also be a failure for Doerr, who for years had argued passionately that
clean technology could be the biggest business opportunity of this
century.
So Doerr, best known for making billions from backing the likes
of Google, Netscape and Amazon in their infancy, dipped into his own pocket for
the roughly $2.5 million that Miasole needed to make payroll, according to two
people familiar with the situation. The highly unusual personal loan allowed
Miasole to stay afloat long enough to be sold to a Chinese renewable energy
company for $30 million.
The quiet fix shows the lengths to which Doerr
was willing to go to avoid the embarrassment that would have come with a
collapse. It also underscores U.S. cleantech's dramatic turn for the worse after
the financial crisis, due in part to competition from China and a surge in the
production of abundant and cheap natural gas at home.
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 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.
Kleiner's financial performance, measured
by the returns its funds have delivered to investors, is not known. VCs, though,
are often judged by their ability to successfully exit startup investments
through initial public offerings or through sales to other companies.
Of
the 38 "greentech" investments listed on Kleiner's website, only Miasole has
been sold. Three others have gone public - biofuels maker Amyris Inc,
microinverter maker Enphase Energy Inc and Chinese inverter maker Sungrow Power
Supply Co Ltd - but all are trading far below their IPO prices.
Some
Silicon Valley entrepreneurs say Kleiner, while well-regarded, is no longer at
the very top of the VC heap. Such impressions matter when VC firms compete to
fund the most promising startups, and getting in on the best deals is in turn
key to future success.
At the annual AlwaysOn Venture Summit in December,
Kleiner Perkins did not make the list of top 10 venture capital firms.
Conference organizer Tony Perkins said he worked with Morgan Stanley and the 451
Group, a research firm, to draw up the list based on successful venture
"exits."
Kleiner partners "are not in the top of founders' minds when
they think about VCs," said Paul Graham, founder of the prestigious Y Combinator
technology incubator.
Media spoke to more than a dozen entrepreneurs and
venture capitalists about the top VC firms, and they more commonly cited Sequoia
Capital, Accel Partners, Greylock Partners and Andreessen Horowitz than Kleiner.
Kleiner's last knockout success was Google's IPO in 2004.
"Every firm has
cycles," Amanda Duckworth, a spokeswoman for Kleiner, said in an email when
asked to comment on the perceived decline in the firm's reputation. She said
that Kleiner has made many high-profile investments outside cleantech and beefed
up its Internet team in recent years, and that its partners and portfolio
companies regularly win awards and remain highly regarded.
Indeed,
several Kleiner investors and entrepreneurs said they were pleased with the
firm, which successfully raised a new $525 million fund last year.
"The
firm remains very vibrant and very energized and very engaged," said Amy Falls,
chief investment officer at Rockefeller University. "We are very happy to be
invested with them." Over the decades, Kleiner has made Rockefeller many
millions, she said.
Some believe Kleiner could yet have the last laugh,
and applaud Doerr for jumping into the sector early and smoothing the path for
others.
"Five years from now, mark my words, a cleantech revival," said
Scott Sandell, a partner at NEA, a large venture firm that co-invests with
Kleiner in many companies.
The alternative energy business looked highly
promising in the mid-2000s. Gasoline prices were rising, and then-President
George W. Bush signed into law a renewable-energy loan-guarantee program that
would funnel billions of dollars to alternative energy programs.
Former
Vice President Al Gore's effort to educate the public about climate change was
also making a mark: His movie "An Inconvenient Truth" won two Oscars in 2007.
Gore joined Kleiner as an adviser later that year.
Doerr emerged as
cleantech's biggest cheerleader, with a commitment that was personal and
political as well as financial.
"Green is the new red, white and blue,"
he told a gathering at Silicon Valley business forum the Churchill Club in early
2006, tying green investing to U.S. energy independence.
Influenced by
Gore's work on climate change, Doerr said his teenage daughter, Mary, had
spurred him to tackle the issue.
In a 2007 talk, Doerr quoted his
daughter as saying: "Dad, your generation created this problem. You had better
fix it."
With an estimated net worth of $2.5 billion, Doerr is an active
philanthropist. But he has repeatedly stressed that cleantech is good business,
not a charitable endeavor. "Going green is bigger than the Internet. It could be
the biggest economic opportunity of the 21st century," he said in
2007.
Kleiner announced in 2006 that it would dedicate $100 million of
its latest fund to greentech — and then doubled that commitment to $200 million.
Two years later, it launched the $500 million Green Growth Fund. Kleiner poured
the cash into dozens of solar, wind, geothermal, energy efficiency and renewable
fuels startups.
Further greening seemed inevitable with the 2008 election
of President Barack Obama, who at the time was a strong proponent of a national
market to limit and trade carbon emissions. The outlook brightened further with
passage of the American Recovery and Reinvestment Act in 2009, which provided
$27.2 billion for energy efficiency and renewable energy projects.
But
things changed fast. The financial crisis stifled investment in solar and wind
projects, while efforts to pass cap-and-trade legislation collapsed in Congress.
The explosion in natural gas development made possible by "fracking" undermined
the economics of many renewable energy projects.
Then came the bankruptcy
of solar-panel maker Solyndra, which had received more than half a billion
dollars of federal support. That unleashed a storm of criticism, which made it
even harder for green companies to secure financing to grow.
The sudden
shift in market conditions and investor sentiment hit some of the Kleiner-backed
firms hard.
Amonix Inc, a solar company, was forced to close a Nevada
factory last year. Luca Technologies Inc, which uses biotechnology to produce
natural gas, canceled IPO plans at the eleventh hour last April due to difficult
market conditions.
Silver Spring Networks Inc, a smart-grid company, and
biofuels maker Mascoma Corp have yet to follow through on mid-2011 plans to go
public. AltaRock Energy Inc, a geothermal energy startup, was forced to abandon
its first project in 2009 due to drilling problems. Another project to
demonstrate its technology is underway in Oregon.
Fisker Automotive Inc,
an electric car maker, has been plagued by production delays and hasn't built a
car in more than six months. It is currently seeking a partner.
The
companies did not respond to requests for comment on their relationships with
Kleiner or their current situation.
While Kleiner focused on cleantech,
which has accounted for more than a quarter of all its investment dollars since
2007, its competitors were lavishing money and attention on the consumer
Internet. Accel Partners bet on social networking site Facebook Inc in 2005 when
it was worth about $100 million. Firms like Charles River Ventures and Spark
Capital first jumped into microblogging service Twitter Inc in 2007, when it was
worth around $25 million.
When Kleiner tried belatedly to catch the
social media wave, prices had exploded. In early 2011, Kleiner invested in
Twitter at a $3.7 billion valuation, Facebook at a $52 billion valuation, and
Groupon Inc at a $5 billion valuation, according to published reports of
valuations from the time.
Kleiner said it did not agree with the reported
valuations. Based on its cost, the firm said, its investment in Facebook is up
39 percent; Twitter, up 111 percent; and Groupon down 38
percent.
Meanwhile, Kleiner's other earlier-stage consumer Internet
investments, including the social network Path Inc and reputation-measurement
service Klout Inc, have yet to make a splash. One that did, social games
developer Zynga Inc, was less of a victory than it might have been because
Kleiner held on to all its shares post-IPO, only to see the stock plunge from an
initial offering price of $12 to trade below $3, where it is trading these
days.
Kleiner faces other questions, too, including who might replace
Doerr as de facto leader of the firm should he retire. Doerr said in the email
that the firm has developed many leaders, including technology-focused partners
Ted Schlein and Randy Komisar, and healthcare partner Beth
Seidenberg.
And it's wrestling with the bad publicity - and possible
financial liability - from a much-discussed sexual harassment and retaliation
suit filed by Ellen Pao, a former partner. Kleiner has said the allegations are
without merit.
The firm has made a concerted effort over the past several
years to burnish its credentials as an Internet VC, hiring Mary Meeker, the
highly regarded former Internet analyst at Morgan Stanley, along with
up-and-coming stars such as Twitter's former engineering vice president Mike
Abbott and Square's former products director Megan Quinn.
At the same
time Kleiner has scaled back its cleantech activity, though even last year it
was the most active VC firm in the cleantech sector, according to research firm
the Cleantech Group, participating in more than 20 funding rounds.
On the
sidelines of a Kleiner party in November, Doerr said that the firm has more
profitable cleantech portfolio companies than any other venture firm. When asked
if he regretted pushing so hard into cleantech so early, Doerr gave a qualified
no. "I wish," he said, "we'd known then what we know
now."
Ends
SA/EN