
The shakeup of Kleiner Perkins exposes the short comings of venture capital - suprgeek
http://gigaom.com/2013/12/13/the-shakeup-of-kleiner-perkins-exposes-the-short-comings-of-venture-capital/
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rayiner
> our Roadmap conference in November, Om asked GE CMO Beth Comstock why a
> young person would want to work at GE when there are hot companies like
> Facebook out there. If there’s one compelling reason why anyone would want
> to, it’s because a company like GE can invest in R&D and tackle some of
> these massive, basic science, infrastructure and manufacturing problems.
> Because who’s more likely to deliver a jetpack, GE or Facebook?

It's a little sad that this even needs to be pointed out. VC's don't have
either the money or the time to fund huge, capital-intensive projects. If you
think about the really big projects going on right now, most are backed by the
government or big public corporations. Google's self-driving cars. Tesla's
electric cars,[1] Space X's low-cost launch vehicles,[2] etc.

The article mentions that VC works when Moore's law is in operation.
Ironically, the actual operation of Moore's law at semi-conductor fabs isn't
funded by VC, but massive capital investment from Intel, IBM, TSMC, etc. To
put things into perspective: Intel's annual capital expenditures of $10-12
billion alone are roughly comparable to all VC investment in Silicon Valley
combined (which is 40% of all VC investment in the U.S. as a whole).

[1] While Tesla paid off its federal loans early, it took $465 million for
four years in order to build the factory that produces that Model S, arguably
one of the most crucial turning points in the development of the company.
Also, Tesla benefits enormously from the electric vehicle tax credit.

[2] Subsidized both by historical NASA research and NASA prepayments on launch
contracts amounting to about half the money Space X has thus far raised.

~~~
DaniFong
Important folks are leaving places like GE and joining places like Tesla,
SpaceX, and my own company LightSail, precisely because they are disenchanted
with the proclivity of GE to actually decide to invest in real new inventions.

Despite the fact that GE _could_ invest in new technologies, they are not. The
man promoted to the head of technology for power and water for GE instead
joined us, for, he says, exactly this frustration.

Hopefully, this will be a possible thing for them to change -- or they are
going to keep losing their best people.

~~~
FD3SA
This is undoubtedly a win for science, but I wish we could push the envelope
even further. For example, which company is willing to fund Dr. Bussard's IEC
Fusion research [1]? The government is currently the only interested customer,
and just barely at that.

1\.
[http://en.wikipedia.org/wiki/Polywell](http://en.wikipedia.org/wiki/Polywell)

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DaniFong
I hugely disagree with this.

KPCB very nearly owned the lion's share of Tesla, and missed out due to a mere
$20MM in delta in valuation (VantagePoint offered $70MM, Kleiner offered
$20MM). They then missed out again simply because of political struggles meant
John Doerr couldn't take a board seat.

They were less than a board seat or $20MM in conviction away from being proven
right -- now everyone thinks they are proven wrong. Just goes to show you the
risks in the game.

~~~
chrisgd
They didn't get Tesla because Musk wanted Kleiner on the board not the partner
who had done all the work. So Tesla took a $70M valuation with a board member
they didn't care about rather than a $50M valuation with the board member they
did want, which Musk says was a mistake. Still there were other missteps.

This article came out a day after this one, which is more in-depth about all
the problems they have faced.

[http://pando.com/2013/12/11/john-doerrs-last-stand-can-a-
dra...](http://pando.com/2013/12/11/john-doerrs-last-stand-can-a-dramatic-
shakeup-save-kleiner-perkins/)

~~~
DaniFong
There are really a lot of potential legitimate reasons for wanting one partner
on your board rather than another; particularly Doerr at KPCB vs Ray Lane, now
emeritus.

Like I said, politics. I don't know the scoop.

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ig1
This is a pretty poor article.

Yes. Cleantech was bad for Kleiner Perkins and a lot of other VCs that bet on
it. But it also didn't work out for large companies, governments or research
groups investing in it either.

Many of the arguments made here could equally well be applied to life
sciences, but life science and biotech VCs have seen reasonable returns in
investments and their LPs are often large pharma companies.

Also the author seems to be clueless as to the fact Moore’s Law is nothing to
do with the speed of company growth but rather to do with the performance of
computing power.

While their might be certain products that require an investment structure
that VCs can't provide, this article fails to make any kind of coherent
argument for it.

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memracom
One good thing has come out of the VC's move on cleantech and that is bigger
mindshare. More people are now aware of the possibilities and in particular,
aware that concerted effort and investment towards a goal can pay off. It just
takes longer than the VCs expected but note that one response to the VC
activities has been that other companies are increasing their R&D spending.

It will be interesting to see how the stars of the digital age respond. We
already have Google investing in various technology initiatives outside of the
mainstream software and networking area. But what will Amazon and Twitter and
Facebook do? Will one of them invest in solar breakthroughs? Or high speed
rail?

The story is not yet over.

~~~
skylan_q
_One good thing has come out of the VC 's move on cleantech and that is bigger
mindshare._

I don't disagree with you.

I think the VCs are also a victim of mindshare. To me, that's the most likely
explanation as to why they erred as much as they did.

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mathattack
Interesting that they point to GE as a place to do basic research. It used to
be AT&T.

