Four Longtime Partners at Kleiner Perkins To Cut Back

Kleiner Perkins Caufield & Byers has confirmed that four of its long-standing general partners will take on reduced roles in its next fund and that a fifth GP has left the firm. It also said that it held a first close on its 11th fund, which is targeted to be $400 million.

KP’s announcement came hours after PE Week published a story on its Web site last Thursday about the new lineup for Fund XI.

Kevin Compton, Will Hearst, Vinod Khosla and Doug Mackenzie will continue to be “partners” in Fund XI, but they will not carry the title of managing partners, also known as general partners. They will “work exclusively with the new KPCB fund on technology investing, while also planning to spend more time with family and on personal causes,” according to a statement issued by the firm.

KP also said that Tom Jermoluk had left the firm, as had previously been reported.

“Some roles shift in each new fund,” said GP John Doerr. “The team of KPCB 11 partners will continue our work together to serve entrepreneurs.”

PE Week‘s online story about the change in the general partnership was based on information contained in a Form D that KP filed with the Securities & Exchange Commission. Form D is a legal document filed by venture firms to let the market know that a fund has sold securities, such as limited partnership interests, in a private placement.

The significance of the change in titles at KP is that Khosla and the others who aren’t listed as managing partners (or GPs) in fund XI “have not committed to be active in the management of Kleiner Perkins XI, i.e. making new investments on behalf of the fund,” says a veteran Silicon Valley venture capitalist who asked to remain anonymous.

That doesn’t necessarily mean that Khosla and the others won’t make any new deals, but they won’t be required to, the source says.

The six general partners in the new fund will be Brook Byers, Joe Lacob, Ray Lane, Ted Schlein, Russ Siegelman and Doerr.

A big change in the lineup of a general partnership could hurt a lesser-known fund without a track record. But because the firm in question is KP, the changes aren’t expected to make a significant difference. The firm has backed so many startups that have gone on to fame and fortune – such as Amazon, Genentech and Google – that it is a magnet for entrepreneurs pitching new ideas no matter what GP is on the roster.

“They’re losing some outstanding guys, but the franchise will endure and continue to succeed,” says the Silicon Valley VC who asked not to be named. “Kleiner Perkins was great before Vinod Khosla got there and it will be great afterward. Tom Perkins’ greatest legacy is the institution that he helped create.”

In an apparent move to show that Khosla, 49, one of its most successful partners, is still very much engaged, KP said, “The fund’s first investment will be in a new electronics venture where Partner Vinod Khosla will join its board of directors.” It did not disclose the name of the startup or the amount invested. A source says that Khosla brought the deal to KP.

“I expect to be quite active as a Kleiner partner, continuing to deliver venture assistance’ – more than venture capital,” Khosla said.

It is unclear how management fees and carry on the fund will be divvied up between those who remain GPs and those who will not be responsible for actively making new investments. It depends on the culture of the firm and individual circumstances, industry sources say.

In addition to its six managing partners, fund XI has six “partners”: Compton, Hearst, Khosla and Mackenzie, as well as John Denniston and Juliet Flint.

Matt Murphy is a “principal” in the fund, and Aileen Lee, Ajit Nazre, Risa Stack and Trae Vassallo are “associate partners.”

In its Form D, KP states that fund XI has a target of $500 million and that LPs committed $182 million as of Feb. 12.

KP’s press release states that the target of the new fund is actually $400 million and that it has held a first close on an undisclosed amount. The firm did not say it expects to hold a final close.

The Form D for Fund XI lists two limited partners: Harvard Management Private Equity Corp. and Yale University. The document identifies them as “beneficial owners,” meaning they have committed at least 10% of the limited partnership interests, or at least $18.2 million apiece.

A total of 25 investors made commitments to the fund, but the names of the other 23 are not listed because they made commitments of less than 10% of the total.

Two names were noticeably absent from the beneficial owners list: Horsley Bridge, a fund-of-funds, and the University of California. They were listed with Harvard and Yale as beneficial owners in a Form D filing for Fund X. A filing for that fund dated June 29, 2000, showed that KP was raising a $1.4 billion fund and that Harvard, Yale, Horsley Bridge and UC had each put up at least 10% of the $199 million raised as of that date.

It’s possible that KP won’t allow UC into the new fund, even though UC has been one of its LPs since KP II. The firm could follow the lead of Sequoia Capital and Charles River Ventures, which kicked out or didn’t invite public LPs into their new funds because some public LPs, including UC, have disclosed their private equity performance numbers to the public.

KP did not rule out that it may have a slightly different LP lineup in the new fund. “The institutional limited partner investors in KPCB have remained largely unchanged over the past two decades,” the firm said. “The partners expect to invest the fund over roughly a three-year period in emerging growth companies in information technology, life sciences and other fast-growing industries.”

Two sources close to KP say that Compton, 44, has been mulling retirement for some time. One source says that Compton, who has been a general partner with KP since 1990, has entertained thoughts of “teaching 7th grade algebra.” Compton sits on the boards of Citrix Systems (Nasdaq: CTXS), KnowNow, Kodiak Networks, Intersperse, Verisign (Nasdaq: VRSN) and Volterra.

Hearst, 53, joined KP in January 1995, after serving as editor and publisher of the San Francisco Examiner for 11 years. His board seats include Applied Minds, Juniper Networks (Nasdaq: JNPR), Oblix, OnFiber and RGB Media.

Mackenzie, 44, joined KP in 1989 and became a general partner in 1992. He is a director at E.piphany (Nasdaq: EPNY), Instant802 Networks, Marimba (Nasdaq: MRBA), Omniva Policy Systems, Scintera Networks and the WeddingChannel.

KP said that Jermoluk, 47, who joined as a general partner in 2000, “elected to leave the firm to return to an operating role. Tom continues to serve on several KPCB portfolio company boards, and the firm looks forward to calling on his expertise and insights.”

Email Lawrence Aragon