Kleiner Perkins Caufield & Byers has confirmed that four of itslong-standing general partners will take on reduced roles in its next fundand that a fifth GP has left the firm. It also said that it held a firstclose on its 11th fund, which is targeted to be $400 million. KP’sannouncement came hours after PE Week published a story on its Web site(privateequityweek.com) on Feb. 26 about the new lineup for fund XI.
Kevin Compton, Will Hearst, Vinod Khosla and Doug Mackenzie will continue tobe “partners” in fund XI, but they will not carry the title of managingpartners, also known as general partners. They will “work exclusively withthe new KPCB fund on technology investing, while also planning to spend moretime with family and on personal causes,” according to a statement issued bythe firm. KP also said that Tom Jermoluk had left the firm, as hadpreviously been reported.
“Some roles shift in each new fund,” GP John Doerr said in an interview withPE Week. “The team of KPCB 11 partners will continue our work together toserve entrepreneurs.”
PE Week’s online story about the change in the general partnership was basedon information contained in a Form D that KP filed with the Securities &Exchange Commission. Form D is a legal document filed by venture firms tolet the market know that a fund has sold securities, such as limitedpartnership interests, in a private placement.
The significance of the change in titles at KP is that Khosla and the otherswho aren’t listed as managing partners (or GPs) in fund XI “have notcommitted to be active in the management of Kleiner Perkins XI, i.e. makingnew investments on behalf of the fund,” says a veteran Silicon Valleyventure capitalist who asked to remain anonymous. That doesn’t necessarilymean that Khosla and the others won’t make any new deals, but they won’t berequired to, the source says.
The six general partners in the new fund will be Brook Byers, Joe Lacob, RayLane, Ted Schlein, Russ Siegelman and Doerr. A big change in the lineup of ageneral 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 makea significant difference. The firm has backed so many startups that havegone on to fame and fortune – such as Amazon, Genentech and Google – that itis a magnet for entrepreneurs pitching new ideas no matter what GP is on theroster.
“They’re losing some outstanding guys, but the franchise will endure andcontinue 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 begreat afterward. Tom Perkins’ greatest legacy is the institution that hehelped create.”
In an apparent move to show that Khosla, 49, one of its most successfulpartners, is still very much engaged, KP said, “The fund’s first investmentwill be in a new electronics venture where Partner Vinod Khosla will joinits board of directors.” It did not disclose the name of the startup or theamount 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 in aninterview with PE Week.
It is unclear how management fees and carry on the fund will be divvied upbetween those who remain GPs and those who will not be responsible foractively making new investments. It depends on the culture of the firm andindividual 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 JulietFlint. 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 thatLPs committed $182 million as of Feb. 12. KP’s press release states that thetarget of the new fund is actually $400 million and that it has held a firstclose on an undisclosed amount. The firm did not say it expects to hold afinal close.
The Form D for Fund XI lists two limited partners: Harvard ManagementPrivate Equity Corp. and Yale University. The document identifies them as”beneficial owners,” meaning they have committed at least 10% of the limitedpartnership interests, or at least $18.2 million apiece. A total of 25investors made commitments to the fund, but the names of the other 23 arenot listed because they made commitments of less than 10% of the total.
Two names were noticeably absent from the beneficial owners list: HorsleyBridge, a fund-of-funds, and the University of California. They were listedwith Harvard and Yale as beneficial owners in a Form D filing for Fund X. Afiling for that fund dated June 29, 2000, showed that KP was raising a $1.4billion fund and that Harvard, Yale, Horsley Bridge and UC had each put upat 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 hasbeen one of its LPs since KP II. The firm could follow the lead of SequoiaCapital and Charles River Ventures, which kicked out or didn’t invite publicLPs into their new funds because some public LPs, including UC, havedisclosed their private equity performance numbers to the public.
KP did not rule out that it may have a slightly different LP lineup in thenew fund. “The institutional limited partner investors in KPCB have remainedlargely unchanged over the past two decades,” the firm said. “The partnersexpect to invest the fund over roughly a three-year period in emerginggrowth companies in information technology, life sciences and otherfast-growing industries.”
Two sources close to KP say that Compton, 44, has been mulling retirementfor some time. One source says that Compton, who has been a general partnerwith KP since 1990, has entertained thoughts of “teaching 7th gradealgebra.” 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 publisherof the San Francisco Examiner for 11 years. His board seats include AppliedMinds, Juniper Networks (Nasdaq: JNPR), Oblix, OnFiber and RGB Media.
Mackenzie, 44, joined KP in 1989 and became a general partner in 1992. He isa director at E.piphany (Nasdaq: EPNY), Instant802 Networks, Marimba(Nasdaq: MRBA), Omniva Policy Systems, Scintera Networks and theWeddingChannel.
KP said that Jermoluk, 47, who joined as a general partner in 2000, “electedto leave the firm to return to an operating role. Tom continues to serve onseveral KPCB portfolio company boards, and the firm looks forward to callingon his expertise and insights.”