Ripped From The Blogs…


Bill Burnham must be feeling a bit like Homer Simpson. The venture capitalist recently posted a fascinating blog that estimated John Doerr’s carried interest at Kleiner Perkins Caufield & Byers. It was so interesting that we followed it up with a story in last week’s PE Week.

Burnham arrived at his conclusions by doing some simple math on filings with the Securities and Exchange Commission about distributions of Google stock. He told us that there were three factors that could make his figures untrue, but he didn’t realize until after PE Week had gone to press that he had neglected to consider one really obvious factor: that Doerr received Google shares because he is both a GP and an LP in the Kleiner Perkins’ fund that made the investment. That changes everything.

D’oh! We should have realized that, too, before jumping on the story. Sorry, John.

Just How Much Did VCs Pocket on Google?

Bill Burnham, Managing Director

Celsius Capital  

A few days ago I did a post that looked at the public filings on Google and did some calculations on how much the VCs involved in Google made. One of the calculations was an attempt to deduce the personal carried interest of the VCs involved (John Doerr and Mike Moritz) by looking at the distributions they received as reported on SEC Form.

I recently talked with some folks who definitely know many of the actual numbers involved and they pointed out to me what in hindsight is a rather embarrassingly obvious fact: that the distributions received by individual partners include both carried interest as well as the proceeds from any personal investments made by the partners, something which I had, quite stupidly, not figured into my deductions.

In many venture funds, these investments are usually quite small, somewhere between 1%-2%. However in some funds partners make significant personal investments and it’s likely that both of the partners in Google had substantial personal investments in their own funds.

I have no doubt now that the 40% share of profits that I deduced for John Doerr is wrong and that the 21.5% share I deduced for Mike Moritz is probably wrong as well. Both of their carried interest shares are lower and in the case of Doerr, significantly lower than the 40% number I deduced. While the absolute number of shares that have been distributed to them is still correct, there’s no way to figure out what portion of those shares were for their carried interest in the fund and what portion were for their own personal investments in the fund without more information, so it’s impossible to estimate their specific carried interests without that information and therefore it was in many ways irresponsible of me to even hazard a guess.

As I said in my original post, both VCs deserved every penny they earned and now that it’s clear a fair number of those pennies came from the partners’ personal money they put at risk and invested into the fund I have to say that I think they deserved their rewards even more that I thought at first.