Tom Perkins has never been the kind of venture capitalist who opts for quiet.
After stepping down from an active role at Kleiner Perkins Caufield & Byers, the storied venture firm he co-founded in the 1970s, his personal and professional activities have included, in no particular order, designing the world’s largest private sailboat marrying (and divorcing) the world’s most widely read living novelist, building and steering a sport submarine, and serving on the highly contentious board of what was once the world’s largest computer seller. He even squeezed in time in 2008 to publish a memoir about all that – “Valley Boy: The Education of Tom Perkins” – for which he was the subject of a “60 Minutes” profile.
Over the past couple weeks, however, it’s been a much shorter piece of writing – a 186-word letter to the Wall Street Journal, to be exact – that’s landed Perkins in the spotlight again.
On Jan. 24, weary of hearing criticism of well-off techies dominate so much public discourse in his hometown of San Francisco, Perkins, born in 1932, penned a letter with the opening line: “Writing from the epicenter of progressive thought, San Francisco, I would call attention to the parallels of fascist Nazi Germany to its war on its “one percent,” namely its Jews, to the progressive war on the American one percent, namely the “rich.” (See full letter here.)
Perkins’ letter sparked an explosive response – much of it negative – and went on to become what WSJ editors say could be the most widely read missive in the publication’s history. The paper’s editorial board stood by the letter (with its response here) and its message, but conceded that the comparison to Nazi Germany was inappropriate. Others, including New York Times columnist Paul Krugman and VC blogger Mark Suster were less forgiving.
Perkins then was interviewed by Emily Chang on Bloomberg Television and said he regretted the Nazi comparison, but then added more material for critics when he said, in reference to his Richard Mille watch, that it could buy a six-pack of Rolexes.
Below is my Q&A interview with Perkins, followed by a sidebar on a fake Tom Perkins blog (which no longer appears active), comments from his peers at the time this was published, and a bio. The story originally was published in VCJ as the cover story in the December 2007 issue.
Still making waves
Tom Perkins sailed away from an active role at Kleiner Perkins many years ago, but he still has strong opinions about the venture industry—and just about anything else you care to ask him about.
If Hollywood ever needed a lead actor to play a retired zillionaire VC, central casting would undoubtedly come back with Tom Perkins.
VCJ December 2007 Cover
Dapper, tense and preternaturally driven, the 75-year-old co-founder of Kleiner Perkins Caufield & Byersseems as much a typecast of a venture capitalist as the real thing. His career—a vertical climb from high school nerd to engineer to entrepreneur to venture capitalist—is classic Silicon Valley. His post-venture capital pursuits—yacht racing, novel writing and submarine building—are classic brash overachiever.
Since stepping down as general partner, Perkins has made retirement into something of a competitive sport. It’s no coincidence that the journalist who chronicled the building of Perkins’ next-generation clipper yacht titled the resulting tome Mine’s Bigger, presumably a testament to both the boat and the character of its builder.
This fall has been a particularly busy season for the former VC, with the release of his memoir, Valley Boy: The Education of Tom Perkins, globe-trotting aboard his clipper The Maltese Falcon, and near-completion of his latest pet project, a personal submarine.
While he’s not actively involved in venture today (he’s held the title “partner emeritus” at his namesake firm for more than a decade), Perkins remains opinionated about how the industry ought to function. Having resigned last year from the scandal-plagued board of Hewlett Packard, he’s equally outspoken on issues of corporate directorship.
On other issues, Perkins isn’t shy about spouting out-of-the-mainstream opinions. While KP General Partners John Doerr and Ray Lane dole out millions to carbon-fighting clean technologies, Perkins remains skeptical that climate change is overwhelmingly the result of human activities. He lives much of the year in leftward-leaning Marin County, but his loyalties lie with the Republican Party. His only donation offer to fellow Northern Californian and House Speaker Nancy Pelosiis an invitation to underwrite her retirement party.Ensconced in a 36th floor office overlooking the broad expanse of the San Francisco Bay, Perkins maintains a markedly restless air for someone with a net worth that enables spending well over $100 million on a boat.
For reasons that seem more related to ego than revenue, his current focus is book sales. In an effort to drum up readership, he’s just wrapped up a barrage of interviews for a profile on 60 Minutes, an experience he characterized as grueling. Always the competitor, he proudly noted that a few weeks earlier, French President Nicholas Sarkozi walked out on his interview with Lesley Stahl, who also grilled Perkins. “I stayed.”
Q: Your memoir hit bookstores in November. What’s the early reception been like?
A: Most people I talk to like it. And last I looked, there were two reviewers on Amazon. One is very favorable. The other one [one star] says he read it standing in a bookstore. He didn’t buy it, but he went home and went onto Amazon.
Q: In the book, you talk a little about venture capital, but you also devote a lot of pages to other pastimes, like sailing, car collecting and your famous yacht, The Maltese Falcon. What’s currently on your plate?
A: Right now I’m building a submarine to go on the boat. It’ll dive to 400 feet, go up to 10 knots (11.5 mph), and you can do loops and rolls. It’s kind of a sports submarine. It’ll be finished early next year and is being built here in San Francisco
As for the boat, right now it’s in La Spezia, Italy, and will be leaving to sail the Atlantic. I’ll join in December and we’ll sail from the Canary Islands to the Caribbean.
Q: Are you still involved in venture capital? Your official title at KP is “Partner Emeritus.” What exactly does that mean?
A: Basically that means I hang around, and every now and again they might ask me for some advice. I do a little investing on the side—mostly computers—but nothing I want to talk about.
Q: That brings me to a question about succession—a big issue in VC circles. KP has done a good job of handling succession issues so far. What lessons did you learn from your own experience that you can share with other founders who should be thinking about stepping aside?
A: I can’t speak for other firms, but at Kleiner Perkins, I’ve always been uncomfortable with the idea that just because your name is on the door you should therefore have a big share of future carried interest. We have had a practice of restructuring the general partnership side of the partnership very frequently. We’ll create a new partnership with a new share of potential profits based on who’s doing the work.
It lends itself naturally to a sort of a reappraisal because we’re always running out of money. Our basic policy, which we’ve had from Day One, is that it’s essential not to reinvest profits but to distribute them.
I’ve always been uncomfortable with the idea that just because your name is on the door you should therefore have a big share of future carried interest.”
Q: How do you figure out who’s doing the most work?
A: You could make an educated guess about how to do that. I’ll say that we’ve never had a big dispute. We’ve never had a partner storm out in anger.
Q: A lot of times in venture capital, a firm launches a great fund, followed by a so-so one. What’s the secret to KP’s consistent success?
A: The secret? I think from the beginning, Eugene Kleiner and I had a knack for determining when a new technology was ready for prime time. We’ve never had a fund that’s lost money. And they’ve come pretty quickly. We’re going to start raising KPCB XIII next year.
Also, we’ve treated our entrepreneurs very well, so we have good rapport with the companies we’ve financed. I think it would be hard to compete with us now since we’ve been at it for so long. Plus, we’ve got John Doerr, Brook Byers and Ray Lane. Those guys are very, very good. I mean, how many Googles do you need?
Q: Still, we hear a lot of chatter in the Valley about how the venture model is broken, and that today there’s too much money chasing too few good deals. What’s your take?
A: Ever since I’ve been in the business, it’s fair to say there’s too much money. Even when there wasn’t any, there weren’t any deals either, so there was too much money. That’s certainly true today. I don’t really know how much true venture capital is available, but let’s say there’s at least $20 billion. Can you multiply $20 billion at 100 to 1 or even 10 to 1, the way every venture capitalist wants to do it? I think the answer is no, you can’t.
Q: So has succeeding in venture gotten harder?
A: Remind me when it was easy. It’s possibly easier now than it was way back because there’s more expectation of success, making it easier to bring entrepreneurs in. Back when Kleiner and I started, nobody knew what venture capital was, and it was hard to get the entrepreneurs to step forward.
One thing that’s changed is I used to think back when Kleiner and I started that venture capitalists should not specialize. In my case, I did lasers, computers, biotech, communications and software. But I may have been the last of the breed, where it made sense to do that. I think there’s a required specialization. I try to keep abreast of technology, but I fall quite a bit behind. It’s moving so quickly, and unless you’re really up to speed in one area, you’ll be lost.
Q: KP seems to be changing in other ways too. It started out as a firm comprised of Caucasian men. But today, about a third of the firm is made up of women vs. an industry standard of 8%-10%. Was this a dedicated recruitment effort?
A: I think we’re just gender blind. We look for talent, and when we find it we try to bring them into the partnership. I’m pleased with [KP’s diversity], but it just makes common sense. It’s not part of an overall strategy.
Q: Back to your book. Memoir writers usually want to be remembered for something. What do you most want to be remembered for?
A: For Kleiner Perkins Caufield & Byers and for helping to make venture capital a viable and scandal-free industry. There have been a lot of problems on Wall Street. So I’m kind of proud of the way Kleiner Perkins has done it and what we’ve established.
Q: What drives you?
A: I’ve always been kind restless. A psychiatrist would probably say that I was striving for love and approval, probably from my mother. That’s probably a pretty basic motivation.
Q: Do you think you succeeded?
Just at KPCB, we’ve helped create about 300,000 jobs and about a half trillion dollars in market value and over 500 companies. If it all gets taxed at income rate it’ll be a very negative effect.”
A: Yeah, I think so.
Q: As a former National Venture Capital Association chairman, you’ve been pretty active in tax-related issues in the past. Where do you stand on the proposal to increase the tax on carried interest?
A: I think that the time scale is critical for determining the appropriate tax rate. For something like a venture firm, where it takes years to mature investments, certainly a capital gains taxation rate is appropriate. On some of the hedge funds, where it’s a year or less, maybe that isn’t the appropriate rate.
Another consideration is that venture capital is a demonstrable good for the American economy. Just at KPCB, we’ve helped create about 300,000 jobs and about a half trillion dollars in market value and over 500 companies. If it all gets taxed at income rate it’ll be a very negative effect. I don’t think that will happen.
Q: What’s your advice on VCs as board directors? You stepped down from HP’s board last year. Is there any lesson you learned from that experience that you can share with other VCs who sit on the boards of large, public companies?
A: It strikes to the question of what should a board do. In the VC model, there’s no question that the board is deeply involved in making the company succeed and building shareholder value. And I don’t think the venture capitalist should leave the company once it goes public.
For [the VC’s] stake in the company, our view is as soon as we can reasonably distribute a liquid security, we do so, as long as we can without disrupting the stock. But we may still remain on the board of directors to help the company and to learn from the company. But eventually, there’s a limit to how many boards you can be on, so we exit boards in order to be on new boards.
But once the company finally becomes enormous, it worries about other things, mostly governance-related issues and Sarbanes-Oxley compliance and so forth. My view is that a board of directors should direct the company. But there’s an emerging view that it should be a board of compliance auditors. There’s the idea that any director can be on any board. You don’t worry about the business; you only worry about complying. I think that’s a negative development, and I hope it’s a short-term development.
Q: It’s been a tumultuous year for financial markets. What’s your outlook for private equity?
A: For venture capital, we can continue find attractive investments. But I don’t know what’s in store for buyout funds and hedge funds. It’s pretty turbulent. There’s just so much money involved, it’s hard to see how everybody gets liquid.
Q: You’ve been following venture valuations a long time. Do the terms we’re seeing for a lot of startups seem overvalued?
A: Yes, but the markets can put incredible valuations on these things, too. I mean Google’s up almost 10 to 1 from its IPO. It’s one of the great companies of all times.
Sometimes it takes a lot of discipline not to invest. We had a period of a year-and-a-half in the late ‘70s where we did next to nothing. And for that period, that was the right thing to do. We’re not compelled to draw down our funds. We’re happy to just look and not necessarily invest.
Q: KPCB has made a big commitment to the cleantech space in recent years. What are your thoughts on this direction?
A: John [Doerr] and I—we don’t agree. I’m not a Holocaust denier. I’m not saying climate doesn’t change. … We perhaps only differ as to the degree of mankind’s responsibility for the acknowledged warming. I am not quite sure that it’s 100 percent. But, Brook [Byers], John and I come to exactly the same conclusion: Fossil fuels should not be burned, but conserved as a resource. Alternative clean energy needs to be developed, including safe nuclear.
Q: Any chance the KPCB name will changing along with its list of general partners? Perhaps a Doerr on the door?
A: You’ll have to ask the other partners. It’s very flattering to me and to Frank Caufieldto have our names still on the door, and of course poor Eugene is deceased. Certainly John Doerr and Ray Lane could and maybe should have their names on the door. I’m absolutely not opposed, but I’m flattered that they don’t change.
A psychiatrist would probably say that I was striving for love and approval, probably from my mother.”
THE FAKE TOM
Tom Perkins didn’t bootstrap Apple Computer, dream up the iPod or launch a hip animated film studio. But the pioneering venture capitalist does have one thing in common with enigmatic Apple boss Steve Jobs: a fake blog.
Since September, an anonymous blogger writing under the name Tom Perkins has been posting with reasonable regularity on faux news site NewsGroper.com. (The blog is at www.newsgroper.com/tom-perkins.) Like Fake Steve (aka Forbeseditor Dan Lyons), Fake Tom’s favored topics include strange new technologies, rants on the ridiculousness of politicians and repeated reflections on his own greatness.
True to his fake VC roots, Fake Tom is most prolific on the topic of tech startups. He has plenty of ideas of his own, such as a concept for an anti-anti-global warming venture called Carbon Debits. Consumers would pay the company to burn coal and raw garbage “to offset the efforts of smug hippies and Democrats like Al Gore and Vinod Khosla.” In another entry, the faux Perkins promotes a $150 million fund for Facebook applications launched solely to outdo rival Accel Partners.
Fake Tom seems to be striving more for absurdity than authenticity. It’s hard to imagine the septuagenarian Perkins composing a line like: “Holy crap! I just made the greatest VC investment of all time. Chuck Norris is going to make the returns on Google, Skype and YouTubelook like goddam bank loans.”
The real Perkins is less than flattered by his imitator. “Well, I am in good company with the Pope and Paris Hilton!” he said via email, referring to other NewsGroper posters using celebrity pseudonyms. “Seriously, I think it’s offensive and probably illegal—but who do you call to stop it?” —Joanna Glasner
We asked Tom Perkins’ peers to share their impressions of him. Here’s what they had to say.
Pitch Johnson, Founder, Asset Management Co.:
“There is a lot more to Tom Perkins than the picture painted on 60 Minutes on Nov. 4. While the show covered Tom’s present high-life, apparently with his help, it didn’t mention the fact that at his core he is a very honest person. His word is good and he seldom fails to say what he thinks. That candor can be blunt and even brutal when he thinks something is wrong or he is not getting his way. One of the ironies of that 60 Minutesstory is that KPCB, from its beginnings and guided by Tom, has been focused on actively helping entrepreneurs succeed well beyond financing them. They have known that the general partners would do very well if the entrepreneurs succeed, and talking about their own financial success was not part of their own successful formula in achieving that. Tom has been out of KPCB for about 15 years, but that legacy has lived on, and the Perkins on that show was not like KPCB, past or present.”
Dick Kramlich, Co-founder, New Enterprise Associates:
“I like Tom a lot. We almost became partners twice. In fact, he asked us and the Davidows to go on a cruise with him in the mid-90s to the outer islands of the Fijis. About halfway through the cruise he let it be known that the reason he invited Bill and me was because we were the only two people who had ever declined a partnership in KP. By the way, in my case it wasn’t because I did not want to be a partner there. It was because I had already given my word to Chuck and Frank that I would be their West Coast partner. Life would probably have been easier had I accepted, but I am very proud of what NEA has become.”
Dixon Doll, Founder, DCM:
“I got to know Tom because when we [DCM] came into the industry we raised the venture industry’s first fund focused on telecommunications opportunities and KP became a limited partner of ours. He has an incredible lust for life and he has lived it to the very fullest. The U.S. venture capital industry wouldn’t be the same if he hadn’t played a really important role in getting it launched.”
Reid Dennis, Founder, Institutional Venture Partners:
“When Tom and Eugene started Kleiner Perkins in 1972-73, the venture capital industry was practically non-existant! It was Tom’s leadership and vision that built KP into the most outstanding franchise in the industry. I enjoyed working with him and I learned a lot back in the days when our firms were both small and we needed each other to get our companies properly financed. We shared some wonderful successes as well as some not-so-wonderful failures!”
Brook Byers, General Partner, Kleiner Perkins Caufield & Byers:
I think it would be hard to compete with us now since we’ve been at it for so long. Plus, we’ve got John Doerr, Brook Byers and Ray Lane. Those guys are very, very good. I mean, how many Googles do you need?”
“Tom always looked for big ideas and technology breakthroughs that could create new industries, and at the same time had an authentic curiosity and love of the science. He would always ask the entrepreneurs: ‘Tell me first how it works, in excruciating detail!’ He had a full workshop in his garage where he could rebuild boats and cars completely and he worked the lathe and re-wiring himself…. Tom identified and mentored now legendary entrepreneurs who started new industries. These include in biotechnology, Genentech with founder Bob Swanson; in fault tolerant computing, Tandem Computers with founders Jim Treybig and Jack Loustaunou; in computed medical imaging, Acuson with founder Sam Maslak; and in commercial lasers, University Labs and Spectra Physics with Herb Dwight. Tom was also the first, and maybe the only, person to be Chairman of the Board of three NYSE listed companies (Genentech, Acuson and Tandem) at the same time. ”
William H. Draper III, General Partner, Draper Richards:
“Tom Perkins deserves to go down in history as one of a select few who made the venture capital industry a powerful force in dramatically strenghtening the U.S. economy. His unflinching support of innovative ideas, entrepreneurial management and winning strategies has paid off time after time. He is one in a million—or should I say one in a zillion.”
Co-founder, Partner EmeritusKleiner, Perkins, Caufield & Byers
EDUCATION: Received a bachelor’s degree from MIT in engineering and an MBA from Harvard University.
WORK HISTORY: After getting his MBA, joined Hewlett-Packard, where he started out as a machinist then worked his way up to sales. Quit after a few years, then worked briefly as a consultant for Booz Allen Hamilton. After a year at Booz Allen, following the advice of David Packard, joined venture-backed fiber optic company Optics Technology Inc. After four years, returned to HP and, in his spare time, co-founded a laser company called University Laboratories Inc., which was eventually sold to Spectra-Physics. Went on to become first general manager of Hewlett Packard’s computer divisions, then co-founded Kleiner & Perkins in 1972 with Eugene Kleiner.
FOCUS: Currently involved in venture capital only as an advisor to his namesake firm and sometime angel investor.
INVESTMENTS: Led investments in companies including Genentech, Tandem Computers and Compaq
PAST BOARD SEATS: Acuson, Applied Materials, Compaq Computer, Corning Glass Works, Genentech, Hewlett Packard Company, Hybritech, LSI Logic, Philips Electronics NV, Spectra-Physics, Symantec and Tandem Computers.
CURRENT BOARD SEAT:
The News Corp.
FAMILY: Has two children from his first marriage to the late Gerd Thune-Ellefsen. Married romance novelist Danielle Steel in 1998 and divorced in 1999.
RESIDENCES: Divides time between homes in Belvedere, California, East Sussex, England, and his boat, The Maltese Falcon.
BOOKS: Authored romance novel Sex and the Single Zillionaire, published in 2006, and memoir, Valley Boy: The Education of Tom Perkins, published in 2007.
FAVORITE RESTAURANTS: Felidia Ristorante in Manhattan, The Dining Room at the Ritz-Carlton San Francisco.
Sources: Valley Boy and VCJ reporting