A Good VC Story Gone Bad

Two months ago, readers of Philadelphia Magazine were treated to an extraordinary tale of covert military missions and technology investing. It was about Mike Burns, co-founding managing director of Guggenheim Ventures. Here’s the lead:

The most successful Philadelphia entrepreneur no one has ever heard of wants to go off the record. Mike Burns, described by one friend as having an altar-boy face and an assassin’s heart, is in his understated King of Prussia office, from which he runs Guggenheim Venture Partners — the “deep tech” venture firm he founded with asset manager Guggenheim Partners, of the philanthropic New York family best known for a museum. Burns, who is all of 37 but looks little more than half that, entered into the Guggenheim partnership after he sold his first two companies for $750 million, one of those companies being Traffic.com.

The problem? I’ve asked about the Lidocaine patch Burns is wearing on a particular body part. When he’s not making millions, the former naval officer is a reservist in Special Operations Forces, a volunteer troop of special-mission commandos. Burns doesn’t talk about what he does as a reservist, but it presumably involves some Bond-like stuff. Last week he returned from his last deployment, likely an exotic place, and he injured said body part — a particularly vulnerable spot, given that he’d injured it before doing something else that was dangerous and secretive. “This has to be off the record,” he reiterates. “I don’t want the enemy knowing any weakness.”

The piece carried on for several pages, including a Photoshopped image of Burns holding a gun in one hand and a briefcase in the other (see above). Fascinating stuff. Well, if it were true.

Burns is currently a reserve officer in the U.S. Navy, and at one point did indeed serve in the reserve unit at U.S. Special Operations Command. But that last part ended back in April 2009, according to Naval public affairs officer Brenda Malone. As for the Lidocaine patch, it was from a small cut into the muscle, which Burns did not receive while on military assignment.

There are a bunch of other misleading items in the story, which Burns and Guggenheim apparently hoped would simply highlight the team’s unusual mix of tech geeks and former military pros (including Dave Jannetta, the former mayor of Altoona, PA who is a retired lieutenant colonel in the U.S. Air Force). There also is no mention of how much trouble GVP had raising its debut fund, or that one of the three founding partners is long gone. And then there is the case of a GVP staffer apparently missing the point of a peHUB Wire item, which the writer retells as a stroke of research and investment savvy.

Now here’s where it gets even a bit more interesting: That writer was Larry Platt, who also happened to be editor of Philadelphia magazine. Just a few weeks after the June issue was released, Platt was fired. Here’s how Philly.com described the situation:

Sources tell us the decision was largely due to Platt’s history of inappropriate and unprofessional remarks and jokes to his employees, in what closely resembled the behavior of the fictional “The Office” boss Michael Scott.

Apparently the final straw was Platt’s decision to give a framed photo of a removed testicular cyst to a departing female editor. Classy.

Sometime soon after, Philadelphia Magazine removed the Burns story from its website and website archives. In fact, the only way to find it online is via Google cache. I asked interim editor Tom McGrath if the removal was due to inaccuracies, and he sounded surprised. Instead, he said: “We discussed the situation with people in law enforcement, who felt the story could post a risk to Burns’ family.” He added that if I had information that part of the story – which “underwent our regular fact-checking” – was incorrect, he’d like to know about it.

To be kind, McGrath was being disingenuous. Both Burns and his attorneys had already contacted Philadelphia magazine by that point, which McGrath acknowledged during a subsequent phone call with me last Thursday. But he still maintained the “family risk” rationale for pulling the story (saying Burns himself raised the issue), at which point I asked why he didn’t also have unsold copies removed from bookstores and newsstands. No response.

Burns declined to speak with me about the situation – methinks at Guggenheim’s urging — which means there still is no explanation for some of the quotes which seem to have led Platt to his ridiculous conclusions. Platt also didn’t return a message left on his home answering machine.

Burns did pass me onto his attorney Dick Sprague, who said via email: “The Philadelphia Magazine article was written tongue-in-cheek. As such, no further comment is warranted and none will be given.”

Really Dick? Then why were you involved in the first place? Oh right, because the tongue-in-cheek parts were based on a false premise that has caused your client harm (at least in the eyes of multiple Philly-area VCs and techies – including some of Burns’ former colleagues — who originally alerted me to the story).

Really just a bizarre situation, and not one that does much to advance the cause of Guggenheim Venture Partners. The firm is more than halfway through deploying its debut fund, which means it will return to market within the next 12 months. There is an interesting story to tell. Just not the one that has already been told.

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13 Comments

  • A good follow on story might be how much background checking goes on with LPs that are looking at VC funds? Do they actually really do their own background searches on firms/partners or do they simply “trust them”?

    One would hope pension funds etc. would do some work, but one wonders…

  • Mike’s “big exit”, Traffic.com was a result of bilking lps in other funds and protecting his own “founders” shares at a higher valuation while keeping out Baker Capital and others from doing a real term sheet. Not surprised his fund has had trouble since that type of behavior is easy to pull off once, but that type of ethics and greed is difficult to build a long term track record on. The era where this type of behavior was forgiven is long gone. There really needs to be an PA AJ investigation into some of these shenanigans at some point since it has affected so many pension holders retirements.

  • [...] A Good VC Story Gone Bad (Source) [...]

  • For future reference in any industry: most any guy who tells you he ran secretive missions probably didn’t.

  • Requesting the records of former military officers and enlisted is fairly simple (unless that person is Sen John Kerry). Relevant FOIA information is here: http://www.archives.gov/st-louis/military-personnel/foia-info.html#mprfoia. The former servicemember himself can get even more information (the full DD-214 record) by filing a form SF-180.

    Also, as you might imagine, the community of former special operations professionals takes membership claims fairly seriously, and there are a number of unofficial means by which to check out people claiming to have been a Navy SEAL, etc.

    Generally, the more bragging someone does about their military experiences, the less those experiences resemble reality, especially in the special operations community.

  • Claiming you are in special forces when you are not diminishes those who are serving to protect us every day. Even if it was in jest…. Very poor judgement which at the end of the day is what a VC gets paid for.

  • How is Mike Burns not in jail yet? This guy is a huge embarrassment for Guggenheim and the industry overall.

  • I find it highly unlikely that the image above was photoshopped. That sounds like an after-the-fact story contrived by someone who regretted posing for the picture.

  • Anyone that has met Mike shouldn’t be surprised by this article. The fact that he and his former partners haven’t been indicted by the PA AJ or the SEC is amazing. Then again, that’s politics. His military claims are only exceeded by his exit claims, which were not only gained unscrupulously as pointed out in an earlier comment, but weren’t nearly the number he is claiming. But rest assured, he didn’t perpetrate these without co-conspirators.

  • Burns’ trademarks are deception and dragging others down with him when his deception is discovered.

    His unique founder contribution to Traffic.com led to the 1999 lawsuit by Santa Fe Technologies that resulted in a 2005 verdict assessing $11M in damages against Traffic and $15M in punitive damages against TL Ventures, on charges of breach of fiduciary duty and conspiracy.

    This guy will continue to tarnish the reputation of Guggenheim Partners and it will be expensive. Shame.

  • [...] According to PE Hub, the story was so riddled with exaggerations and inaccuracies that Philly Mag has taken the story down (read it on Google cache). Editor and PE Hub founder Dan Primack – and some of the story’s comments – take several issues with the story about the venture capital firm that is run with a military attitude: [...]

  • “I’ve never met anyone smarter or more effective than Mike Burns,” said Pennsylvania State Treasurer Rob McCord in the Philadelphia Magazine article.

    McCord should know. Burns made the highest single personal contribution to McCord’s political 2007 election campaign. Subsequently under McCord’s tenure, two PA state agencies made aggregate capital commitments of $35M to Burns’ $65M fund.

    Fascinating.

  • you know, the comments in this article are almost more interesting than the actual PE Hub story.

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