A lot of people have been expressing their surprise and disappointment in the recent writings of Thomas Friedman, the New York Times columnist who has, inarguably, become one of the nation’s most influential journalists over the past decade.
As many readers know by now, Friedman recently wrote that the smartest way to spend $20 billion in taxpayer dollars would be to “call up the top 20 venture capital firms in America, which are short of cash today because their partners — university endowments and pension funds — are tapped out, and make them this offer: The U.S. Treasury will give you each up to $1 billion to fund the best venture capital ideas that have come your way. If they go bust, we all lose. If any of them turns out to be the next Microsoft or Intel, taxpayers will give you 20 percent of the investors’ upside and keep 80 percent for themselves.”
Friedman has been roundly criticized for that proposal by the people who know the industry best — including the VCs who populate it and the reporters whose job it is to cover it. Indeed, there’s been no shortage of observers quick to point out that top venture firms hardly need $1 billion from the government — and that most wouldn’t want to deal with the scrutiny that such monies would invariably entail anyway. (VCs, especially the country’s “top” VCs, many of whom are billionaires, aren’t particularly well-known for their austere lifestyles.)
What hasn’t come up in these conversations, however, is who, exactly, is advising Friedman. Possibly, he’s expressing entirely independent thought. But it’s curious to me that no one has mentioned his close friend, the uber-VC John Doerr of Kleiner Perkins Caufield & Byers, who, among other things,
- Takes an annual cross-country ski trip with Friedman every New Year’s Day,
- Has interviewed him as a guest host on Charlie Rose, and
- Recommends Friedman’s best-selling books at every opportunity.
Why would John Doerr think $20 billion dollars from Uncle Sam is a good idea for his firm and its competitive peers? Consider that many of KP’s follow-on investors are in serious doo-doo right now. And potential sources of capital, especially the kind that could once afford to contemplate the large cleantech projects that KP has taken to backing, looks to shrink further.
Just yesterday, the New York Times ran a story with Harvard’s Jane Mendillo, who has seen the university’s endowment shrink by roughly $8 billion, to $29 billion, since she took over the endowment in July. Mendillo has already had to layoff a quarter of her staff. There’s little question that behind the scenes, to raise cash, she’s also trying to finagle Harvard’s way out of many other commitments, including to venture, private equity, and hedge funds.
Which leads me to another point; a lot of people have said of Friedman’s columns that he’s dead wrong, that the best venture firms have zero capital concerns. But that’s not necessarily true, given that uncertain times we’re in and that exit opportunities have become so astonishingly few and far between.
Kleiner is already taking action, raising annex funds for its 11th and 12th funds and continuing fundraising for its once-closed Green Growth Fund and its $700 million Fund XIII.
Apparently, the firm is having little problem securing new commitments; as of a couple of weeks ago, documents showed that the firm was nearly three-quarters of the way toward its overall target of $1.25 billion. But with every institution from Harvard to the finance department of Dubai hard hit by the global financial crisis, I doubt Doerr is taking anything for granted at this point.
In fact, I’d guess a $20 billion injection from the government to the “top 20 venture capital firms” is a proposal that Doerr could get behind, if he hasn’t already. After all, KP wants its companies to thrive and it can’t support them on its own — not if it wants to diversify its risk and maintain a balanced portfolio.
Yes, taxpayer dollars would likely come with some uncomfortable strings attached, but if a firm like Kleiner could strengthen its companies while also potentially providing returns for American taxpayers, would it really say no?