Newspaper article International New York Times

After Trial, Expect More Structure in Silicon Valley ; Venture Capital's Glory Era of Scant Documentation and Few Rules May Be Over

Newspaper article International New York Times

After Trial, Expect More Structure in Silicon Valley ; Venture Capital's Glory Era of Scant Documentation and Few Rules May Be Over

Article excerpt

In its glory days, venture capital was a freewheeling enterprise with few rules and scant documentation. That may all be over now.

John Doerr really needed a win, and late Friday the esteemed venture capitalist got one of the biggest of his career: a jury's complete dismissal of gender discrimination claims against his firm, Kleiner Perkins Caufield & Byers.

But success in the courtroom is a tricky thing, and Kleiner's victory contains perils that his company will still have to overcome, such as its image as a boys' club. There is a less obvious one, too, which is how the details that came out during the trial may upend perhaps the most celebrated aspect of venture capitalism: investing on instinct, almost impulsively.

Instead, expect more bureaucracy.

In its glory days, venture capital was a freewheeling enterprise with few rules and scant documentation. That may all be over now.

This probability became apparent during the testimony of Ellen Pao, the former junior partner who was suing Kleiner. She said that she had discovered Twitter as a potential investment for the venture capital firm. But Kleiner disputed that Ms. Pao had found Twitter because she could not prove it. Twitter is now worth $32 billion.

"There is not a single piece of evidence to suggest Ellen Pao ever sourced Twitter," Kleiner's lawyer, Lynne C. Hermle, told the jury. "Not one. I can say I sourced Twitter, too, but that doesn't mean it's so. There should be evidence -- written evidence, consistent with the practices of Kleiner -- if that's true, and there is nothing."

The issue of having to document an idea is now set to ripple through Silicon Valley. While the truth of what did or did not happen with Twitter was one of the many unresolved points of the trial -- Kleiner did invest later in Twitter, but at such a high valuation that it did not qualify as a home run -- it is a pretty good bet that the next time a junior partner at Kleiner or any other venture firm thinks he or she has come up with something great, the partner will record it in emails, memos, diaries and possibly stone tablets.

"As a result of hearing the testimony, I would advise my clients to document any information and make notes, and perhaps formal memoranda, regarding their contributions to the firm and their decisions," said Kathleen M. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.