Cleantech Crony Capitalists Bring Shame to My Industry
It's hard enough being a member of a demonized class without watching your colleagues go rogue. As a venture capitalist, I have never been comfortable being lumped in with leveraged buyout shops, hedge fund moguls, and, God forbid, investment bankers.
Although we take crazy risks in search of outsized rewards, we rarely use debt. And while our exuberance fueled bubbles that sometimes popped, deflating overvalued stock markets, we never crashed the economy. We were proud that we kept our distance from Washington. And when our businesses failed, which happens a lot, we never took the taxpayers down with us.
A new breed of venture capitalist has blossomed during the Obama administration, like mushrooms after a rainstorm. I call them venture porkulists.
The scale at which these people have feasted on your money as they hosed it down rat holes like Solyndra, Beacon Power, Ener1, and others is unprecedented. The leverage they've obtained through political connections - risking pennies against your tax dollars - to ramp up manufacturing of immature and economically unsustainable technologies boggles the mind.
The wreckage that awaits as this cycle of malinvestment runs its course will distort the economy for years, not only because of the money vaporized but because public policy aggressively tilted the playing field, harming real, value-creating businesses. Reversing these policies will take time, during which even more damage will be done. And it's all in the name of saving the world from the dire predictions of climate models increasingly shown to be suspect.
I used to admire a guy named John Doerr, a rock star in our business. Compaq, Netscape, Symantec, Sun Microsystems - all of these and more were financed by John and his colleagues at Kleiner Perkins Caufield & Byers. I remember when John started to change, writing about it back in 1997 after he founded a liberal Silicon Valley lobbying outfit called TechNet.
TechNet's mission was to attract federal government involvement in technology businesses that had previously thrived without Washington's "help." Along with it came a cycle of campaign donations, policy initiatives, and regulatory arbitrage that continues to this day.
John's evolution from venture capitalist to venture porkulist wasn't complete until he drank Al Gore's apocalypse Kool-Aid. You must spend eighteen minutes watching a speech John gave at the TED conference in 2007. He starts with a warning - "I'm really scared, I don't think we're going to make it" - and wraps up in tears crying for the future of his children lest they drown when the Greenland ice cover melts into the sea.
It was a masterful performance. In between he lays out his case for a massive government takeover of the energy business, without which he claims we will face "irreversible and catastrophic consequences."
The cleantech/renewable energy/green investment boom was on. Al Gore became a partner at Kleiner Perkins on his way to becoming the first carbon billionaire, as The New York Times put it, "profiteering from government policies he supports that would direct billions of dollars to the business ventures he has invested in."
The companies spawned during this frenzy managed to pry some money out of George W. Bush's administration. But the spigots didn't really start gushing until after Obama was inaugurated, his presidential campaign generously financed by the cleantech crowd, his administration peppered with their people.
Kleiner Perkins is not alone. Vantage Point Venture Partners is the venture porkulist poster boy of the week. The Washington Post reports that the Obama administration funneled $2.4 billion in public funding to clean-energy companies financed by Vantage Point after one of the firm's partners joined the Obama Energy Department.
Many other venture firms are feeding at this trough, but I won't name names as some of them are still my friends. I'm sure you'll read about them in the press when the government-backed turkeys in which they invested go down-along with your money.
John Doerr would undoubtedly justify all this because, as he says in his TED speech, "We have a real climate crisis. There is a time when panic is the appropriate response. That time has come."
I have two answers to that. First, if we're going to make a mad rush into new technologies, can we at least choose some that are sustainable? Electric cars, batteries, windmills, biofuels, solar - none of these come close to making economic sense on the scale at which they are being pursued. Many, like ethanol, don't even make sense for reducing carbon emissions. I guess that's what happens when your investment strategy is driven by pork and panic.
Second, what if the computer models are wrong? What if instead of catastrophic, hockey stick-shaped, irreversible, 20-foot-ocean-rise global warming we get the same mild temperature increases we've experienced over the last century? At least until a decade ago, when satellite data show that the warming stopped, a fact that computer models predicting catastrophe still cannot explain.
As class warriors paint a bull's-eye on venture capitalists looking to redistribute our returns, the shady dealings of venture porkulists is not helping. It would be nice, guys, if you could stay out of the headlines for a while. As Obama "doubles down" on the Niagara of money he is piping our way, perhaps a few of you can even stand up and say, "No thanks, I think I've had enough."