Benner on Tech: Jurors and LPs Decide Kleiner's Fate
People are Talking About…
Closing arguments ended yesterday in the Ellen Pao v. Kleiner Perkins trial, and the jury is now deliberating in a secluded, windowless room at the San Francisco Superior Courthouse. A decision could come as early as this afternoon, but the case hasn’t been a slam dunk for either side, and I suspect it could take more than a day for jurors to weigh the evidence.
Pao’s lawyer Therese Lawless argued that her client is an extraordinarily capable person whose career was derailed by sexism.
“If you look at the reviews of the gentlemen and see the different subject descriptions of everyone and how they’re judged -- ‘being a lone wolf, acting on their own, having sharp elbows.’ All those negative criticisms … for the men, it didn’t hurt them getting promoted. But it hurt [Pao],” Lawless told the jury. “Women will be judged in one way and men in another. That’s not how it works in this country … It’s illegal.”
Kleiner’s lawyer Lynne Hermle -- whose charismatic, intimidating oratory made her the trial’s breakout star -- delivered a vigorous rebuttal, arguing that Pao’s failure at Kleiner “had nothing to do with gender or retaliation.” Hermle told the jury that Pao had only ever played for “Team Ellen,” and never for Team Kleiner. “Once she understood that she wasn’t succeeding at Kleiner Perkins, and while her job search wasn’t working out, Ellen Pao turned to lawsuits to get the big payout,” Hermle said.
As we wait for a verdict, one narrative that lots of publications have argued has given me pause -- the idea that Kleiner is in trouble whether it wins or loses. Most recently the Wall Street Journal said that Kleiner’s investors and the entrepreneurs that the firm backs are “divided in their support of the firm.”
I don’t doubt the Journal’s reporting. Startup founders have told me that with all of the other sources of capital in the world they can steer clear of a place embroiled in an unsavory trial. And I agree that this case has changed the way people think of Kleiner. But I don’t think this trial alone has the power to hurt the firm.
If limited partners and entrepreneurs back away from Kleiner it will be because the firm stops investing in winners and stops making people rich. Moral imbroglios rarely wipe away financial institutions. Banks, hedge funds, mutual funds and venture firms have survived countless scandals because they kept making people money.
If Kleiner loses this case -- and loses on appeal -- but invests in the next Uber or Facebook or Google, believe me, LPs will continue to give Kleiner money, and founders will still want the firm’s imprimatur. Kleiner has spent plenty of time lost in the wilderness, and investors were unhappy. But Kleiner has been clawing its way back with recent investments in hits like Lending Club, Nest and Mandiant. It just invested in Ayasdi, a hot data analytics company.
Kleiner’s lawyer Lynne Hermle has been very convincing, but she doesn’t see eye-to-eye with LPs when it comes to determining what’s the most important thing about the venture business. She told the jury that “realizing profits” would be a “crazy criteria” as a characteristic for promotion at Kleiner. I assure you that “realizing profits” is a top priority for the firm’s LPs. Whether or not that’s a problem, well that’s a column for another day.
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