Brotopia

by Emily Chang

  Sequoia and Kleiner reached the top of the VC hierarchy by roping “unicorns,” that is, making early investments in companies that later reach the billion-dollar valuation mark. During the dot-com boom, a top partner emerged at each firm: Moritz at Sequoia and John Doerr at Kleiner. As the men who led their firms’ investments in Google and served on the search engine’s prestigious board of directors, they delivered the lion’s share of the returns and thus became the most influential partners within their respective fiefdoms. As such, they closed deals with investors and entrepreneurs, spoke at industry conferences, and had the greatest sway over internal hiring and operations.

  After it became clear that Google was going to be huge, Moritz and Doerr took different approaches to finding the unicorns of the next decade. Sequoia stayed small and lean, making early investments in some of tech’s biggest hits, such as YouTube, Airbnb, and WhatsApp. Most founders dream of getting a check signed by Sequoia and the contacts and bragging rights that come with it.

  Kleiner, on the other hand, changed its approach, scaling up in staff size and widening its investment focus to include new energy and clean tech—changes made largely at the behest of Doerr. Among the slew of new partners hired were big names such as former vice president Al Gore, the famed former Wall Street analyst Mary Meeker, and the esteemed doctor Beth Seidenberg; the new junior partners included a number of promising women. Doerr continued to push recruiters hard to find more women, even when other partners didn’t agree it should be a top priority. With these new hires, Kleiner became one of the most gender-diverse top-tier venture capital firms in Silicon Valley.

  Despite its ambitious expansion, over the next decade Kleiner’s reputation suffered. The firm failed to invest early in some of the most successful web 2.0 companies such as Facebook and Twitter (though it invested in both at a later stage and a much higher price tag); Kleiner even found itself playing catch-up to the hot new venture capital firm on the block Andreessen Horowitz. Then came the biggest blow yet. On May 10, 2012, Kleiner was sued for gender discrimination by an employee named Ellen Pao.

  Pao had joined the firm as Doerr’s chief of staff in 2005. She came with an electrical engineering degree from Princeton as well as a JD and an MBA from Harvard and had already worked at several tech companies. At Kleiner, she was promoted to junior investing partner but didn’t make the cut for senior partner when the firm decided it was time to downsize. Pao charged that she was denied partnership because of her gender, while the firm maintained she simply underperformed. Pao’s work ethic was never in question. She put in so many hours that at one point Doerr wrote to her, “Please, please, really take a real leave. You deserve it!” Nonetheless, many current and former Kleiner employees agree that Pao, however hardworking, was an unremarkable investor. Current Kleiner partner Beth Seidenberg says of Pao, “She was always quiet in meetings. She never spoke up. She didn’t take a seat at the table. She did a lot of things that do not serve women well.” (Pao later told me she didn’t get opportunities to take a seat at the table.) Still, Doerr continued to be Pao’s champion, asking other partners to give her more time to prove herself.

  But things got messy. Pao had a romantic relationship with a married junior partner, Ajit Nazre. It was consensual, by all accounts, but then soured. Pao reported to her managers that Nazre was harassing her and excluding her from important emails and meetings. A few years later, Nazre also hit on another female junior partner, Trae Vassallo, once showing up at her hotel room wearing a bathrobe and carrying wine. When Vassallo reported this to the firm, Ray Lane, a managing partner, allegedly joked that she should have been “flattered” by Nazre’s attention. In court, Lane denied making that comment but admitted he did not handle the complaint appropriately.

  After an internal investigation into Nazre’s behavior, he was fired, but in the meantime several incidents that built Pao’s case piled up. One senior partner gave her a book of erotic poetry by Leonard Cohen on Valentine’s Day. She also claimed two male partners (Ted Schlein and Matt Murphy) and a CEO (Chegg’s Dan Rosensweig) discussed porn stars and their preferences for sex workers on a private plane ride to a business meeting, which she later wrote about in vivid detail in her memoir, Reset. Schlein, Pao writes, said he preferred “white girls—Eastern European, to be specific.” Pao also alleged that women at the firm were excluded from all-male ski trips and dinners. Specifically, she claimed a male partner, Chi-Hua Chien, suggested that women not be invited to an upcoming dinner hosted by partner Al Gore, because they “kill the buzz.”

  On the stand, Chien denied saying this but confirmed that an all-male dinner did occur at Gore’s home and that the number of guests was limited because of the size of his living room. Chien also testified that he often invited Pao to get-togethers that might lead to deal flow but she was too busy to attend. Kleiner’s attorneys presented multiple emails that showed Chien inviting Pao to meetings he thought she might find interesting. The implication was that Pao chose to pass on critical social opportunities that might have advanced her position within the firm.

  • • •

  WHETHER PAO WASN’T INVITED, or chose not to attend, or was invited but didn’t feel welcome, her experience is a stark reminder that venture capital partnerships are deeply competitive and political. Not only do you have to persuade the most desirable entrepreneurs to choose you and your firm as backers; you must also convince every single partner who may be less enthusiastic about that start-up than you are. Plus the more money you get to invest in your companies, the less there is left for others. When the final vote on the deal happens, you need to wield serious influence in that room, and whether you’ve got it depends on several factors: your track record and your partners’ confidence in you, of course, but also how smart you are about pushing your agenda through the organization. If you don’t have sufficient personal and political capital, it can be hard if not impossible to succeed. Pao claims that she advocated for the firm to invest in Twitter earlier, but couldn’t persuade another partner to agree.

  When promotion time came, Kleiner promoted three men to senior partner. Pao and Vassallo were passed over. Pao didn’t think that it was a coincidence. In a letter to John Doerr in 2012, she wrote, “The two people who have made recent complaints of discrimination, harassment, and retaliation—have been . . . relegated to more junior status.” She also expressed her disappointment and called for change. Later that year, she filed her suit.

  It’s useful to compare Pao’s career at Kleiner with that of Aileen Lee, who joined Kleiner in 1999 as an associate partner, also working very closely with Doerr. Colleagues tell me that Lee was more successful than Pao because she worked harder to build personal relationships and was ultimately promoted to senior partner. But Lee left Kleiner just before the downsizing that sparked Pao’s suit got under way to start her own seed fund. Now, assessing her own chances of becoming a managing partner at that time, Lee says, “I don’t think I would have gotten a seat at the table. Internally, [Kleiner] had changed a lot and I wasn’t happy. We had gotten big. Seed was an important new category where I felt like I could have a chance to repot my plant.”

  Lee won’t speak specifically about Pao’s case against Kleiner, but I asked if she herself ever felt she was treated differently there because she was a woman. “It’s confusing how much was boys’ club and how much was just mismanagement,” Lee said. “I think VC has been a boys’ club, and even if many of those boys have great intentions, many of them don’t realize the privilege that they have being male and mostly white and how things they do or say may unintentionally make others feel excluded or uncomfortable or discouraged. At the time, I didn’t think of a lot of those things as bias. I just thought, ‘Oh, there’s a cool kids’ club, and I’m not in it.’”

  Lee added that when women aren’t invited to male-only social events, or don’t attend, they often don’t know what they’re missing. “You don’t realize they trade deal flow an
d talk about what they’ve learned and what’s a hot deal,” Lee said. “When that hot deal is raising their next round and someone says, ‘Who should we call?’ Someone says, ‘Oh, how about Jeff?’ And Jeff gets the deal.” When I asked Lee if she felt that these circumstances qualify as gender discrimination, she paused, then said, “I think most women at VC firms, most women in business, if they wanted to could probably put together a case.” When Lee was on maternity leave, for example, her seat on the board of the solar company Miasole was eliminated. The company had decided to change its board structure, reducing the number of Kleiner’s seats from two to one. Doerr, the other Kleiner board member, kept his seat. No one called Lee to inform her of the change, and she found out on her own when she returned.

  Ellen Pao ultimately lost her case against the firm. The Pao jury cleared Kleiner of any wrongdoing, including gender discrimination and retaliation. But in the court of public opinion, Kleiner’s reputation was badly damaged. Pao’s story appeared on the front page of the New York Times, and the tech blogs had a field day reporting the salacious details and mocking the firm’s poor management.

  Despite the controversy surrounding the trial, when I told Doerr I was writing a book about the challenges facing women in technology, he quickly agreed to talk to me.

  “A partnership is a family business. It’s like improv,” he told me. “There’s an ensemble. The cast takes risks, and if someone is in trouble, your partners are there to help you do better.” In Doerr’s recounting, his efforts to help Pao advance within the firm had backfired, leading him to believe that he should have more carefully considered his partners’ pleas to move Pao into an operating role at one of the companies Kleiner had funded. Doerr speculated that had he acted differently, he might have avoided the lawsuit altogether. “If we had transitioned Ellen a year earlier, if I had listened [to my partners], I don’t think we would have gone through the trial.” It is a thought Doerr has lost sleep over for many nights since.

  In 2016, Doerr stepped back from his investing duties at Kleiner but as chairman remains focused on recruiting. He says he hasn’t given up on working on tech’s diversity issues. “I think the problem begins early. Yes, there is a pipeline problem. Yes, there is a leaky bucket problem. Yes, there is a hidden bias problem. Yes, there is a role model problem,” he told me. “You have to get up and work harder every day to prioritize and source outstanding candidates that are going to cause the culture of your organization to reflect the world you want to win in.”

  While Kleiner Perkins is still working to rebuild its reputation post-lawsuit, Pao’s reputation has evolved considerably in the two years since the verdict. After the trial ended, I would often hear Pao discussed as a cautionary tale.

  Many women I spoke with applauded her bravery, but some who felt they had been victims of gender discrimination took her experience as a warning. They vowed they would never sue, because they didn’t “want to end up like Ellen Pao.”

  The case also weighed on VC firms. “[Kleiner] got seriously burned in this very, very public way that makes everyone else have a natural excuse: ‘Oh, hey, Kleiner was trying to do the right thing, and look what happened to them,’” Greylock’s Reid Hoffman told me in 2016.

  When I spoke with Pao about a year after the verdict, she said she wouldn’t recommend that other people pursue legal action if they can help it. “If you think people will listen, you should try to change from within, if you have the energy for the path you want to take,” Pao told me. “But I tried to change from within, and it did not work.”

  By fall 2017, however, amid a deluge of sexual harassment and gender discrimination allegations in Silicon Valley and beyond, Pao herself seemed to feel differently. I asked if she thought she might win her lawsuit in today’s climate. “I don’t know that we would be here if I hadn’t filed my suit. We’ve changed the conversation. No longer are women forced to defend themselves. It’s a much easier experience to say, ‘I’ve been harassed, I’ve been discriminated against.’ People believe it. If it hadn’t been for all these women who have come after me to share those stories, we wouldn’t be where we are today.”

  THE POST-PAO EFFECT

  In this new climate, some VC firms have slowly started to recruit and hire more women. Some seem to be doing so at the point of a gun, afraid to be called out publicly. Others believe that doing so will be a competitive advantage. Chamath Palihapitiya told me that his firm, Social Capital, beat out Sequoia for a recent deal with a female entrepreneur: “Just yesterday, those fucking bozos, we ran circles around them and did a deal from right under their nose . . . they’re going to ask, why did they not see it?”

  Palihapitiya claimed to see an opportunity where other investors haven’t, to hire partners—both men and women—from a variety of ethnic and religious backgrounds. (His wife, Brigette Lau, as well as three other women are investing partners.) “We have more empathy in the room,” he asserted. “These people are making really emotional decisions about who they connect with.” Palihapitiya has built his firm’s brand, in part, on trying to rectify the visceral inequality in Silicon Valley. Whether it will be more than marketing bluster remains to be seen. (The firm lost a key male partner to Kleiner in 2017.) Though Sequoia’s returns still dwarf those of newer funds like Social Capital, Palihapitiya declares that the next decade will see a shake-up in the VC hierarchy. Exploiting the perceived weakness of one of his largest rivals, he calls Sequoia’s partners “a bunch of soulless milquetoast bros”—and says they have created a massive blind spot by not hiring women: “There is no excuse for that kind of stuff if your goal is to win.”

  Other firms have a similar strategy. Canaan Partners was the first of the big firms to hire not one, not two, but three female general partners: Maha Ibrahim, Wende Hutton, and Nina Kjellson. In meetings with female CEOs and founders, says Ibrahim, “You can almost see their surprise . . . when they sit across the table and say, ‘I’ve never seen a firm like this. I can have a voice here. I can be heard.’” In her view, however, the rest of the industry isn’t changing so fast. “The bias exists. It’s going to exist for a long time. We have umpteen stories we can tell you. It’s a sad situation,” she says. “The only thing we can do is just dig in.”

  Some firms seem less motivated by potential profit than by the desire to do what they see as the right thing. When LinkedIn’s co-founder Reid Hoffman joined Greylock Partners in 2009, he tells me, the conversations about hiring a woman were already under way. “Everyone agreed strongly that it was embarrassing that we didn’t have women partners, and it was kind of like saying, ‘Are we part of the problem?’” Hoffman says. “We decided that we were going to go to the ends of the earth to recruit a female partner. We would not stop making it a weekly partnership discussion until we had one.”

  Greylock then made a critical decision: it redefined the talent pool it would draw from. Did every partner really need to have a technical background? In those conversations, “we mentioned Mike Moritz and his dumbass comments on women. He’s got a literature background, and, you know, no one disagrees he’s a pretty damn good VC,” Hoffman points out. As part of the search, Hoffman says, he had a conversation with every powerful woman he knew about potentially joining the team as an investor. Greylock pursued a few female candidates who turned it down. Then the firm discovered Sarah Tavel, a philosophy major from Harvard who had also worked as a junior VC. Tavel might not have studied computer science, says Hoffman, but she had something else Greylock decided was key: “company-building” experience at Pinterest.

  Tavel doesn’t believe an engineering background is essential to a venture capitalist’s success. “Would my life be easier if I was technical? Yes,” she says. “But the more senior I get, the less it matters.” In fact, she believes the analytical rigor of her philosophy studies prepared her perfectly. “When you’re investing in a company, you have hypotheses that you’re assuming,” Tavel says. “I believe this is
the way the world’s going to evolve, this is the product for that world and this is why, and if you believe those things, this is going to become a big company.”

  Before Pinterest, Tavel worked as an analyst and, later, as an associate at Bessemer Venture Partners, where she was often the only woman in the room. “I was the youngest person; I was the smallest person. You feel the physical difference especially because everybody’s voice is literally stronger than yours. It was intimidating in a way I was totally unprepared for, and I blamed myself for being intimidated by it,” Tavel says. “There were three other analysts, all men, and they were chummy with the male partners in a way that I didn’t feel comfortable [being] . . . It could have been about sports, or it didn’t even have to be a male topic, but it was the way in which they had that conversation that didn’t feel natural to me.” Still, Tavel stepped up to the plate and ultimately co-led Bessemer’s investment in Pinterest, where she later became one of the discovery site’s first product managers.

  A year after I spoke with Tavel, she made news in the venture capital industry by jumping ship from Greylock to Benchmark, another firm that had yet to hire a woman. Tavel had only positive things to say about her former Greylock colleagues but explained that she felt Benchmark’s smaller, more intimate team was a better fit. On the one hand, it was encouraging to see another top, all-male firm welcome a woman. On the other, it was discouraging to see two firms fight over the same woman, rather than expand the overall female-partner pool.

  As for Sequoia, the firm did hire its first woman partner, a year after I interviewed Moritz on TV: Jess Lee, a Stanford computer science major who was the CEO of the fashion site Polyvore. Other partners at Sequoia spent years recruiting her and actually offered her the job before Moritz’s controversial comments, but she did not accept immediately. At the time, she was working for Yahoo’s CEO, Marissa Mayer, a longtime mentor, after the company had acquired Polyvore, and it took a great deal of persuading before she agreed to leave for Sequoia.