Monday, March 29, 2010

Credibility Questions Emerge Over Kleiner Perkins' Involvement with Terralliance

Although it's been pointed out several times previously that not every Kleiner Perkins investment yields a win, many still believe Kleiner Perkins' involvement with EEStor provides credibility. But a new article penned by Adam Lashinksky about a firm formerly known as Terralliance challenges this belief. Lashinsky makes a compelling case that relying on the due diligence of firms like Kleiner Perkins or Goldman Sachs is not without risks.

The whole story is, quite frankly, hugely embarrassing for Kleiner Perkins since it seems to show that if you are good at weaving stories regarding fantastic returns on investment, you may just be able to shake close to $100Mil from Kleiner despite any of the consultants they hire to vet out your claims. Billionaires with slightly above average interest in the likelihood of success with investments with Kleiner should pay close, very close attention.

First of all, things have gone so poorly with Terralliance that they changed their name to TTI Exploration. The old Terralliance website doesn't even redirect to the new one. EEStory followers will also note that the Bio for Kleiner Perkins' appointed CEO, Mike Long no longer mentions EEStor as it did when it was on the former Terralliance website.

The similarities and differences with EEStor are worth noting. TTI's founder, Erlend Olson is depicted as a persuasive dreamer who is better at locating investor money than oil, which is what his technology was claimed to do ( a claim the new website maintains). The same can't exactly be said of Dick Weir who only accepted $3Mil of Kleiner's money but whose claims of grand outcomes is certainly on par with Olson's. (it's worth remembering here John Doerr's much written about and touching story about being inspired to invest in green technology after his daughter asked him what sort of planet she and her children would inherit... in light of the enormously disparate investments in TTI ($93Mil) & EEStor ($3Mil) ). As for other differences, EEStor, unlike TTI, has pursued a path of protecting it's intellectual property with patents. According to the article, TTI's founder not only didn't file any patents, he also must not have written much down which brings us to the climax of an apparent trainwreck.

Seems everyone is suing everyone associated with TTI or Terralliance. Kleiner is trying to sue the founder. Investors are suing other investors. It's all so disturbing that it's now little wonder so many Kleiner firms have sought Federal funding lately. Surely the due diligence of career federal government bureaucrats cannot equal that of competent Venture Capital firms? And if they can, surely any ensuing lawsuits won't be as formidable as those lodged by disgruntled investors.

Is EEStor another Terralliance waiting to happen? I suppose asking KPCB that question is a no-go.

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