July 20, 2005

Keeping Up with the Jetsons

Continued from page 1

By Andrew Madden

'Celebrity' VCs
Secretary Powell becomes Partner Powell -- and other alarm:clock news from the land of private venture funding

One of the most highly covered business news stories recently was Colin Powell's career move into venture capitalism. The former head of the U.S. Joint Chiefs of Staff and Secretary of State is a perennial name on the list of potential U.S. presidential candidates. Now, though, he's with Kleiner, Perkins, Caufield and Byers, perhaps the most prestigious venture capital firm, and an investor in Netscape, Amazon.com, and Google.

In fact, Powell (should we say "Secretary Powell" or "General Powell"?) is not a General Partner -- rather he's a "Strategic Limited Partner." That means he gets to invest in the fund. As Kleiner Perkins' partner John Doerr has stated in news reports, Powell also will be a mentor. Powell will not sit in meetings where VCs determine which companies to add to their portfolio, but rather he will add further prestige to Kleiner Perkins, so it can extract better investments terms and promote portfolio companies.

With all of his options, why would Powell commit to weekly communications with a relatively small investment firm -- when he could certainly have joined Goldman Sachs or the Carlyle Group? In fact, Powell is not quite a newcomer to technology: he was on the board of AOL. His latest affiliation with Kleiner Perkins will firm up his reputation as a leader in cutting-edge businesses. In addition to information and biotechnology investments, Kleiner Perkins is investing in fields such as alternative energy and nanotechnology. So Powell will likely not only make a great return on his investment in Kleiner Perkins, but also win points for having spent time in the trenches with those who are building America's cleanest and smartest assets.

For Kleiner Perkins, the Powell connection is a tremendous public relations coup of course. John Doerr may be well known at the right clubs in Palo Alto and New York, but he's no Colin Powell. What's more, having Powell in your corner opens every door in Washington D.C. Kleiner Perkins emphasizes that Colin Powell is a "global leader" -- and venture-backed companies are increasingly going global. Certainly, any tech company that has an emissary who can make a call to a political leader in, say, China or India will gain a huge advantage over its rivals.

But Colin Powell is not the only global superstar to be recruited by a VC firm. Last year, Elevation Partners announced that Bono, the front man for the band U2, was becoming a limited partner. Elevation plans to invest in media and entertainment projects. As with Kleiner Perkins, the firm is led by a team renowned in Silicon Valley, including technology investor Roger McNamee and John Riccitiello, the former president of videogame maker Electronic Arts. Again, the addition of Bono makes Elevation Partners a big deal. A third VC firm with a celebrity partner is Insight Venture Partners, with ex-Treasury Secretary Robert Rubin as a Special Limited Partner.

Easily the most successful investment firm at adding celebrity partners, though, is the elusive D.C.-based Carlyle Group. For starters, its chairman is ex-IBM CEO Louis Gerstner, its European chairman is former UK Prime Minister John Major, and George Bush Sr. is a Special Advisor.

Andrew Madden is a freelance writer in New York City.