Why Silicon Valley Venture Firm Kleiner Perkins Bet On Fisker, Not Tesla

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Ray Lane takes delivery of the first Fisker Karma

Ray Lane takes delivery of the first Fisker Karma

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Venture capitalists fund a lot of startup companies, and most of them don't pan out.

So famed venture firm Kleiner Perkins' stake in Fisker Automotive--which is still trying to sell itself, but hasn't built a car for 12 months--could be viewed as just another failed investment.

On the other hand, Tesla Motors [NSDQ:TSLA] successfully offered itself to the public in June 2010, and is now on track to build and sell 20,000 or more of its Model S electric luxury sport sedan during 2013.

Its stock has since risen fivefold, and the company turned a profit in the first quarter of this year--albeit on the strength of its sales of zero-emission vehicle credits, which more than offset losses in the core business of selling cars.

So how did Kleiner Perkins come to bet on the wrong startup carmaker?

According to a recent Business Week article, it was because Tesla wouldn't give Kleiner Perkins partner Ray Lane a seat on its board of directors as opposed to famed partner John Doerr.

Based on a Pando Daily video interview with Tesla CEO Elon Musk last year, the magazine says that Musk turned down Lane for a board seat.

Instead, Lane ultimately became chairman of the board of Fisker Automotive after the Kleiner board chose to invest in that maker instead.

The story has been updated since it was published, to reflect Lane strongly disputing this version of events, saying that a majority of Kleiner's board voted against investing in Tesla.

In hindsight, the Fisker investment did not end well for Kleiner Perkins.

Business Week notes that the now all-but-failed Fisker became one of the venture firm's largest investments, and has burned through almost $1 billion in capital to produce roughly 2,000 cars.

And the article ends with a summary of Lane's recent travails. Among them: Losing his seat as chairman of the board of Hewlett-Packard.

The story's worth reading as a demonstration of how major investment decisions hinge on personalities as well as the projected fundamentals of a business.


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Comments (47)
  1. This story is not true at all. Another irresponsible media outlet making up rumor and lies to try to get attention. Why are reporters nowadays not responsible for their shoddy reporting? This is not what happened and is 100% false.

  2. And how are you so sure of yourself..?

  3. I was there

  4. @Jim: Details, please? Did you work at Kleiner Perkins? At Fisker? In what capacities? I'm not finding anyone on LinkedIn with your name who's a previous Fisker employee ... so do help us assess your qualifications to comment, please.

  5. John,

    My comments are above and you can read them. I am not on LinkedIn. Hopefully this is not a required criteria to comment. You don't have to take my word for it. I believe Martin Eberhard posted a comment in the article you linked.

  6. Prove it.

  7. Then spell out what is incorrect, of course. Otherwise, your comment is meaningless. And, of course, the main story in the end isn't how exactly things transpired, it's about a horrendous decision. Mr. Lane's lame response about how the board voted seems intended to shift blame from him, while conveniently ignoring the fact that it turned out to be a terrible decision by people who knew next to nothing about that in which they invested.

    And your constant claims about how the Karma is better than the Volt and Model S (yes, I read Motor Trend) border on insanity, of course. How's that Fisker thing working out again?

  8. Ray Lane getting a seat on the Tesla board had nothing to do with KPCB with re its potential investment in Tesla. None of these reasons had to do with Ray Lane.

    ROBOK2: I also worked for Tesla and own both vehicles...What is your background?

  9. Former supplier to Tesla (protos only), about 20 years in the industry, worked initially with Fisker, too, before my company realized the company was a joke and too poorly organized to ever succeed. Something about orders for prototypes being needed long before Fisker even had a specification, then multiply by ten. Terribly run.

    Good idea, passable design, the worst execution I have ever seen in an industry not exactly known for smooth launches. I can't comment on the board situation, of course, so thanks for commenting there, although I knew what you owned since you mention that in almost every post.

    It doesn't change the facts. Good riddance to Fisker, the company, and let Mr. Fisker get back to designing, not ever making cars again.

  10. what did you supply? what was the name of your company? What is your expertise? I would like to know this information to verify that you are qualified to make judgements based on design and engineering. For all I know you could be a supplier of floor mats or car covers.

  11. You're rather pushy for details for someone who won't give any on your own background.

  12. And people, to get where Mr. Ackley is apparently coming from, here's a typical comment of his from Motor Trend:

    "The Model S is a vanilla looking any car similar to a 6 year old Jaguar XF or the many other cars of the egg-shaped design mold. The Fisker Karma by all intensive purposes completely shatters that mold. Regardless of how you feel about the Karma there is no denying that it is one of the most dramatic vehicles ever created. No one will ever mistake a Karma for being a Kia (like people have the Model S).

    Tough times when your car dies in the market at the hands of a Kia-look alike Model S... Yeah, I'm sure lots of people see Kia in the Model S. SMH...

    Karma shatters the mold? More like shatter the molds since it's dead.

  13. In the quote that you used, Jim is intending to state that the Fisker looks like nothing else on the road while the Tesla does not stand out looks-wise.
    Are you disagreeing with this point?

  14. Let's see, the vast majority of people I know personally and who comment on various EVF-related blogs strongly prefer the Model S to the Karma. I would agree that the Karma is more unique. I would also opine that the Model S looks far better.

    To call the Model S vanilla is laughable, of course. I'm not a Tesla fan boy (hate the grill, for example), but the Karma looks like a poorly-designed Matchbox car to me. Which is a shame because Mr. Fisker designed some nice cars before starting his company.

  15. Are you familiar with surface modeling at all?

  16. I thought the Karma was gorgeous. I also thought the
    Roadster and Model S look nice too. I also like the looks of the volt. I'd say the Karma was gorgeous and a very high end car
    but, the magic never happened.

  17. No, Jim, I've managed to work decades in the automotive industry without ever being aware of surface modeling. And I don't know what PPAP, APQP, DFMEA, PFMEA, TS/ISO, etc. mean, either...

    And save your pompous breath already since no matter what excuse you'll have this time, the Karma was a joke and died a deserved death. Surface modeling doesn't change the laughably bad manufacturing and QC/QA anywhere but in your painfully delusional mind, of course.

  18. There are more comments in this thread
  19. Fisker burned about a billion developing a somewhat half baked car based on third party technology while Tesla spent a lot less than that on an award winning product with lots of proprietary technology in it.

    Seems to me a lot of things went wrong on Mr. Lane's watch.

  20. Apples and Oranges but you seem to have it all figured out with google and your crystal ball.

  21. Jim,

    what do you think went wrong at Fiskar, what do you think went right?

    I thought they had a gorgeous product, but the price point was kind of high, and they were a little late into the window.

    I think if they were closer to 70K, for the Karma, and had gotten to market 12 months earlier, they might have done better.

  22. Fixing the UI would help too!

  23. First off its Fisker not Fiskar. 2nd of all Fisker did have some significant supplier problems which led to the well publicized stories re the Karma. I do not think it was a price issue with the Karma but rather a convergence of inexperienced wasteful management, ego's, and supplier problems. Fisker is not dead yet- the best may still be coming.

  24. @ Jim Ackley, lack of substance seems to be the trade mark of your postings here.

    Just to be clear though: it wasn't so much mr.Lane's ability to pick winners I was criticizing but the fact that tremendous amounts of money seems to have been wasted by Fisker Automotive while he was on the Board.

    About picking winners: A design oriented company trying to incorporate a novel, untested, third party supplied drivetrain in it's first attempt at car building does sound a bit more like a stretch to me than an experienced EV builder doing a second product based on proprietary technology that had already proved to be successful.

  25. I do not think it was Ray Lane specifically that was responsible for the waste. The Fisker engineering team faced some surprise challenges during the final stages of Karma development. Make no mistake- Fisker has some of the best engineers in the world within its ranks. It is plain wrong to claim that Fisker is a design company. Take a look at the suspension and chassis design on the Karma. A design company would not be able to engineer this type of setup. It seems as if you are just typing up what other "journalists" have reported rather than combing over the facts and making a determination based on this.

  26. I agree with you Jim 100%.. These media bloggers need to get their story straight and quit bashing Fisker.. I'd like to see any of these guys try and start a company..
    The truth is that Fisker spent 1 billion on bringing the Karma to market, design/engineering on the Atlantic and several other models that nobody has seen yet. I can tell you first hand there was a lot of progress made for that 1 billion invested.. If Fisker was able to raise the additional funding they needed to bring Atlantic to market, we would not be talking about all the negative/ mistakes they made but how very smart the two co-founders were for making this happen..
    By the way, the same two co-founders are still trying to keep the Fisker dream alive right now. why?

  27. And if Fisker had not proven so incompetent, it might have had a chance to get that funding. But I loved going for my test drive and seeing 30+ loose wires all over the $100K+ car. I loved it even more when the dealer manually used duct tape to tie and move some of the dangling bundles of wire so we could sit properly.

    Nobody is claiming Fisker is dumb and there were some smart people, too, of course. But the product development and validation work must have been done by some particularly uneducated monkeys to develop and release far too early a vehicle which was the worst of all possible worlds. The worst launch I've seen in the industry in my life, and I've seen dozens. Fisker was so disorganized my company chose to stop supporting it.

  28. where were these loose wires?

  29. Who are you? What are your credentials? Why do you think you have a right to ask such questions?

    Sorry, I was channeling Jim Ackly, carry on...

  30. Other posters on this site know my background. Go read the Motor Trend article comments I gave a pretty significant bio on myself. I don't have time for lazy comments.

  31. @Jim: So rather than responding to a question, you suggest that other commenters should respond with their knowledge of your background?

    Or, alternatively, the people who want to know should go to some other website because you're too busy and "don't have time for lazy comments".



  32. Hilarious. And when Jim claims he doesn't have time for lazy comments, he's clearly not including his own. Yes, wires exposed on a new car? How dare you ask anything that doesn't fit my pre-selected narrative about Fisker.

  33. Surprisingly enough, Jim, the company that did such a poor job finishing the Karma's interior also somehow failed to specifically identify which wires were tied together, which ones were left loose, etc...

    Considering I'd never been in a new vehicle with any wires exposed, much less a $100K+ plus vehicle, I didn't worry too much about which wires were wrapped together, which ones were still exposed elsewhere, etc...

    But only you can take an obvious mistake by Fisker and try to turn the blame around. Yes, Fisker's inability to do even mediocre assembly work means a consumer can't ask questions...

    Childish and priceless.

  34. Hey look - a dead horse! Let's go beat it!!

  35. @John
    It seems as if many of your stories are poached from online forums. May I suggest you actually do some fact finding and talk to people who were actually involved in negotiations?

    Why fan the flames with information that could be wrong. Slow news day? At the end of the day all that matters is facts and your facts are wrong.

  36. @Jim: (1) BusinessWeek is a business magazine, not an "online forum."

    (2) Green Car Reports cites stories in other outlets that we draw from when not all of the reporting or commentary is ours. The article notes that the claims were made by Business Week and in Pando Daily. Was that not clear to you?

    (3) Please note the following sentence also included in the story above:

    "The [Business Week] story has been updated since it was published, to reflect Lane strongly disputing this version of events, saying that a majority of Kleiner's board voted against investing in Tesla."

  37. @john
    how come the headline did not reflect that as well?

  38. @Jim: The headline says: This story will be about why the decision was made. The headline doesn't say what the reasons actually are.

    The story then lays out the claims in the article, and notes Lane's response.

  39. @John

    If you take a look at the original BusinessWeek article that you graciously linked to, the headline reads:Did Ray Lane Cost Kleiner Perkins a Slice of Tesla Motors?

    This headline clearly transmits the idea that this is rumor (based on unnamed sources). Your headline on the other hand attempts to answer the "Why" by linking to a rumor piece. There is a big difference between the two. Once shows a possible (unsubstantiated) link and your article frames this as gospel.

  40. @John

    I believe this is the youtube video that is most relevant to this discussion:


    Elon frames this as being a one way street that Tesla rejected KPCB, it was quite the opposite. It had nothing to do with Ray Lane but other factors that I would do not think would be appropriate to discuss on this board. You should contact Ray Lane directly and he can explain the story. I would like nothing more than a follow up story that is based on your own research and information.

  41. I think the number Fisker execs and managers that were from traditional automotive 'management' positions from failed automotive companies vs. the near absence of same at Tesla speaks volumes..

  42. So apparently this means that K-P viewed Fisker and Tesla as having exactly equal chances of success? Odd.....

  43. @ Jim Ackley. I watched the YouTube video in one of your recent comments. Musk seems to support the contention of this article - that the seat on the board was the make or break contingency....

  44. yes but that is not true. It was KPCB that rejected TSLA not vice versa. Ray Lane had nothing to do with this. Elon has a personal issue with Ray and is using that as a platform to voice his issue.

  45. Fortunately the final story will be written by "the market." Yes, Fisker is not totally dead, but it certainly is in death throes with very little promise of survival.

    Multiple car magazine reviews of the Karma were never more than lukewarm in terms of performance and EV functionality. Consumer Reports had perhaps the worst vehicle experience ever with their purchased "test car."

    IMHO, I consider the Fisker Karma the "Paris Hilton" of vehicles....it IS beautiful to look at, but it would be hell to live with.

    Just saying....

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