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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