Valley investors: Kleiner Perkins has a bigger problem than Ellen Pao

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John Doerr

John Doerr, Kleiner Perkins

Kleiner Perkins may have walked away with a victory in the Ellen Pao trial, but there's a bigger issue lingering over the firm, according to a number of investors we spoke with.

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What happens when the firm's best-known partner, John Doerr, retires?

It's worth noting that the VC industry is fiercely competitive, and it's easy for investors to badmouth each other anonymously.

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But all the people we talked to pointed to the same problem: Kleiner has so far not found a clear leader to succeed Doerr, the 63-year old who's been heading the firm for decades.

First, the trial definitely did some damage to the firm's reputation, painting a picture of an old, bureaucratic boys' club.

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"It's going to be the unfortunate adjective that describes the firm for years. Every smart person in the Valley's thinking: why didn't they just pay the money and settle it [out of court]?" one VC told us.

This VC described the situation as "cognitive dissonance around how young people are different, how they have different values, morals, and expectations." He added, "I'm not sure you overcome that in any way other than completely gutting and rebuilding the partnership with younger, more connected people to the ground."

When a group of female tech workers are taking out a full page ad to thank Ellen Pao, it's easy to imagine some entrepreneurs shunning Kleiner for the sake of taking a "principled stand."

"It's just a question of will people look past John and the firm. He's 62, 63, how long can you be in the game? I don't know."

Another VC argued the Pao trial won't have any material effect on the firm for now, but shared the same concern about what happens in a few years.

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"Pretty much everyone in the Valley would love to work with John Doerr and Mary Meeker," this VC said. Meeker is a former stock analyst who joined Kleiner in 2010, and is best known for her annual Internet Trends report.

"John's image is tarnished because he's the boss, and it makes it harder to connect with young founders. But the relationships Doerr and Meeker made go back decades and they're not going to be impacted," this VC argued. "As long as Doerr stays at Kleiner, it'll be successful. The real question is, can it survive after John Doerr leaves?"

A third VC agrees: "Who takes over the firm when Doerr retires, I think that's the big question. That question's been going on forever, and now it's even harder."

To be fair, Kleiner hasn't had much difficulty finding deals recently. Just last week it participated in three deals - Ayasdi, DoorDash, and Spruce Health - whose funding rounds totaled more than $100 million, according to Crunchbase.

In the last year, it's also made some late-stage investments, like Slack, Uber, and Snapchat, whose valuations have gone up significantly since then. Last year's biggest US IPO, Lending Club, was a Kleiner portfolio company too.

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But it's worth noting that Doerr helped lead Slack's $120 million round in October, and was behind the Uber deal as well. Meeker was credited with the Lending Club investment

For its part, Kleiner is aware of the perception and is working to bring in some younger blood.

Ted Schlein is often assumed to be the next leader of the firm, and he's only 52 - years away from retirement.

Mike Abbott, the 42-year old partner who joined the firm three years ago, told Reuters that the company's searching for new leaders and will be adding new names within the next two years. It's also part of the reason why Kleiner tried to merge with Social+Capital, one of the fastest growing VC firms in the Valley founded by ex-Facebook exec Chamath Palihapitiya, in January.

Still, when one firm's image is so dependent on a single revered leader, it's reasonable to ask what happens when that leader is no longer in the picture.

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Kleiner Perkins declined to comment on this story.

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