Kleiner & Sequoia’s Fund Returns Could be Exposed in CA Lawsuit

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the news organization simply wants to profit from the traditionally confidential information by producing investment products that it can sell to subscribers.

If the lower court ruling is allowed to stand, “no one who does business with the government can be assured that otherwise confidential documents—unused and unseen by the government—will not be released to competitors or opportunists,” university system attorney Charles F. Robinson said.

They seem to have a compelling legal argument. But you have to wonder: Just what sort of horrible fate would really befall Sequoia and Kleiner Perkins if they were forced to pony up information on how their old funds did? (The two firms cut the university system’s pension fund out of most new investments after 2003 because of the threat of public exposure of their performance data).

First of all, it’s not a secret how venture capital as an overall group has done over the years. At the risk of oversimplifying things, the short version is that there were some amazing years in the 1990s, peaking around the time of the dot-com bust. But the decade or so since then has been relatively lackluster.

That’s actually reflected in the court case. In a footnote, the lower court judge says the universities saw unspecified “spectacular returns” with some Sequoia and Kleiner Perkins funds, including investments in 1992, 1994, 1996, and 1998. But the university system also has lost money on Sequoia and Kleiner Perkins investments from 1999 and 2000 (although the court filings don’t say which particular funds accounted for those losses).

Moreover, Kleiner Perkins has itself acknowledged some uninspiring performance in the past few years. According to this Reuters report from early this month, which quoted several unnamed investors who attended a private meeting, the lionized Silicon Valley firm recently apologized for subpar returns and promised to improve.

There’s also no evidence that the other firms that have subjected themselves to public disclosure of their returns have been badly compromised just because of that scrutiny—scrutiny that comes, don’t forget, in exchange for big checks from the retirement nest eggs of public employees like teachers, cops, and firefighters.

In the end, the arguments for secrecy seem to come down to the sentiment expressed in a Sequoia letter to the university system in 2003, after the firm decided to boot its longtime investor from future funds because of the threat of public disclosure:

“Discretion and privacy are the handmaidens of successful venture capital firms,” it read. “The venture capital industry is damaged when alluring performance information attracts billions of dollars of hot money seeking quick returns.”

In other words, the big VCs didn’t like the idea that data about their successes would get out and alert other capitalists to the nice little cottage industry that had been built up in the Valley.

But that’s happened anyway. These days, the push to keep publicly funded VC data from the general public seems more likely to be motivated by the unwillingness to show just how these top-tier funds have performed, just like the dozens of other firms that take public cash.

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