When John Doerr, Silicon Valley's most prominent venture capitalist, early this year faced a room full of investors wanting answers about his firm's recent slide, he had more at his defense than a track record backing Google (GOOG) and Amazon. He also had Ted Schlein.

In a valley where top venture capitalists are treated as rock stars, Schlein -- small, balding and bespectacled -- is far from a household name. But for the past seven years, he has quietly helped Doerr run Kleiner Perkins Caufield & Byers. And now, the two hope to pull off a turnaround after an annus horribilis that has included a headline-grabbing sex discrimination lawsuit and questions about the firm's billion-dollar bet on green technology.


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Doerr, who at 62 is more than a dozen years Schlein's senior, calls him "my better brother. We've got each other's backs." Jim Goetz, a partner at rival Sequoia Capital, credits Schlein for tough personnel decisions that in the past 18 months have seen some older Kleiner partners step aside and young talent recruited from the likes of Twitter and Square.

Schlein -- who seldom grants interviews -- told this newspaper he's well aware of the whispers that Kleiner Perkins has lost its mojo.

"If we're not No. 1 or No. 2, it's uncomfortable," he admitted during a two-hour interview in the firm's San Francisco offices, dedicated last fall in hopes of wooing the latest generation of tech entrepreneurs.

"People in the industry will say what they're going to say," he continued. "Until we prove them otherwise."

Schlein joined the firm in 1996 after a decade helping build Symantec from startup to security powerhouse. He has carved out a niche investing in enterprise software, but it's in his role as the firm's operations guru that his impact is most felt.

Since he began sharing the reins with Doerr in 2006, Kleiner Perkins has grown from a staff of about 20 to more than 50. The firm now manages more than $7 billion, part of it in new specialized funds that target particular kinds of tech companies. Kleiner also has built a sizable operation in China.

Ted Schlein, general partner at Kleiner Perkins Caufield and Byers, at the Kleiner offices in San Francisco, Calif., on Thursday, June 13, 2013.   (LiPo
Ted Schlein, general partner at Kleiner Perkins Caufield and Byers, at the Kleiner offices in San Francisco, Calif., on Thursday, June 13, 2013. (LiPo Ching/Bay Area News Group) ( LiPo Ching )

Yet of late, Kleiner has suffered public stumbles. A junior partner, Ellen Pao, filed suit last year claiming the firm, including Doerr and Schlein, retaliated after she complained that a co-worker had pressured her into sex.

Kleiner Perkins missed out on Facebook and LinkedIn, two of the biggest deals in recent venture history. And the firm's $1 billion cleantech fund has seen few hits and several notable meltdowns, including carmaker Fisker Automotive.

Schlein and Doerr won't discuss the February investor meeting, at which the two men reportedly promised better returns for the pension funds and university endowments that trust Kleiner with their money.

What Schlein does acknowledge is that the criticisms are painful. "I take it very personally," he said. "Venture capital is about your commitment to your partners, to your investors. You want to deliver for them."

Schlein's passion for the venture business was sparked in high school. His father, Phil, was running Macy's western division when he was approached by a young Steve Jobs, who was seeking a retail partner for his fledgling Apple Computer (AAPL). The elder Schlein eventually joined Apple's board, which also included venture legend Arthur Rock.

"He told me, 'You get to create something out of nothing,' " Schlein recalled of Rock. The conversation remained with him for decades -- in fact, long before his father himself became a venture capitalist.

Another future VC, Heidi Roizen, was key to Schlein's introduction to Symantec. While earning his bachelor's degree at the University of Pennsylvania, Schlein interned one summer at Roizen's first startup; when her friend Tom Byers in 1986 came looking for help with marketing at the small software company he'd joined, she recommended Schlein.

Symantec at the time had just a few dozen employees and was nearly out of money. But new CEO Gordon Eubanks indulged the young economics graduate's interest in finding new technologies on which to bet.

One of Schlein's earliest ideas was developing the first commercial anti-virus software. "He probably saved the company," Eubanks says now.

After a decade of similar hits, Symantec's revenues topped $500 million, and startups were courting Schlein with CEO jobs. Instead, he decided to scratch his venture itch and throw in with Doerr, who had been on Symantec's board. (It also helped that Kleiner Perkins co-founder Brook Byers was the brother of the man who'd hired Schlein at Symantec.)

Doerr calls Schlein, a former high school wrestler, "an amazing player-coach. There's no more competitive, aggressive, determined, effective and reliable partner to have in the venture business."

While Doerr is a billionaire who consorts with presidents, Schlein avoids the spotlight. He guards details about his wife of 20 years and two children, and uses a sailboat metaphor to describe his relationship with Doerr: "If John's the mainsail," he said, "I'm the keel. I make sure we stay balanced while John's out there in front."

Colleagues say that even keel steadied the firm through the turmoil of the still-pending Pao lawsuit. Last month, Kleiner lost a bid in the California Court of Appeal in San Francisco to force Pao to move her sex-discrimination claims to arbitration, which would have spared the firm a potentially embarrassing public trial. Of the suit, Schlein will say only: "It's unfortunate. It's also completely meritless."

He holds forth more freely on those who carp about investments Kleiner has lost to other firms.

"We missed Facebook; guess what, most of the venture firms in Silicon Valley didn't do Facebook," he said. "But we did Flipboard, we did Chegg, we did Waze. All you can do is control what you can control, which is make great investments and build great companies."

The firm also hired former Internet analyst Mary Meeker two years ago to run a $1 billion "growth fund" that lets Kleiner buy into late-stage startups. Some outsiders question the approach, noting that late investors in a private company pay a much higher price than those in the early rounds.

But Schlein is confident it will pay off.

"We wrote our single biggest check in the history of the partnership to Twitter, and we're going to make a good return," he said. "Would we have made a bigger return had we done the Series A or B? Sure. We're not going to get them all."

Like many venture firms, Kleiner also has narrowed its cleantech strategy, which it had initially seen as a new source of home-run deals like those it scored in the dot-com era. "We learned the hard way," Schlein said. Now the firm is eschewing capital-intensive green industries such as solar power.

Sequoia's Goetz said Schlein has no illusions about the challenges facing Kleiner. And he believes the recent personnel changes his friend and rival has helped usher in are already paying dividends.

"There's star power usually associated with Kleiner," Goetz said. "Now they're leaning aggressively toward youth, toward ambition. They've fielded their strongest digital team, in my view, in a decade."

"Venture firms, to have longevity, have to always be thinking about generational transition," Schlein said, crediting that to Kleiner's 40-year tenure.

"There are some firms that might be 'in' now, and then they're not," he added. "You'll be back 'in' as soon as you have your next hit."

Contact Peter Delevett at 408-271-3638. Follow him at Twitter.com/mercwiretap.

FIVE FACTS ABOUT TED SCHLEIN

Because his father was an Apple board member, Schlein showed up for college in 1982 with a state-of-the-art Apple II and laser printer. He started a business offering other students word-processing and printing services.
He's involved with a group, Students Matter, that's suing California in hopes of improving public education.
With his father and sister, he owns an organic Napa vineyard whose winemaker previously ran Francis Ford Coppola's winery.
A cybersecurity expert, he's a board trustee of In-Q-Tel, the CIA's venture capital firm.
His biggest investment wins include Fortify Software, which Schlein conceived of and incubated within Kleiner Perkins and which Hewlett-Packard bought for $300 million. His biggest miss was Wineshopper.com, an online retailer into which Kleiner poured millions of dollars before it went bankrupt.