Kleiner Perkins Lawsuit Gives Inside View of Clubby Venture Capital World

May 24, 2012 — -- Though it was widely known that the world of venture capital is dominated by male partners and funding recipients, a gender discrimination suit filed by a female employee of Kleiner Perkins Caufield and Byers has exposed a system that allegedly boosted male positions and compensation while excluding the company's female employees.

Ellen Pao, 42, an investment partner with the firm, filed a lawsuit on May 10 alleging the firm engaged in gender discrimination against her and other female employees. She said she faced retaliation when she complained of multiple instances of sexual harassment, which included being pressured by a junior partner to have a sexual relationship and being given a book that had "sexual drawings" and poems with "strong sexual content."

Kleiner Perkins, the esteemed venture capital firm based in Menlo Park, Calif., is seven miles away from the headquarters of Facebook, one of the many tech firms in which it has invested in its 40-year history. Google, Zynga and Groupon are among other beneficiaries of Kleiner Perkins' investments, which range from $100,000 to $50 million.

In this elite world, women represented fewer than 10 percent of high-level venture capitalists, and left the industry at twice the rate as that of men, according to an estimate from the Kauffman Foundation in 2004.

Teresa Nelson, a professor at Simmons School of Management in Boston and faculty affiliate at the Center for Gender in Organizations, said she has no knowledge that the situation has changed.

"The world of money has always been a difficult place for women to break into at the top levels and there are a variety of reasons why that's true," she said.

Simmons School of Management is the only MBA program in the U.S. with a curriculum designed for women, which Nelson said aims to make a contribution to gender equality.

"Gender is not a women's issue, it's society's issue," she said.

She said women are as rare as partners in venture capital firms as they are as recipients of venture capital funding.

"Probably some of this has to do with discrimination but there are many social issues that play into this as well," she said.

Kleiner Perkins has 49 partners, 12 of whom are women, and is one of the most gender-balanced venture capital firms based on those figures, it says. Of the 12 women partners in the firm, nine are investing partners and three are operating partners, according to the firm.

Pao, of San Francisco, was hired in June 2005 as a junior partner after working at a bevy of technology firms and a law firm. Pao studied electrical engineering at Princeton and went to Harvard Law School and Harvard Business School.

In the complaint, filed in San Francisco Superior Court, she alleges she was the victim of sexual harassment by Ajit Nazre, a former Kleiner Perkins investment partner who left the firm in January of this year, and gender discrimination and retaliatory action from the firm. She seeks unspecified compensatory damages, punitive damages, among other forms of relief.

Nazre, who could not be reached for comment, had been at the firm for two years longer than Pao and directed some of her work, the suit said.

"Mr. Nazre made inappropriate sexual approaches to [Pao]" during a business trip to Germany in February 2006, according to the filing. Pao "rebuffed his advances" and Nazre "responded to her rebuff" by "becoming brusque and distant."