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Follow the Money: Did Men Earn Quintuple What Women Made at Kleiner Perkins?

Pro tip for an aspiring VC: Be a managing member. That's where the money is.

KPCB website

In the world of venture capital, being promoted to managing member of an individual fund won’t just add a few thousand dollars to your paycheck — it could quintuple it, testified Kleiner Perkins CFO Susan Biglieri.

And only after Ellen Pao began making complaints in 2011 and 2012 did many women at the storied Silicon Valley venture firm start to get those promotions, the plaintiff’s attorney Alan Exelrod argued.

Today in San Francisco, Biglieri, who has been at the firm for 25 years, took the stand in the high-profile gender discrimination trial brought against Kleiner Perkins Caufield & Byers by former employee Pao to talk about VC salaries, the promotion process and who actually benefits from successful venture investments.

And the plaintiff’s attorney began to craft a critical argument for Pao’s damages (she’s asking for $16 million): That women weren’t put into positions where they could make the larger amounts of money from hit funds.

Explaining partner compensation, Exelrod asked Biglieri to do some quick math on how much a number of male VC salaries rose once they got to be managing members of a fund. In the first example, she said it was four times, but Judge Harold Kahn quickly corrected her and noted it was “more like five times.” Biglieri smiled and answered: “I usually use a calculator.”

But the pattern Exelrod was trying to prove was obvious: Once attached to a fund, a Kleiner partner was in the very big money. As Biglieri pointed out in court, it was the difference between being a “W-2” employee and like an owner who collected something called a “net fee.”

While Kleiner Perkins partners such as Bill Joy and Bing Gordon were made managing members quickly, Exelrod argued it was a much slower and harder journey for women. Senior partner Aileen Lee was never made managing member, for example. And senior partner Trae Vassallo — despite sourcing Nest, which sold to Google for $3.2 billion, with Kleiner partner Randy Komisar — wasn’t promoted to that level either.

That said, as Kleiner’s attorney Lynne Hermle quickly countered, senior partner Mary Meeker became a managing member of its digital growth fund in 2011 — the first woman to be given that status in all of Kleiner’s fund history. Senior partner Beth Seidenberg was also made a managing member of the 2012 fund.

But Pao, who sourced RPX which IPO’d within three years, was never made senior partner, so was also never given the lucrative managing member role (to add to the confusion, Kleiner has shifted around its titles, and some of these partners are also called general partners).

In any case, had Pao risen to that higher level, with her 2012 salary and bonus of $560,000 — which was unveiled in court today — she could have earned close to $3 million. So, was Pao’s investment in companies like RPX not impressive enough for promotion?

Biglieri estimated that fewer than 10 percent of investments reached liquidity within three years, with the average time being between five and seven years. And that was in a late-stage investment fund, with which Biglieri was most familiar, and where the chance of liquidity events was “much higher,” she said. In the early-stage investment funds like RPX, the chance of liquidity is even lower.

Another line of questioning: Why was Kleiner Perkins’ anti-discrimination policy posted publicly only after Pao filed this lawsuit? While it has long been distributed in all Kleiner Perkins offer letters, it was only on display after 2012.

And finally, Exelrod asked Biglieri to recall what she characterized as an unusual late-night phone call from Pao.

Biglieri said Pao had made a complaint about an “airplane incident” on a plane and told Biglieri about it. Though not directly mentioned today, Exelrod’s opening argument described a New York trip taken by private plane in October 2011 where Kleiner Perkins partners were talking about porn star trips to the Playboy Mansion within earshot of Pao. This may be what Biglieri referred to today as well.

In the call, Pao asked Biglieri to speak with Pao’s lawyer. She agreed.

Exelrod seemed to be trying to show that, at least in that moment, Biglieri was having similar issues to Pao, and the two had spoken about those issues previously in a variety of discussions.

But not today.

On the stand, Biglieri said: “The reason I agreed to talk to her lawyer was I wanted to get her off the phone.” (She later admitted, after a question from a jury member, that she could have just as easily declined Pao’s request too.)

Biglieri said she then told Eric Keller, the chief operating officer of Kleiner Perkins at the time, about her call with Ellen: “I told him that I thought Ellen might be suing the firm.”

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