The Sugar Daddies of Silicon Valley
What challenge does the world offer the Young Turks of Silicon Valley, the Wunderkinder who before age 40 achieved legendary status and wealth beyond their wildest dreams? Another start-up? Or might there be something more?
* Fresh from making their fortunes and changing the world, many tech execs are beginning to see that power is not measured in megahertz alone. There’s a whole country out there beyond their cubicles and computer screens, and someone needs to run it. More and more, they want to get into the game.
* Happily absent from the political scene five years ago, California’s tech barons--the mavericks behind what venture capitalist John Doerr famously dubbed “the single greatest legal creation of wealth in the history of the planet”--are becoming the hot players in politics. With their piles of paper wealth and geek-chic sex appeal, they are participating in national public policy debates and fund-raising on an increasingly grand scale.
“It is a dramatic change,” says eBay Senior Vice President Steve Westly, a longtime Democratic party activist who for years saw his tech colleagues look askance at government.
Motivations vary, according to the new political players themselves. For some, it’s a corny but heartfelt desire to use their brains and bankrolls to make the world a better place. For others, it’s strictly business, and a fear fueled by the Microsoft antitrust case that they had better play ball with the government or risk being torn to pieces by it. Although few would ever admit it, some have a superficial longing to be photographed alongside presidential candidates Al Gore and George W. Bush to show their colleagues they really do matter.
“For some of these guys, it’s an ego thing,” says Tom Proulx, who authored the Quicken personal finance program while attending Stanford and then co-founded the software company Intuit. “For some of these guys--once you hit $100 million, it’s like funny money. There is nothing you can’t buy. So to plunk down $50,000” on politics, “the cost is very approachable.”
Closer to home, California techies are engaged in full-blown romance with direct democracy. Little-known millionaires such as venture capitalist Tim Draper and entrepreneur Reed Hastings are spending their pocket money to take simple but contentious ideas straight to voters through the state’s initiative process. In doing so, they’re instantly becoming some of the most influential people in California on fundamental issues such as taxes and public education.
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TECH MONEY STILL MAKES UP A FRACTION OF THE DOLLARS being spread around this election year--the chemical companies, lawyers and labor unions are not exactly getting muscled out--but it’s growing, with some individuals now among the largest contributors in politics today.
Aware of the financial opportunity and public-relations value that Silicon Valley represents for them, both major political parties and their top presidential contenders are fiercely courting the titans of the New Economy. President Bill Clinton and Vice President Al Gore saw it right away, but Texas Gov. George W. Bush has caught up quickly, benefiting from what one tech exec dubbed a “pent-up release of enthusiasm” from Republicans happy to have a candidate with a winning chance.
The leading candidates show off their tech supporters as if they were newfangled electronic accouterments. For years now, Gore has been meeting with his Goretechs, an informal cadre of Silicon Valley advisors that includes Netscape co-founder Marc Andreessen and Doerr, who provided seed money for such industry stalwarts as Compaq and Sun Microsystems. Not to be out-teched, Bush often powwows with his technology council, which includes Dell Computer founder and fellow Texan Michael Dell and John Chambers, chief executive of Internet router dynamo Cisco Systems. Bush even scored a coup by luring away one of the Goretechs, CNET founder Halsey Minor.
Now the previously apolitical tech execs, who had largely been unattached to the ideology of either side, are raising the stakes by opening their sizable wallets. They are dropping large contributions of goods and money--so-called “soft money”--into party committees, which, unlike direct contributions to candidates, are not limited by federal law to $1,000. That money is placing some of the tech guys (they are almost all young white men) among the most generous donors in the land.
“It’s our own mini version of the arms race,” says former Indiana Atty. Gen. Jeff Modisett, who quit that post to work for Democrats at TechNet, the Silicon Valley’s premier lobbying organization. “Everyone wants to show their coffers are bigger.”
Modisett startled the hometown Hoosiers when he quit this year for the TechNet job. But the man who put Mike Tyson in jail for rape and won the state of Indiana a $3-billion settlement from the tobacco companies knew he was trading up. “This,” he says, “is raw politics.”
Two years ago, Netscape’s Andreessen, the wonder boy who, as a University of Illinois undergrad, developed the first browser for the World Wide Web, did not figure among the top 100 individual donors in soft money. Now he is in the national top 20.
One of the Democrats’ splashiest donors, Andreessen has written single checks as large as $250,000 and now finds himself in esteemed company. Last year he watched the Harvey Keitel film “Shadrach” with Clinton in the White House movie theater. And when he turned 28 (28!) this year, his birthday celebration was marked by a personal telegram from Al and Tipper Gore.
Republicans have their silicon sugar daddies as well. The affable Chambers, a favorite of old-line congressmen in Washington for his ability to talk tech in plain English, wasn’t on the soft-money radar screen in 1998. The Cisco chief executive now ranks among the nation’s top 25 donors. And he recently offered his Los Altos Hills home for a fund-raiser featuring Bush and wife Laura that shattered all Silicon Valley fund-raising records. Says Cisco spokesman Kent Jenkins: “He is basically enamored of Bush.”
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THAT LEVEL OF POLITICAL PASSION SEEMED UNTHINKABLE among the brainy young businessmen and tinkerers of Silicon Valley just a few years ago. Before 1996, the leading lights at the superconductor makers and nascent dot-coms in this fabled stretch of Santa Clara County sought above all to be left alone by government, an isolationist stance that led them to be pegged as libertarians.
That changed with one blistering issue, a fusillade of shareholder stock-fraud lawsuits that struck at the heart of the valley’s hyper-capitalist spirit. Angered by what he saw as frivolous lawsuits to raid their newfound wealth--often orchestrated by the same lawyer, William S. Lerach of Rancho Santa Fe--Intuit founder Proulx organized his tech brethren behind three California initiatives to curb the power of trial lawyers.
The lawyers, one of the state’s most formidable special interests, struck back hard with a flurry of television ads. The Silicon Valley’s campaign, which was late hitting the airwaves, lost on all three counts in the March 1996 election. But the technology crowd regrouped and responded with a fury in the fall. Their effort shattered California’s spending record for a ballot measure (at that time) by amassing more than $40 million to kill Proposition 211, a lawyers counter-initiative that would have expanded stock-fraud suits.
When the dust settled, nothing had changed. And Silicon Valley leaders, $40 million poorer, concluded that there had to be a better way to defend their turf.
“In the post-mortem of 211, we asked a lot of people [in Washington], ‘Why did this happen?’ ” says Daniel Scheinman, a senior vice president at Cisco Systems. “And the unanimous opinion was, if you were here and had a seat at the table, and did not just come in and scream at us, then maybe this would never have happened.”
Out went the “fly-bys” in which tech executives traveled to the capital, hurriedly (some say smugly) preached to Congress on their issues and then caught the first flight for the coast. In came substantive, face-to-face discussions with politicians and, gulp, full-scale lobbying.
“This is all uncharted territory,” says Dhruv Khanna, a former senior attorney at Intel who left to found Covad Communications. Santa Clara-based Covad is now among the nation’s largest providers of high-speed DSL Internet access, and Khanna is constantly interacting with government to defend the 1996 tele-
communications deregulation that enables his company to compete against the Baby Bells. “If you don’t participate in the shaping and the making of the laws, whether it’s something like digital signatures or encryption, you could find yourself hurt.”
One Silicon Valley player did not embrace the new style: Intuit founder Proulx. Disappointed by what he saw as a shallow, personality-centered approach to politics during his 1996 initiative battles against the trial lawyers, and frustrated with the political scene in general, he bowed out.
“Everybody wanted to hobnob with Al Gore and Bill Clinton, but when it came down to getting [their] hands dirty at the state level, there was no interest,” says Proulx, now chief executive at NetPulse, a “captive media network” that hooks up Internet terminals on exercise machines at gyms. “It’s one thing to mention at a cocktail party that you had breakfast with Al Gore, but it’s much different to talk about having breakfast with some state official, even [Gov.] Gray Davis.”
Proulx’s colleagues dismiss such comments as sour grapes, but Proulx has a point. For whatever reason, Sacramento politicians have largely missed out on the latest Gold Rush.
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SILICON VALLEY BIG SHOTS SUCH as Doerr and Chambers have been among Davis’ biggest donors in recent years, but most techies, especially those at dot-coms and newer start-ups, have stayed out of politics in the state capital.
A notable exception is David Shimmon, who, to his great surprise, became Davis’ largest individual donor last year. The company he runs, Kinetics Inc., builds the systems that feed the gas, water and chemicals into the machines that make semiconductor chips and biopharmaceutical products. Riding the tech boom, Kinetics has grown from $30 million a year in revenues 10 years ago to more than $1 billion today, and Shimmon cashed in when a larger firm bought his company in 1997.
He is worth more than $100 million, not an altogether unusual sum among Silicon Valley entrepreneurs these days, and has begun to dabble in the horse-racing world. He outbid the crown prince of Dubai for a promising colt during a Kentucky thoroughbred sale last fall, plunking down $2 million.
Taking advantage of the state’s loose campaign-finance laws, he has made a similar splash in politics with $200,000 to Davis and $250,000 to his favorite public official, state treasurer Phil Angelides, but insists his newfound interests in horses and politics are not connected. What political contributions give him, Shimmon says, is entree to important leaders in case he ever needs it, and a seat at what he considers an “entertaining debate” with politicians.
“To believe you are going to get anything more than that is wrong and it’s inappropriate, and I believe most of the executives [who are] becoming more involved have the same approach,” he says.
Actually, many of the tech moguls interested in California affairs take their pet issues directly to voters.
This fall, Draper, a wealthy venture capitalist who has made millions betting on such products as the Hotmail e-mail program, will ask Californians to approve school vouchers--cash to parents who want to enroll their children in private schools. It’s one of the most controversial concepts in American education, strongly opposed by Davis and the state’s powerful teachers’ union. Doerr and Chambers are united behind another ballot measure that would make it easier to approve local school bond measures. A similar proposal lost at the polls this spring, and the follow-up has raised the ire of taxpayer groups.
But taxpayer activists have Al Shugart, one of the founders of computer hard-drive company Seagate Technology, on their side. “How many times are we going to have to defeat it?” Shugart asks. “Am I going to have to keep spending my money on this? Well, at least my kids know they’re not getting any inheritance.”
A colorful figure in an industry full of mavericks, Shugart has certainly seen the highs and lows of ballot-measure politics. A target of several Lerach shareholder suits, Shugart generously backed the 1996 propositions to rein in lawyers. For his support, he was portrayed in a negative opposition TV ad in which the face of notorious Lincoln Savings & Loan figure Charles H. Keating Jr. morphed into Shugart’s above the words: “Protect yourself from the next Charles Keating.” Shugart later sued and won.
The experience did not turn him away from politics, because he’d already done that. To protest the lack of qualified candidates, Shugart ran his Bernese mountain dog, Ernest, for a House seat in 1996. “It took forever for the Federal Elections Commission to let us know a dog can’t sit in Congress,” Shugart says, citing the episode as an example of government’s glacial pace. This spring, he spent more than $1 million to put a measure before voters that would have allowed them to choose “none of the above” on the ballot if no candidate was worthy of support. It lost badly amid opposition from Democrats, Republicans and even the Green Party. Shugart vows to press on.
“There is no question that I am disillusioned with politics. I don’t know what to do,” Shugart says. “The basic objective of politicians is amassing power. That is not serving the people.”
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THEY ARE RELATIVELY FEW, BUT some in the tech set openly desire the most public of all roles in the political game: politician.
Alex Edelstein’s resume is the stuff of tech mythology. From Harvard straight to Microsoft as program manager on the Microsoft Exchange e-mail program. From there to Netscape as product manager for Netscape Navigator. From there to the search engine business Inktomy. Millions by age 30, but a yearning for something more.
Edelstein, now 31 and the chief executive at Viralon, a tech marketing start-up, has spent much of the past year “investigating” the San Francisco political scene. With his business background, Edelstein expected easy entry into Bay Area politics, possibly as a San Francisco supervisor. Instead, he found that his assets were no match for political alliances in certain politically desirable ethnic communities.
“It was a real eye-opener,” Edelstein says. “It’s a completely different culture and operates under different motivations. I may have millions of dollars, I may have built a company, but I had no influence in San Francisco. I was viewed the same way as an undergraduate coming out of Berkeley.”
Money, however, is one political asset that never goes out of style, and Edelstein is learning to use his cash to his advantage. He has been attending pricey fund-raisers for Sen. Dianne Feinstein, sprinkling a little soft money around--the $1,000 federal contribution limit on candidates “seems irrelevant,” he notes--all with the long, long, long-term goal of making friends and raising his profile.
“When I give money, I am not only thinking about that candidate,” Edelstein says. “I am working on my 40- to 50-year game plan, how I can get to where I want to be.”
Clearly, the tech barons are learning they need to be in the game for good.
