Investors Pour Millions Into Prop. 71 Race

Times Staff Writer

Half of the $19 million raised by backers of Proposition 71, the stem cell research initiative, has come from venture capitalists who invest in promising young companies.

The number and size of the donations have prompted opponents to accuse the investors of lining up to profit from an initiative that would send $3 billion in taxpayer money to scientists in search of medical breakthroughs.

Supporters of the initiative dispute the charge, and say the donations simply reflect a web of personal relationships among wealthy people who have either suffered from the devastating diseases that stem cell research might cure or believe in its potential.


Robert Klein II, the man behind the initiative, is a Fresno developer of affordable housing. His teenage son is diabetic and his 84-year-old mother has Alzheimer’s disease. Klein said he has spent more than $1 million on the initiative out of frustration with federal policies that limit stem cell research, which he believes might help his family members.

Joseph S. Lacob, a partner with the Menlo Park venture capital firm of Kleiner Perkins Caufield & Byers, has, along with his wife, contributed more than $1 million to the Yes on Proposition 71 campaign.

“There’s no money going to be made from this today,” Lacob said. “It’s all about basic research. It’s about finding cures for diseases.

“My wife and I both do not like giving money to be spent on television ads,” Lacob said. “I’d rather invest directly in research. But in this case, every dollar you spend on an ad leads to a hundred times the number of dollars that will eventually be spent on research.”

Because opponents of Proposition 71 have raised only $163,000, they say they cannot afford much advertising to get out their message: that Proposition 71 would be a public subsidy for biotechnology, pharmaceutical and venture capital companies.

“Voters in California know that when people are writing millions and millions of dollars in checks ... it’s almost always because they’re going to get a direct monetary benefit,” said Wayne Johnson, a political consultant spearheading the opposition.

Those working to defeat the initiative include people who have moral objections to any research that uses human embryos, fiscal watchdogs who believe California can’t afford the expense, women’s health advocates concerned about creating a market for human eggs, and groups such as the California Nurses Assn., which supports stem cell research but says it believes Proposition 71 lacks strong enough oversight.

Versatile building blocks that form a few days after conception, stem cells can grow into many kinds of specialized cells, including heart, liver, blood and nerve cells.

Backers of Proposition 71 say research using embryonic stem cells could lead to new treatments for a range of afflictions, including spinal cord injuries, heart disease, Alzheimer’s, diabetes and Parkinson’s.

The list of big donors to Yes on Proposition 71 reads like a who’s who of America’s wealthy entrepreneurs:

Gordon Gund, the blind investor who owns the Cleveland Cavaliers basketball team, has given $986,000; Herbert M. Sandler, chairman of the board of World Savings Bank, has donated nearly $2 million; EBay founder Pierre Omidyar has given more than $1.5 million; Google Inc. founder Sergey Brin has contributed $100,000; and William K. Bowes Jr. of U.S. Venture Partners -- who also is a director of a Berkeley biopharmaceutical company -- has given nearly $2 million.

Klein said he personally had contacted all of the biggest donors except one, Microsoft founder Bill Gates, who gave $400,000. Two of the venture capital executives most generous to the campaign -- like Lacob, they are partners at Kleiner Perkins Caufield & Byers -- are a former college-era roommate of Klein and a fellow veteran of Bay Area public school bond campaigns.

David Gollaher, president of the California Healthcare Institute, an advocacy group for the biotechnology industry, said venture capitalists are ponying up for Proposition 71 in part because they have the money to invest and because they understand the notion of leveraging general research into commercial endeavors.

“The venture capitalists are saying ‘Look, if the state or the federal government or governments in general make these early-stage basic science investments, there is some real probability that in the medium-to-long term that inventions will arise from that process that will be useful in making medicines,’ ” Gollaher said.

If voters passed Proposition 71, Gollaher predicted, money would flow to the University of California, Stanford, and the state’s other leading academic institutions. Private companies also could apply for a share.

If any of the university research turned out to be commercially lucrative, Gollaher said, probably a private company would sign an agreement giving the universities the right to some future revenues.

Proposition 71 states that a committee would distribute the bond money and balance the state’s opportunity to gain from patents, royalties and licenses against “the need to assure that essential medical research is not unreasonably hindered by the intellectual property agreements.”

Critics say that provision fails to guarantee that taxpayers would benefit from their investment, which would amount to $6 billion over 30 years when interest on the $3 billion -- raised through a bond issue -- is taken into account.

“If it’s going to be publicly financed, shouldn’t the public be the beneficiaries of any discoveries that are made?” said Marcy Darnovsky, associate executive director of the Center for Genetics and Society in Oakland.

Darnovsky belongs to the Pro-Choice Alliance, a group formed several weeks ago to oppose Proposition 71. Its members say they support stem cell research but oppose the initiative as “massive biotech corporate welfare.”

Supporters of the proposition say California’s early investment in human stem cell research will benefit future taxpayers through patents. The University of California, for example, earned $67 million last year through royalties and licensing fees from inventions derived from its research.

Less directly, California would gain from the creation of biotechnology jobs, proponents of the measure contend.