The genius that made Tom Perkins a venture-capital legend and the lessons he learned along the way can be seen through his latest investment...

Tom Perkins is an impatient man. For the most part, this isn’t, in his mind, a flaw. Rather, he views his impatience as a professional necessity, a business creed and the way he and Eugene Kleiner, founders of the iconic Silicon Valley venture-capital firm Kleiner Perkins Caufield & Byers, pushed forward Genentech, Compaq and Sun Microsystems.

Now 75, Perkins hasn’t lost his sense of urgency. One morning this October, he stands inside a workshop on the ground floor of a marina complex in Point Richmond, California, just north of Berkeley and across the bay from San Francisco. He has driven here from his home in Marin County in a Porsche Carrera GT, widely regarded as one of the world’s fastest production cars. With a price tag near a half-million dollars, it’s also one of the most expensive.

Perkins is in Point Richmond to review the progress of another exotic machine he plans to buy next spring: a two-seat submersible, roughly 20 feet long, that “flies” underwater using forward thrust to dive, surface, bank and roll as if it were a porpoise or a gadget from a James Bond film. Like a plane, it has “air” foils and tail rudders — or, rather, it will have these things. A small company called Hawkes Ocean Technologies, housed in the Point Richmond workshop, is in the process of building the sub, the brainchild of Graham Hawkes, a longtime submarine engineer and inventor.

Perkins makes sure to phone or pop in on Hawkes’s operation at least once a week, just to make his presence felt. He came across Hawkes and his invention after doing an Internet search for personal submarines. (He used Google, of course — Kleiner Perkins had provided the company with its seed capital.) Perkins wants to store his underwater airplane on the deck of the Maltese Falcon, his 289-foot-long space-age yacht — yet another marvel of engineering. Perkins, an accomplished diver, intends to use the sub to explore underwater terrain, benefiting from mobility, range and depth unavailable to even the best scuba diver. “I hope to use it in the Pacific when I go to Fiji next year,” he says. “It’s the most beautiful diving spot in the world.”

Perkins looks very much at home inside Hawkes’s high-tech workshop, with its advanced computers, electronic equipment and carbon-fiber tools. After all, he received his engineering degree from MIT, served as head of Hewlett-Packard’s nascent PC business and, prior to that, had made his first fortune by spending a lot of time in a milieu similar to Hawkes’s. In a small lab above a glass-blowing loft in Berkeley in the mid-’60s, he started his own laser company, University Laboratories, which he eventually sold to Spectra-Physics for a profit of several million dollars. “I wanted to be a millionaire before I was 30,” he says. “I didn’t make it.” (He was 31.)

Now he stands next to Hawkes in front of computer-generated plans for the submersible and asks a series of precise questions about the carbon-fiber hull, the suppliers Hawkes chose to use for the machining of certain components and the electronics systems that Hawkes and his team developed, from scratch, for the craft.

Later, Hawkes will introduce Perkins to Richard Fisher, the CEO of a subsidiary of Hawkes’s company, which plans to build deep-water submersibles for scientific exploration in addition to those created for recreational purposes. (Hawkes holds patents on the underwater-plane concept and is attempting to commercialize the technology.) After shaking hands with Fisher and listening to him talk about the deep-water craft, Perkins says with an easygoing laugh, “Just don’t let it get in the way of my project.” He might be only half-joking.

For Perkins, life after deal making — now retired from Kleiner Perkins, he remains an emeritus partner there and participates as a limited partner in the firm’s funds — has echoed his career fostering the technologies of Silicon Valley startups. Only now, instead of developing complicated companies, he develops complicated toys. “I don’t know,” Perkins says. “Maybe I’m returning to childhood as an ancient.”

His Maltese Falcon project, for example, which he calls his “crowning achievement,” was an attempt to create a superfast sailboat — and one of the world’s largest — by deploying the most cutting-edge thinking available on the subject. The Maltese engineering team invented a new kind of ball bearing, among many other components and design concepts, so that the boat’s masts might rotate in order to seek favorable winds. Perkins was so deeply immersed in the design and construction process that Newsweek editor David A. Kaplan wrote a book about him — Mine’s Bigger: Tom Perkins and the Making of the Greatest Sailing Machine Ever Built was published this July.

Known for his unrepentant boastfulness, Perkins is more than willing to brag about his yacht, the culmination of a passion for sailing that began when he was a teenager. While growing up in Westchester County, New York, Perkins learned to sail on Long Island Sound by crewing on boats owned by his friends’ parents. His father, an insurance assessor, likely could never have afforded one. “[The yacht] is a combination of everything I love. It’s beautiful, high-tech, fast and comfortable . . . it has it all,” Perkins says. “It appears to work better than we could ever have dreamed. I love to sail it. Catching those crossing trade winds and riding them across the ocean — it’s fabulous.”

Perkins would like to spend more time on the Maltese, maybe two months a year, but so far he hasn’t been able to, despite scaling back his work in recent years. He keeps a private office atop the Embarcadero Center in downtown San Francisco but doesn’t interact with Kleiner Perkins every day. Instead, he shows up periodically at its main office in Menlo Park and, he says, “floats around.” “I don’t want to get involved in new ventures now. It’s too much work,” he says. “I can’t tell you the last 10 deals we’ve done.

After a while, they all start to sound the same: ‘We’re gonna save the world; we’re going to do this or that.’ We’re doing a lot now in immunology and mass disease, and we’re doing a lot in China — I’m not current in those areas.” After resigning as a Hewlett-Packard director in 2006 amid the leak-investigation scandal he was responsible for making public, Perkins now sits on only three boards: those of News Corp. and two small European technology startups. His resignation and the ensuing HP scandal, however, were not what inspired Perkins to write his autobiography, Valley Boy: The Education of Tom Perkins (see review, page 24), which was recently published by Gotham Books. In fact, he first put words to page in January 2006, five months before he resigned from HP’s board “in cold fury,” as he later wrote. So why, exactly, did he decide to write his memoirs? “You could argue that I like to show off, that I like to be in the limelight or that I wanted to contribute to the background of Silicon Valley,” he says. “But I’m not sure I have a good reason, other than I like to write.”

He produced the bulk of the text in three months. “I’m not a good enough writer to have writer’s block,” he jokes. Only later did he decide to include his version of the HP scandal, placing it in the book’s first chapter as though to get it out of the way and move on to more interesting material. Indeed, the chapter seems perfunctory; Perkins offers little that’s new or revelatory. He does, of course, defend himself against the attacks of former CEO Carly Fiorina, who blamed him for her firing, and Patricia Dunn, HP’s former chairman and the executive behind the dubious leak investigation, who accused Perkins of spreading “disinformation.”

His main goal in presenting his side of the story, though, was to further his ongoing critique of what he calls “compliance boards” as opposed to “hands-on” boards. “I take the word literally: A director should direct,” he says. “But I think most CEOs would rather have a board that makes sure the company isn’t breaking the law, and stays out of the way. If I were a CEO, I might feel the same way.”

He compares the board of News Corp. to that of HP: the directors at Rupert Murdoch’s company “just work on things. We have fun, we take risks, we’re deeply involved and the company is succeeding,” he says. “At Hewlett-Packard, we had directors who didn’t have the slightest idea what our market share was compared to Dell — they didn’t think that was part of their agreement. This is a philosophical thing, and isn’t going to be settled for a long time. I come out of the venture-capital model, where the directors are hands-on — and that model works.”

Perkins is as opinionated as he is impatient. He knows that in concert, these traits might rub some people the wrong way. “I have been characterized as being able to radiate tension just by walking into a room,” he writes in Valley Boy. “This is among the kinder things said about my personality.” His opinions range widely on any number of business topics.

In the book, Perkins boils the founding principles of Kleiner Perkins down to the notion that the fund’s general partners make no money unless its investors do. Then he takes a shot at private equity, enumerating the fee structures by which buyout shops receive their pay.

“I guess I’m embarrassed by how those guys figured out how to reward themselves,” he says. “Kleiner and I weren’t nearly that creative. They give themselves a fee for putting the fund together, for making an investment, for winding up the fund. Whether the investors ever get their capital back or not, they’ve paid themselves fees all along the way. It remains to be seen whether, at the end of the day, those funds can achieve returns and liquidity. Maybe they can.”

Nor does Perkins hold investment bankers in high regard. “The man on the street thinks venture capitalists and investment bankers are pretty much the same, and investment bankers would probably encourage him to think that way,” he says. “But we’re not. I see venture capitalists as the creative side and investment bankers as clipping a few [percentage points] off every deal. Unfortunately, you can’t access large pools of capital, or the public, without going through investment bankers. They have an SEC-licensed monopoly. Maybe offerings over the Internet will change that someday.”

Perkins, however, isn’t optimistic about that prospect. He cites the example of Google and its IPO, which was partially conducted via the Internet in a kind of Dutch auction. “They tried and failed to circumvent Wall Street,” he says. “I don’t know what happened, but just before the issue came out, there were rumors circulating that it was in trouble, the price was going to collapse, and watch out. Where did those rumors come from? I think they came from Wall Street, though I can’t prove that.” Investment banks, he adds, may have started the rumors “to make sure they didn’t help create a monster competitor. And nobody has tried it since that I’m aware of. Plus, the SEC didn’t know how to handle it, and Google screwed some things up, too. The bottom line is: Here it is today, the hottest stock of the last decade, at least, but they had to lower the price and cut back the offering. It’s kind of ridiculous.”

Everyone knows about Kleiner Perkins’s blockbusters, of course, but what about its failures — which, after all, constitute a majority of the 525 companies the firm has funded since inception? “If you don’t have a lot of failures, you’re probably not taking enough risks,” Perkins says. He spent most of his hours at Kleiner Perkins on businesses that failed, simply because he was working so hard to save them. In its early days, the firm backed a company that re-soled tennis shoes — by mail. Perkins also recalls a startup skunked by a cocaine-addled CEO. But his most “frustrating” deal, he says, was trying to support a company that had invented an artificial heart.

“It was called Novacore. It was an incredible technology, and it worked,” he says. “We implanted hearts in people, saved their lives. But the Food and Drug Administration effectively made it impossible to succeed.” He says the FDA demanded a new clinical trial whenever Novacore wanted to make even small tweaks to the device. “We got to the point where we proved the principle. We ended up just giving the company away — to a pharmaceutical company who dropped it,” Perkins says. “The irony is the FDA loved it. There still isn’t an artificial heart. This was 20 years ago. It was a bitter lesson.”

The key to Kleiner Perkins’s success, he says, was determining a venture’s risk, then attempting to eliminate it. With Novacore, the risk was in the complexity of the device and the ossified strictures of regulatory bodies. “I should have known better,” Perkins says. With other ventures, the risk might have come from the entrepreneurs themselves, or from marketing or manufacturing. “If we couldn’t figure out how to get rid of the risk, then we didn’t do the deal.”

That meant, of course, that at times his firm missed out on a blockbuster. One day in the late ’70s, he and his partners heard a pitch from two young computer technicians and, after some debate, passed. So Apple Computer found its startup capital elsewhere. “Kleiner and I couldn’t figure out how to differentiate it from the half-dozen other small computer startups at the time,” Perkins says. They believed the risk would be in how to market Apple’s products, not recognizing the mastery with which Steve Jobs would render that peril nonexistent. “Obviously,” Perkins says, “we were stupid.”

Which is all to say that it’s nearly impossible to tell — no matter how acute a VC’s risk-management antennae — which ventures will succeed and which won’t. That ambiguity, Perkins believes, is what has made his career worthwhile. Inveterate dreamers were his stock in trade, and whether their wild ideas would work in explosively lucrative ways or fizzle into oblivion was almost beside the point. “Unless there’s some excitement, some possibility of something you’re in on the ground floor of, some fantasy, sizzle and romance, it’s just another used-car parking lot,” he says. “For me, in a way, it was never about the money. It really wasn’t.”

To reinforce his point, he makes an astonishing claim. “I never worked much more than a 40-hour week,” he says. “That’s a crazy thing to say, but the only time I ever did was when I ran the Hewlett-Packard computer business and University Labs at the same time. Then, I probably worked a 45-hour week.” How, exactly, was it possible to keep such a streamlined schedule? “I get impatient with people who can’t make decisions quickly, who can’t recognize when they’ve made a mistake and fix it,” he says. “Impatience is my trademark. I make decisions fast and get on with it, then change course as necessary. If you think hard about what you’re doing at the beginning, you don’t have to put in endless hours. Still, I like work. I stop liking it if it’s exhausting and taking too long.”

Perkins looks at his watch. He must be going. Before heading back out to his Porsche, though, he takes another gander at the plans for his submersible and asks Hawkes, with some urgency, when a certain key component will be ready. Then, with one foot out the door, he turns back. “See you next week,” he says.

Perkins's Underwater Plane: Meet the Super Falcon:

Predecessors: Deep Flight I and Deep Flight Aviator — two prototypes test-piloted by inventor Graham Hawkes in Monterey Bay, California, in 1995 and 2003, respectively. Both were decommissioned.

Top speed: Ten knots. “That is really fast,” Hawkes says.

“Because of all the particulate matter in water, it feels like warp speed.” Indeed, five knots is the typical top pace for such a craft, Hawkes says; he and his team designed the submersible to handle well enough to hug the sea’s bottom and the walls of underwater cliffs. But when maneuvering with that kind of dexterity, “10 knots is way too fast,” he says.

Why has the Super Falcon been designed to be capable of such speeds? So it will be able to keep up with fast, super-agile sea creatures such as sharks, dolphins, stingrays and even sea lions. In comparison to the Super Falcon, “snorkelers and scuba divers get left in the dust,” Hawkes says. “I wouldn’t be surprised if Tom was the first to get a motorcycle gang of dolphins around him.”

Operating Depth: 1,000 feet

Life support: Twenty-four hours of oxygen. If the air runs out, enough will remain in the cabin to give the pilot plenty of time to get back above water. “It’s a hell of a lot safer than scuba or aviation,” Hawkes says. “As long as the hull doesn’t collapse, you float right back to the surface.”

Layout: Two in-line cockpit cabins, both with pilot controls and five-point harnesses (similar to those found in race cars and aircraft cockpits)

Length: 20 feet, six inches

Weight: Approximately 4,000 pounds — about the weight of a full-size sedan

Wingspan: About nine feet. The wing tips feature a rolled design, which deflects the craft should the pilot get too close to the ocean floor. “We wanted something that flies responsively and precisely,” Hawkes says. “You end up flying with the wing tips inches off the ground or inches from the cliffs, just because you can.”

Component Materials: Mostly carbon fiber

Price Tag: Over $1 million, custom-built. If produced as a series, they’ll probably cost about $250,000 each.

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