Aug. 28–He’s been overlooked, but venture capitalist Garrett Gruener has rocketed into fourth place in fundraising among the many candidates for governor.

As of Wednesday, the founder of popular Emeryville Web search engine Ask Jeeves had contributed $500,000 to his own campaign. That puts him behind only Arnold Schwarzenegger, Peter Ueberroth and Cruz Bustamante in fundraising.

Gruener, who is also a partner at the San Francisco venture capital firm Alta Partners, has emerged from left field. Not only because he’s a relative no-name, even in the venture community. On his Web site, www.gg4g.com, he blogs that Michael Moore’s anti-gun documentary “Bowling for Columbine” is one of the best movies he has seen.

He’s not shy about what he thinks. His platform is also straightforward: He wants to cut the state budget across the board back to 1999 levels, which is when he says spending ran out of control. The exception, he says, would be education.

Another sub-theme of his platform is the environment. He wants to adjust the vehicle license fee, raising it for people who drive gas-guzzlers, and erasing it for those who drive a Toyoto Prius. (Gruener drives a 10-year-old Lexus, but has a Prius on order).

For Gruener, the strategy needed in Sacramento is similar to good venture capitalism: When a company is in trouble, “the first thing you have to do is stop the bleeding,” he says. The next thing, though, is to invest in the company’s best growth prospects. And for California’s innovative economy, that means education.

He would raise taxes, but they’d be temporary, he says.

He says he wants to run the best Internet campaign ever, engaging people in debates online, and having “rich media” presentations that go beyond “30-second sound bites.” Those presentations will be up soon. Also, he promised a detailed budget proposal would be posted by today.

On Wednesday, though, there was one glitch. Gruener promised to spend big money on search engine advertising — for example, placing ads by Google results when a user types in “California recall” — ads which would then direct users to his site.

So TermSheet typed in “California recall” Wednesday on both Google and Gruener’s own site, Ask Jeeves, which partners with Google and so takes Google ads. But Gruener’s campaign ads didn’t appear on either. Instead, Arnold dominated Ask Jeeves with an ad titled: Arnold for Governator Tee: “Hasta la Vista, Davis,” and “Vote for Me if you want to Live.” Even Georgy Russell, a Veritas software engineer who graduated from University of California-Berkeley in 1999, had a listing. Hmmm. Gruener’s campaign people said they didn’t know why the ads weren’t there, but pledged to spend “millions” on them.

A quick look at his investments, in about 16 companies, shows nothing exceptional. Still, if you want straight talk, Gruener might be the guy. Ask those who know him well, and the consensus is that he’s bright and comes up with good ideas, but can be hard-headed.

“A classic entrepreneur,” says Peter Schwartz, chief executive of Global Business Networks, a futurist think tank in Emeryville. “That’s how you get a business to work.”

He has worked with Gruener for years, invested in several companies with him, and often flown with him in Gruener’s plane. “You can call him stubborn,” he says. Indeed, maybe that’s what we need in Sacramento.

–Term Sheet — a name drawn from the formal proposal that a venture capitalist offers to an entrepreneur — is a biweekly column published on Thursday about venture capitalists and the companies they fund. To read this column online, see www.siliconvalley.com/mld/siliconvalley/business/columnists/mattmarshall. Contact Matt Marshall at mmarshall@mercurynews.com or (415) 477-2518.

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To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com.

(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News.

ASKJ, VRTS,

Aug. 14–SCHWARZENEGGER SEEKS SUPPORT FROM VENTURE CAPITALISTS: Millionaire Arnold Schwarzenegger hasn’t made much money from his investments with local venture capital firms so far — in fact, somehave been duds.

Still, he’s been cautiously courting the area’s VC community, and may well be able to corral its support in a way last year’s Republican candidate Bill Simon wasn’t able to.

Last year, Schwarzenegger helped raise $90,000 for the BizWorld Foundation, a program founded by Tim Draper, venture capitalist at Draper Fisher Jurvetson. The program teaches children the basics about business.

Draper now considers Schwarzenegger a friend, and says he’ll be supporting Schwarzenegger. That’s significant, because Draper, normally politically active, was mum on Simon’s candidacy last year. “I will be coming out big for Arnold,” Draper said. “He could be a really fantastic governor.”

And Schwarzenegger will likely win over Simon supporters like Floyd Kvamme, the venture capitalist with Kleiner Perkins Caufield & Byers who is President Bush’s technology adviser and has been active in Republican circles for years.

“It’s time to just shake the system up,” said Kvamme, who said he was impressed by the actor when he stopped by to lobby Kvamme last year for support of the After-School Program Initiative, which voters later endorsed in the election.

(The initiative provides state funding for schools wanting to set up after-school programs for children.)

On Wednesday, Schwarzenegger enlisted Warren Buffett, an outspoken proponent of expensing stock options, to be an adviser. (Maybe some of the VCs lobbying for him will cool on Arnold when they hear?)

At first glance, it’s a bit strange that Schwarzenegger is soliciting help from Silicon Valley in the first place. His investments haven’t done well at all. (On second glance, he could use their political contributions and backing, even if they haven’t made him any money.)

Little is known about the performance of his investment in San Francisco’s Acacia Venture Partners, a venture firm that invests in health care companies — where Schwarzenegger has more than $1 million invested, according to his financial statements.

But another investment, in Atherton’s Angel Investors, has been one of the worst performing among venture capital funds. Angel is run by Ron Conway, who threw lavish cocktail parties at his home during the Internet bubble years and put money to work for stars like Shaquille O’Neal, Tiger Woods and Henry Kissinger — and yes, Schwarzenegger.

In April, Conway disclosed to investors that he’d invested the entirety of his first fund ($25 million) and second fund ($125 million), and that they’d returned only 31 cents on the dollar, and 6 cents on the dollar, respectively. There’s one great company among Angel’s investments: Google. But even a whopping initial public offering probably won’t make enough money to bring Angel into the black.

And another investment, in Menlo Park’s Redpoint Ventures, has also done poorly. Or at least, so far.

Redpoint launched in 1999, and like Angel, made many investments at the height of the Internet bubble. Redpoint is led by two of the more aggressive young VCs in the business, Geoff Yang and John Walecka. But Redpoint’s first fund, Redpoint I, was invested at the worst possible time, and hasn’t done very well. Several high-tech companies it invested in have gone out of business, and others have sold for a loss. There appears to be little public information about it.

Redpoint’s funds last for 10 years, and so some of the companies it backed might yet turn around. The rule of thumb is that a fund only begins showing its general performance after three years.

More is known about Redpoint II, a $750 billion fund that the firm raised in 2000. By December 2002, according to documents released by one public investor, Redpoint II had invested about a fifth of its fund. And of the money put to work, about a third of its value had been written down. It has so far returned no money to investors like Schwarzenegger.

While Schwarzenegger’s standing among right-leaning venture capitalists might be strong, the VC community isn’t a tightly knit behemoth.

“I think the recall is a waste of time,” says Peter Levine, a VC at Menlo Park’s Mayfield Fund, referring to the cost to the state, and the confusion caused by the large number of candidates running for office. “I think it’ very disruptive.”

Mayfield’s addition: Levine, it should be noted, was promoted this week to partner at the venerable firm. Levine, 42, worked at software company Veritas for 12 years, until he quit two years ago. He’d pledged to his wife that he was retiring.

They moved to Santa Barbara, but within two weeks Levine said he began “going nuts.” He tried running, mountaineering, biking — all the things he’d envisioned for a perfect retirement — but it wasn’t enough. So he’s back in Silicon Valley, and ready for the “15 years of career” ahead of him. At a time when many VC firms are laying off partners, it’s a sign of hope.

Termsheet — a name drawn from the formal proposal that a venture capitalist offers to an entrepreneur — is a biweekly column published on Thursday about venture capitalists and the companies they fund. To read this column online, see www.siliconvalley.com/mld/siliconvalley/business/columnists/mattmarshall. Contact Matt Marshall at mmarshall@mercurynews.com or (415) 477-2518.

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To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com.

(c) 2003, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News.

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