Opening arguments for Ellen Pao v. Kleiner Perkins Caufield & Byers — the gender discrimination lawsuit that cracked Silicon Valley’s claim to meritocracy like an iPhone screen — began a week ago in San Francisco Superior Court. Entire afternoons of testimony have fixated on the financial perks of being one of the (mostly male) senior partners at the celebrated venture capital firm, or the potential fivefold increase in income for (mostly male) "managing members," who get to make decisions about a particular Kleiner fund and share in its profits.

That’s just a peek at the cloistered habits of venture capitalists revealed in this trial. Normally, discussion of titles at venture firms is taboo. You’d be hard-pressed to find a LinkedIn profile that admits to being a "junior partner" or a "managing member." And the "team" pages of top VC firms like Kleiner only obfuscate the issue. Are the female faces as powerful as the men in the head shots all around them? Probably not, but before Pao filed her industry-quaking lawsuit in 2012, the lack of women investors — at any pay grade — was rarely discussed.

Pao’s case is often mistaken for a sexual harassment lawsuit. The complaint alleges that Kleiner retaliated against Pao because she reported being pressured into an affair by Ajit Nazre, a married coworker who had a "strong influence" on Kleiner partners. But Pao’s short-term affair with Nazre in 2006 was consensual. He wasn’t fired until another female junior partner reported unwanted sexual advances from Nazre. Pao, who is currently the interim CEO of Reddit, is suing for discrimination, alleging that Kleiner held back other women on the investing side based on gender. Pao's case is often mistaken for a sexual harassment lawsuit She is asking for $16 million in damages for lost wages and "carried interest" from profitable investments. Pao’s attorney Alan Exelrod has described how Pao was excluded from business events and limited in the number of investments she could make each year. But performance reviews cite her lack of experience — the "thousand tiny paper cuts" familiar to any woman in the industry. Meanwhile, when Lynne Hermle, Kleiner’s charismatic counsel, is asking the questions, it sounds like senior management liked every woman except Pao, who just couldn’t cut it as a VC.



But gender bias is for the jury to decide. Regardless of the outcome, courtroom testimony has already helped expose the highly competitive and capricious process that determines which technologies and founders get funded, and who gets to get rich off the next Google, Amazon, Uber, or Snapchat (all Kleiner investments).

The trial is expected to last five weeks. Billionaire John Doerr, Kleiner’s best known personal brand and a father figure to Pao, is on the stand right now, and Mary "Queen of the Internet" Meeker is still to come. Here’s what we've learned so far.

How much venture capitalists get paid

Before she was fired (or "transitioned out") of Kleiner in 2012, Ellen Pao was making $560,000 a year, between her base salary ($400,000) and annual bonus ($160,000). It’s but a fraction compared to her male peers whose take-home pay ballooned to as much as five times that after they were promoted to senior partners and attached to one of Kleiner’s funds as a "managing member," an ownership role that allowed them to start receiving "net fee" income, or a share in profits.

Men made up to five times more after being promoted

On the stand, Kleiner CFO Susan Biglieri, who has worked for the firm for 25 years, was asked by what multiple had compensation increased for three men after they were promoted: Amol Deshpande (Biglieri said four times; the judge interjected and said more like five times), Wen Hsieh (about three times), and Chi Hua-Chien (about four times). The implication is that Pao could have made as much $2.8 million a year. She worked at the firm for seven years. All three of those men were promoted in 2012, despite Pao’s seniority. Like Pao, Hsieh had also started out in the "chief of staff" role, assisting Doerr.

When Chien was on the stand, we also heard about a Kleiner-sponsored ski trip where employees and those associated were flown to Vail on a private jet and provided a dinner at Al Gore’s condo at the St. Regis in San Francisco. Gore is a partner at Kleiner. Pao, who was not invited, also lived at the hotel.

Reddit’s valuation: less than you think

Two can play at the discovery game. Kleiner’s lawyers used the trial as a reason to peek into Reddit’s finances, arguing that the amount Pao stands to make from the so-called front page of the internet should offset damages, according to The Wall Street Journal. Reddit, however, is not one of those billion-dollar unicorns trumpeting its valuation. Normally the bigger the company, the better, but Pao is more likely to win her $16 million if Reddit is perceived as being worth less. In a pretrial hearing, Kleiner’s attorney pointed to the $500 million valuation reported as part of the $50 million Reddit raised in September from the likes of Peter Thiel and Marc Andreessen, as well as Jared Leto and Snoop Dogg. Pao’s lawyers said an expert had valued the company about half that amount.

The identity of Nazre’s other accuser

Kleiner fought hard to exclude other harassment complaints against Nazre, so it was a shock when former partner Trae Vassallo took the stand on the first day of arguments to testify. An independent investigation found that Nazre had repeatedly crossed a line in his behavior towards Vassallo, but not Pao. (Both investigations were conducted in 2012 because Pao only formalized a complaint after she heard Vassallo went through a similar experience.)

A surprise witness for the accuser

The first instance of harassment towards Vassallo was in 2009 when, she said, "he started touching me with his leg under the table," during what was supposed to be a meeting to talk about Kleiner’s green-tech investments. During a business trip to New York, Nazre told Vassallo he was going to introduce her to an influential connection, but the restaurant reservations were for two, and the executive never materialized. Half an hour after dinner, Nazre showed up at her hotel room door in a bathrobe and slippers. Eventually, she was able to "push him" out of the door.

Vassallo also said general partner Ray Lane, a close and treasured mentor with whom she had an "awesome" relationship, told her she "should be flattered." Lane denied saying that, telling Exelrod, "It’s just not me." But Stephen Hirschfeld, the lawyer who conducted the independent investigations, recalled Vassallo communicating something to that effect.

Held back from a promotion

The inclusion of her testimony is instructive not only because it establishes Nazre as a predator, who took advantage of Kleiner’s inaction on Pao’s complaints about retaliation, but also because Vassallo was clearly well-liked at the firm. Both Lane and Schlein spoke highly of her personality, where communicating with Pao made them bristle. Despite her promise and interpersonal skills, Vassallo was also held back from promotion to senior partner in 2011.

Double standards and extreme subjectivity

Kleiner laid out its plan to attack Pao’s capabilities as an investor in the trial brief filed last month. According to the firm, Pao’s electrical engineering degree from Princeton, a law degree and MBA from Harvard, and stints at a handful of tech companies did not give her the skills needed to be a good board member or help portfolio companies. Much of the testimony has involved parsing Pao’s performance reviews, which Exelrod maintains contained input from Nazre, even after she reported his retaliatory behavior.

Even Mary Meeker had a hard time

But it’s a powerful thing to hear that Mary Meeker and Aileen Lee, two of the best-known female venture capitalists, also had a tougher time getting promoted than their male counterparts at Kleiner. Lee, who founded a fund of her own called Cowboy Ventures in 2012, was never made a managing member at Kleiner. Yesterday, Exelrod produced a document from November 2011 indicating that Meeker was not initially a managing member on Kleiner’s Digital Growth Fund, responsible for its investments in Spotify and Waze, despite the fact that she headed up the fund.

Judge Harold Kahn allows jurors to submit questions when testimony is unclear, and they’ve proven themselves to be exceedingly sharp, probing around the issue of how subjective perceptions of success can be at Kleiner. One of yesterday’s questions involved how carried interest is divided among partners. Kahn, who reads the jurors' questions, asked if "any objectivity or mathematics" were brought to bear when managing members divvy up carried interest. "There’s not some input to an equation," Schlein replied. It was hard not to think back to that when Lane, Nazre’s mentor, explained why Nazre was allowed to stick around after initially lying to him about the affair with Pao. Months after he found out about the affair, Nazre was promoted to senior partner with Lane's support.

When 'cocky' counts against you

Another question yesterday concerned Schlein’s notes on a potential male hire from 2011 that seemed to imply the candidate’s "cockiness" was an attribute. (Many of Pao’s performance reviews called her arrogant and brash, noting her "sharp elbows," where similar aggression in partners like Chien was not a cause for concern.) Schlein was asked to explain when cockiness is a good thing. "If you’re cocky and then by the time you’re done talking to somebody and they don’t like you," it’s the wrong kind of cocky, he said.

Testimony from his partners made it clear that Doerr was one of Pao's only supervisors who liked her, or had faith in her, but with his firm's reputation on the line, we'll see how much he is able to "recall" in court.

Kleiner Perkins Trial Brief

Amended Complaint filed by Ellen Pao against Kleiner Perkins