Just trust me. It’s Kenneth Lerer’s favorite line, and the 58-year-old general partner at Lerer Ventures and co-founder of the Huffington Post—“Kenny,” as he’s known to friends—employs it convincingly. Huffington Post senior editor Katharine Zaleski, one of the site’s first employees and the home page editor until May 2009, recalls the early days of the site, when it wouldn’t be unusual to receive 20 phone calls a day from Lerer regarding the headline of the top story. “He was the kind of boss who would make you do something, or you’d put it up and say, ‘This is crazy, this headline makes no sense,’” and then he’d say, “Trust me, just trust me.’ And then, oh my God, it would be a huge hit.”
Lerer made headlines himself on Feb. 7, when it was announced that he and Arianna Huffington were selling their monster news site to AOL for $315 million. It’s crazy; it makes no sense—and it’s a huge hit for Lerer. But there’s very little emphasis on his role in the coverage of the story. He’s often eclipsed by his brash, charismatic co-founder, in part because he intentionally shuns the spotlight with the vigor of someone who’s done something wrong on reality television. His name rarely appears amid the speculation about exactly how much money Huffington made from the sale of the site, despite the fact that the two started it together after contributing $2 million each. And he likes it that way.
But he may not be able to stay out of the spotlight for long. Even as he offloaded the Huffington Post to AOL, Lerer also made an acquisition—Huffington Post’s CEO, Eric Hippeau, a former partner at Softbank and an effective rainmaker who could turn Lerer’s fledgling seed-stage fund into a powerhouse venture capital player. Hippeau knows the business and has deftly made the transition from operator to financier before (he was the CEO and chairman of Ziff-Davis from 1993 to 2000 before joining the large venture fund), so it’s not a new path for him. But it’s entirely new for Lerer, who, prior to the Huffington Post, was a high-powered PR executive accustomed to navigating the political structures of large, established companies. He has no transactional finance experience, and the Huffington Post was his first real entrepreneurial venture. His fund is tiny, consisting of three partners: Lerer; his 28-year-old son, Ben (the CEO of Thrillist.com and the manager of Lerer Ventures); and Ben’s pal Jordan Cooper (a venture partner who’s also the CEO of Hyperpublic). How can he be a serious contender in the venture space? Should we just trust him?
On the upside, so to speak, it’s one endeavor that doesn’t have a press release in mind.
“Kenny had and has no discernible public ego—and I have a Geiger counter for public egos,” said Mark Green, a former New York mayoral candidate and longtime friend of Lerer’s. “But he also has an enormous private pride in pulling off things well.”
After a stint in politics, where he met Green, and a few years covering the beat for New York magazine, Lerer entered the public-relations world, first with Warner-Amex, and eventually founding the firm Robinson Lake and Lerer in 1986, where he gained attention as the flack for embattled junk-bond trader Michael Milken. His image as PR Guy was solidified by a passage in James Stewart’s 1991 Den of Thieves (Simon & Schuster) that described Lerer’s interactions with the reporters of the major papers. “Lerer would call these reporters frequently, working the phones as he played Nintendo in his office, or calling from his car, planting story ideas worked up by members of his staff,” Stewart wrote. “Occasionally he dribbled bits of ‘exclusive’ information to his current favorites. Lerer once called it ‘breast-feeding’ the reporters.”
“Lerer was doing less of the story-by-story push-back and more of a softer sell, trying to sell Milken’s human side,” said John Riley of Newsday, who covered the Milken trial during that period. No one was buying that Milken had a human side, and the former junk-bond king went to jail, but Lerer had already developed a reputation for taking the long view in damage control. He began working with MTV in the Beavis and Butt-Head era on retainer for when, as then–MTV CEO Tom Freston put it, “someone would blow up a dog with a firecracker and try to blame it on us.”
He became close with future AOL President Bob Pittman, and continued working publicity through the ’90s until Pittman convinced him to abandon a Microsoft account to join him at AOL for PR work. Lerer did damage control at AOL— notably working on one of the “America Offline” connection crises, when the company became so swamped with users that none could sign on—and eventually became a senior vice president, one with a reputation for dispensing withering criticism. “He never did it with a smile,” said a former Time Warner executive who worked with Lerer in that period. “There were probably people who were a little more in-your-face, but they did it with a smile. He never did.”
The plaintiffs in the lawsuit over the origins of the Huffington Post, recently detailed in Vanity Fair, point to Lerer’s complete silence during the site’s first major meeting as damning evidence, but it would seem hardly out of character to anyone who knew him at AOL. Even among heated discussions about the merger, which by most accounts Lerer opposed, former Time Warner CEO Gerry Levin remembers Lerer as a bastion of collectedness.
“I can remember some pretty intense, highly intense, volatile meetings where there were conflicting points of view, things were really rattling around the table, and I’d look at him and call on him and he was just calm, straightforward, extremely poised while everyone else around the table was losing it,” Levin said. Pittman left the company after the merger, followed later by Lerer, both of them with enough money to retire, and Lerer eventually became a member of Pittman’s investment fund, the Pilot Group.
The Huffington Post grew out of Lerer’s private office at Broadway and Prince Street, his post-AOL base of operations. Huffington and Lerer publicly split the duties between business and editorial, but Lerer fell into the role of de facto news editor, calling up to chastise writers who posted a story that was off-brand or who chose a photo that was all wrong. He was particularly proud of one headline collaboration, Zaleski remembers, for a top story about John McCain’s negative campaigning; it eventually went up as “From Maverick to Mudslinger.” Lerer’s editorial involvement tapered off after the first two years so he could focus on his other investments, though he returned to his editorial role with a vengeance for the 2008 campaign.
As he began to focus more on angel investing, he handed off his business management duties to CEO Betsy Morgan, relegating his own status to “chairman,” then brought on Greg Coleman and Eric Hippeau; the latter helped secure a 2006 SoftBank investment for the website and seemed a good replacement for Morgan.
Investing wasn’t a logical next step for Lerer, as he’d spent most of his life prior to the Huffington Post working in publicity. But he’s already developed an investment style: He invests quickly, widely, in small amounts and with people from his own network.
Throwing money at friends and friends of friends isn’t a bad policy for Lerer, because he knows so many people. “I’ll be talking to someone and they’ll start talking about ‘my friend Ken,’ and I’ll say something like, ‘What do you mean, your friend Ken? I thought he was my friend,” said Jim Spanfeller, former Forbes.com CEO and founder of Spanfeller Media Group, a Lerer Ventures investment.
But perhaps more important than Lerer’s network is his son Ben’s network. The younger Lerer, who owns the Daily Candy–for–men site Thrillist.com (an investment of Pittman’s Pilot Group), and the third partner, Cooper, a former General Catalyst Partners investor and a friend of Ben’s from high school, bring in most of the Lerer Ventures deals. The two are nearly as sociable as Ken purports not to be, so despite the general policy of backing only known quantities, the firm has already invested in 35 ventures. Many of them have much younger founders than the friend-of-Kenny investments, and it may be that Lerer doesn’t have to be particularly good at sourcing deals himself if the younger Lerer can do it for him.
In early-stage venture capital, of course, no one has to be particularly adept at sourcing good business opportunities, at least in the traditional business sense. For many investors, the product and the market are secondary to the entrepreneur—the personality driving the business. Such may be the case with Scott Kurnit, whose AdKeeper—a Lerer investment—received a total of $43 million in financing for a product that operates from the somewhat dubious premise that users will voluntarily bookmark ads they want to see in order to view them later. (After 45 minutes, Lerer pulled Kurnit out of his pitch meeting to tell him that he wanted to invest.) Lerer isn’t necessarily betting on AdKeeper; he’s betting on Kurnit. And if AdKeeper fails, participation in this venture may buy him participation in Kurnit’s next venture, which may be successful even if this one isn’t.
The entrepreneur is all that matters, and it helps if the entrepreneur has friends like Lerer. And both Lerers are fans of Kurnit. “When Scott Kurnit decides that he’s going to do something and he’s going to put all of his energy into it,” the younger Lerer says, “you know that Scott is someone who thinks big, you know that Scott is someone who knows how to scale a company and you know that Scott is someone who knows how to sell a company.”
The younger Lerer shares his father’s taste for quick investing. One venture, the e-commerce eyeglasses store WarbyParker, came to the company after the younger Lerer stopped a Thrillist-related meeting with the founder to tell him he wanted to invest. And Daniel Gross, the 19-year-old founder of Lerer Ventures investment Greplin (“the search bar for your life”), received his money after a single meeting with Cooper.
“Some of these angels take a very long time to decide,” Gross said. “If someone takes three weeks [to decide] whether to write you a $50,000 check, it’s kind of a bummer if you have no money to live on.” But taking three weeks to write a check isn’t unusual among professional investors. “I think it’s probably rare for an institution to only have one or two meetings; it’s much more common to have more meetings, to make a lot of phone calls, to have a lot of references done,” said Thatcher Bell, a principal at DFJ Gotham, speaking generally. “In general, it takes us more than one meeting for sure to get to the point to signing a term sheet because we think it’s important to get to know an entrepreneur.”
And if this style of fast, seat-of-the-pants investing goes sour, Lerer finds himself in the back room exclusively, with no story line to sell and nowhere to leak. “Just trust me” may have been a workable motto for a message man, but it doesn’t always work in the collaborative venture capital world. He can be far slower to sell than to invest. A deck and a phone call may be enough to get a check, but when Lerer investment Justin Schaffer wanted to sell his start-up HotPotato.com to Facebook, Lerer told him to sleep on it for 24 hours.
These days, Lerer can be found at the sleek offices of Betaworks, the incubator fund where he serves as chairman. It’s hard to say whether this suits him more or less than the offices of HuffPo, where he re-jiggered headlines and put his PR skills to good use remaking Arianna Huffington into a Web media maven. If anyone’s capable of remaking Kenny Lerer, PR Guy, into Kenny Lerer, Prominent Venture Capitalist, it’s Kenny Lerer. New York Times media reporter David Carr recently referred to him as a “technology executive,” though it’s questionable whether mastery of blogging software and SEO methodology implies technology expertise.
But he’ll get there. Just trust him.