Mannerisms

In those days the firm was just Eugene Kleiner, Tom Perkins, and $8 million. The $8 million was put into government bonds while it waited for homes among the Valley's entrepreneurs.

Then Kleiner and Perkins heard about an arbitrageur who was making good returns playing bond spreads in the public market. These should have all been hedged so the only possible risk of loss is the loss of interest on one contract.

Kleiner and Perkins entrusted the arbitrageur with $1 million of their precious first fund. "The initial results were most encouraging", says Perkins in his book Valley Boy, "a return in the vicinity of 30 per cent per annum."

Then the KP financial officer pointed out the contracts the arbitrageur was making with their money didn't balance. Perkins took them off to check over a weekend. "By Sunday night I was in a state of purest panic", writes Perkins, "the contracts weren't even remotely hedged: our guru had put us into a naked, totally exposed short position of tens of millions of dollars."

So Kleiner, Perkins and their lawyer go off to see the arbitrageur.

The lawyer starts to argue the case.

"I found myself trembling", says Perkins, "I found that another person, actually a raging vicious beast, was inhabiting my body. Suddenly, I sprang up and nearly leapt across the table - Gene later told me that I was definitely frothing at the mouth - and I threatened the arbitrageur with horrible, terrible, physical mayhem if he didn't immediately make full restitution."

The lawyer and Kleiner "forcibly dragged me out of the place", recounts Perkins.

Back in the KP offices they were ticking off Perkins for his behaviour when a messenger arrived with a cheque for the full $1 million. The arbitrageur had, apparently been convinced that Perkins wanted to kill him.

What of the arbitrageur?

"He went bust", recalls Perkins, "in a huge wipe-out some months later."