For VC, $13M House Doesn't Come Cheap

You might think that venture capital big-wig Jeffrey Drazan would use the same care in picking contractors to build his $13 million home as he does promising startups.

Well, think again.

Drazan, who left Sierra Ventures in 2005 to start Bertram Capital, has been locked in breach-of-contract litigation with his contractor, Vance Brown Inc., for three years. On Thursday, a state appellate panel sided with the contractor and ordered the dispute into arbitration.

It appears that Drazan had all his venture capital wits about him when he formed his own limited liability company to manage the construction of his own home (who does that besides those LLC-happy venture capitalists?). In late 2002, work was under way on the $13 million (yes, we’ll repeat the number until we win the lottery and can finally buy a shed somewhere in the Bay Area) “residential complex” in wealthy Woodside.

But things went downhill fast.

Work started without a contract. And after a number of drafts went back and forth, Drazan ended up signing one version (without a lawyer present, it should be noted) and the contractor signed another, ultimately leading to the dispute that ended up in the appeals court.

At the time of the agreement Drazan was using local real estate lawyer Norman MacKay. Once the litigation started he turned to Buchalter Nemer’s Jeff Kirschenbaum, but soon replaced him with Peter Rehon of San Jose’s Rehon & Roberts. Vance Brown has been represented throughout by Thelen’s Gregg Dulik.

Anyway the moral of the story is: if you want someone who knows how to pick start-up stars like FrontBridge Technologies  and Theravance, call Jeff Drazan. If you want someone to manage construction of your next $13 million home, call someone else, like Bob the Builder.

Update: Legal Pad got in touch with Drazan's lawyer, Rehon, who filled us in on the breach of contract dispute. He said Drazan filed suit only after Vance Brown walked off the job in a huff over which version of the contract applied. Drazan won in the trial courts and on appeal, he said. After that, the contractor agreed to use Drazan's version, but pushed for arbitration. So, Rehon said, it's a loss to go to arbitration but a bigger win to be using Drazan's contract. 

As to whether Drazan is to be blamed for picking a bad contractor, Rehon said absolutely not: "He did everything he could do to make this work and still it went sideways." Rehon said the lesson here is that if a really smart guy like Drazan picks a reputable firm like Vance Brown and it still doesn't work out then there's basically no hope for "any poor slob like you or me."  Legal Pad won't argue with that.

-- Zusha Elinson

 

Comments

[wealthy affiliate make money]

wow a 13 million dollar house. i am not sure what i would do with this.

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[no name]

The guy is a jerk. http://articles.sfgate.com/1999-11-17/news/17706905_1_capitalists-silicon-valley-sierra-ventures