An Eric Schmidt Investment Firm Crumbles After Mismanagement, Soured Romance
The former Google CEO once said Steel Perlot, founded by his then-girlfriend Michelle Ritter, could become a new kind of Y Combinator. Now Ritter blames Schmidt for the firm’s unraveling, while former employees point to Ritter’s erratic management.
Michelle Ritter felt stuck. She knew it was an odd thing to say last month, as she sat on the living-room carpet of the 13-bedroom Bel Air mansion—previously owned by the Hilton family—that she currently lives in.
The owner of the mansion is Eric Schmidt, the 69-year-old former Google CEO, whom Ritter, 30, began dating in 2020 when she was an ambitious third-year student at Columbia University’s law school. The business Ritter had started with funding from Schmidt, a startup incubator and asset manager called Steel Perlot, was out of cash. Several of the fledgling companies it had launched had shut down.
And she and Schmidt, Steel Perlot’s only funding source, had broken up earlier this year. This spring, Schmidt said he would stop funding the firm, Ritter wrote to Steel Perlot employees last month. While Ritter blamed her frayed personal relationship with Schmidt for the business separation, Schmidt had found evidence that Ritter had asked employees to exaggerate the success of the business so it would be more likely to get additional funding from him, a person close to Schmidt said.
The Takeaway
In an interview, Michelle Ritter says her ex-boyfriend—former Google CEO Eric Schmidt—was responsible for the crumbling of an investment firm she founded with funding from him. But former employees of the firm said Ritter has a history of mismanagement and questionable choices.
In recent months, Schmidt, Ritter and their respective lawyers have been locked in a contentious battle over how to disentangle their business interests. She is trying to cut a deal with Schmidt that would ensure she would still share in the proceeds of potential profits from startups Steel Perlot invested in under her watch, which includes blockchain startup Keeta and AI startups Hebbia and Pryon.
“I’m not giving up on my economics,” she said in a two-hour interview.
The messiness of their breakup, along with Ritter’s willingness to speak on the record about it, serves as a cautionary tale about the hazards of mixing business and personal relationships.
It also sheds further light on the degree to which Schmidt, one of the tech industry’s wealthiest and most respected leaders, has flouted that truism. Last month, The Information revealed how the entrepreneur hired an advisor who helped him resolve difficulties with ex-girlfriends by structuring investments on their behalf—some of which didn’t pan out.
In Ritter’s case, Schmidt used his money and clout—both attributes he had in spades—to go into business with her while they were in the midst of a whirlwind romance. He was at the top of Google during its meteoric rise, from 2001 to 2017, first as CEO and then as executive chairman.
Along the way he amassed a fortune Bloomberg currently estimates at $33 billion. In his post-Google career, he has made himself into a Washington, D.C., power broker, becoming a close ally of former president Barack Obama. And he recently penned several op-eds on the war in Ukraine and founded a military drone startup.
Hillspire—the family office of Schmidt and his wife, Wendy—pumped about $140 million into Steel Perlot over the last three years, a little more than half of which paid for the firm’s operating budget, financial documents reviewed by The Information show. The rest of the money is tied up in outside investments in startups and another venture capital fund, some of which could still generate cash returns.
Ritter wasn’t an obvious candidate to put in charge of an operation like Steel Perlot. While she had business and law degrees, she had little experience in building and investing in startups when she and Schmidt founded the firm.
It showed. Employees at Steel Perlot complained about her erratic management and questioned her professionalism. For example, she had a tendency to drink wine out of coffee mugs during business meetings and in many instances failed to show up to meetings she had set up with her employees, three former employees said.
She asked employees to buy prescription drugs for her without orders from a doctor, two former employees said. Some employees, in interviews, said they were afraid of her.
Under her leadership, Steel Perlot spent freely on high employee salaries, while bringing in meager revenues. Ritter had a $1 million annual salary, internal documents showed. Some startups that Steel Perlot incubated, like one to develop tools for social media creators, shut down soon after they started. She frequently told employees she had raised significant amounts of money from new investors that never appeared, former employees said.
Ritter concedes she isn’t blameless when it comes to Steel Perlot’s problems. “There are some things I've certainly done wrong. I think about it all the time: ‘What would you do differently?’” she said, adding that she tried to juggle too many business endeavors at once.
Still, she blamed Schmidt for most of Steel Perlot’s problems. She said he didn’t stay as involved in the company as he had promised and only supported the business initially as a way to get closer to her romantically.
“I think the best and worst champion I’ve had is Eric,” she said.
The relationship’s souring took extreme turns. Near the end of 2022, Ritter asked employees to hire private investigators to follow Schmidt, a former employee said. They declined her request. Ritter said she didn’t follow through with the request.
“It was a consideration raised by my legal counsel in response to a continual string of attempted security breaches at the businesses, particularly targeting me personally, shortly after Eric began retaliating against the venture as our relationship worsened,” she said in an email.
In happier times, Schmidt was an energetic hype man for Ritter and Steel Perlot. In a 2022 email to her, Schmidt wrote that the company would combine “the best of Blackstone and Google X and Y Combinator.” Several former top employees said they joined because they admired Schmidt’s pedigree and trusted that he would help the company succeed.
The former couple became Steel Perlot’s only two shareholders, with Ritter and Schmidt owning 51% and 49%, respectively.
Now their relationship is in tatters. In recent months, Schmidt changed the locks on one of his homes in Manhattan so that Ritter couldn’t enter, and has pressured her to leave his Bel Air home and for her parents to do the same from another property he owns next to it, she said.
Last month, in an email to Steel Perlot’s staff, Ritter said talks broke down with the company’s “business partner and sole funder”—Schmidt—to continue funding the business. She directed employees of the firm—now a skeleton staff, down from 90 at its peak—to send questions about the company’s future to his family office.
“The former collaboration and transparency needed for our success has dwindled due to unrelated personal matters,” she wrote.
Last week, Schmidt’s lawyer, Craig Marcus, wrote to employees that the family office, Hillspire, was “in the dark” about Steel Perlot’s plans and said Ritter hadn’t responded to “several offers of assistance to ensure a smooth transition for all employees.”
Matthew Hiltzik, a spokesperson for Schmidt, said: “While Eric was optimistic about the prospects for this investment and is disappointed that it hasn’t worked out, he is grateful for the efforts of the very talented [Steel Perlot] team and will continue to support them as they transition out of the company and they identify new opportunities.”
‘She’s the One’
Ritter and Schmidt’s relationship first became tabloid fodder in 2021, when she was seen with him at billionaire Richard Branson’s space launch in New Mexico. Despite being married to Wendy since 1980, Schmidt had long dated other women and brought them with him to social and business events.
The two met in September 2020, when one of Ritter’s Columbia law professors introduced her to a business associate of Schmidt. At the time, Ritter was more interested in entrepreneurship than she was in becoming a lawyer and was looking for help getting a startup off the ground—an online platform for sports fans called StarX. Ritter, Schmidt’s associate and Schmidt himself had dinner together in New York.
A few months later, Schmidt and Ritter began dating. Schmidt told friends that he was drawn to Ritter’s charisma and intellect, according to text messages viewed by The Information.
He told Ritter he wanted to have children with her and planned to divorce Wendy, Ritter said to an employee and people close to her, although some of those people told her they doubted he would follow through. “I think anyone would have believed, in my position, he would actually get divorced,” she said.
Within a few months of the start of their relationship, Ritter and Schmidt began picking out houses together in Los Angeles, Malibu and the Hamptons, which Schmidt ended up purchasing, said Ritter.
Soon, Ritter became a fixture in Schmidt’s circle of high-powered friends and business contacts, including OpenAI’s Sam Altman, Scale AI’s Alexandr Wang and former U.S. Secretary of State Henry Kissinger. She attended Fanatics CEO Michael Rubin’s White Party—an annual bash in the Hamptons that attracts celebrities and sports stars.
“It moved so fast,” she added.
Schmidt met Ritter’s parents, Terry and Shamim, who grew to like him. The Ritters had faced legal and financial difficulties in the past, including a court battle with JP Morgan after they struggled to keep up with mortgage payments following the 2008 recession. The bank later forced the sale of their home.
But after they entered Schmidt’s orbit, their fortunes improved. Schmidt paid for her parents’ medical bills. Ritter’s parents lived in and cared for the $5 million home next to his Bel Air mansion.
Schmidt also hired Ritter’s father to help with architectural design on Schmidt’s homes, including one of his passion projects—the construction of a mini-railroad on Schmidt’s property in upstate New York, which was previously owned by early 20th century real estate magnate John Jacob Astor IV.
According to Shamim Ritter, Schmidt did not hide his intentions regarding her daughter. “He did tell us: ‘She’s the one,’” she said. “We basically believed in everything he said to us.”
A Great Journey Ahead
After they met in 2020, Ritter and Schmidt began discussing big ideas about business strategy, Ritter said. Eventually, Ritter arrived at her vision for Steel Perlot—a new kind of hedge fund that used advanced trading strategies and also incubated startups involved in payments, crypto, AI and the creator economy, former executives said.
In 2021, Ritter and Schmidt created Steel Perlot as a limited liability corporation, without a board of directors. She named Schmidt as chairman. Schmidt initially owned 5% of the company (the next year, he successfully pushed Ritter to up Hillspire’s stake to 49% after he agreed to commit more funding). Ritter, who owned the rest, was chief executive.
The two of them signed an operating agreement that largely prevented Schmidt from removing Ritter as CEO, a person with direct knowledge of the matter said. While Ritter didn’t tell most employees what the origin of the company’s name was, she told some people that steel was a reference to Schmidt’s “steel blue eyes,” a person who spoke to her said.
Ritter’s profile in tech and business began to grow. She spoke at a conference on the future of cryptocurrency regulation and joined an executive advisory board for an academic center run jointly by Columbia’s business and law schools. And she joined the board of Pryon, an AI startup valued most recently at $500 million by venture capital firms including the U.S. Innovative Technology Fund.
“She was a big thinker,” Igor Jablokov, Pryon’s CEO, said. “She was thinking about how we could grow as aggressively as possible.”
Steel Perlot got its funding in regular installments from Hillspire, the sprawling Silicon Valley-based family office that controls the fortune of Wendy and Eric Schmidt. The family office had hundreds of employees and oversaw high-profile philanthropic ventures like Schmidt Futures, which awards grants to scientists and entrepreneurs, along with money-making efforts like an investment in the hedge fund D.E. Shaw.
Former employees recalled Schmidt sometimes coming to Steel Perlot’s New York office and working with them in his Los Angeles home, but he largely abstained from day-to-day duties, leaving the startup’s management to Ritter. One of his pieces of advice was that she should focus on expanding the firm’s headcount, Ritter said.
“He would say, ‘Look, just get more people. What I've learned is at Google is you just have bodies around people and things just kind of happen. It kind of just comes together,’” she recalled him saying. “So that's what I did.”
By the end of 2022, Steel Perlot had about 90 employees and payroll expenses of $16 million for the year, internal documents show. In a more recent quarter, the average annual salary for the firm’s employees was more than $300,000, according to an analysis of the documents.
Other costs at Steel Perlot piled up. According to financial records for Steel Perlot, the startup leased offices near New York’s SoHo neighborhood and in Los Angeles that cost the company more than $160,000 a month.
Meanwhile, the romantic relationship between Schmidt and Ritter began to fray. Around the middle of 2022, Ritter accused Schmidt of sleeping and traveling with other women and she became increasingly frustrated that Schmidt remained married to Wendy, according to two people she spoke with.
During a 2022 employee trip to Saint Tropez, on the French Riviera, Ritter argued with Schmidt about not inviting her to meetings with people in his network, said a former employee. She also was angry that a news article featuring Steel Perlot’s startup Keeta mentioned Schmidt as an investor but not her company.
Mounting Losses
Steel Perlot made some fortunate decisions. In 2022, it pulled all of the money it had in an FTX account for crypto trading—about $100,000—before the exchange collapsed, a former employee said.
But other Steel Perlot bets ran into problems. One of its biggest projects was called Knox Networks, which was developing software that would allow banks to settle transactions at higher speeds than they could at the time.
But in August 2022, Knox fired and sued the executive it hired to develop the software, Ryan Tate, in a dispute over the ownership of the intellectual property behind the software, according to documents filed in the U.S. District Court for the Northern District of California.
The parties later settled the dispute after it went to arbitration, according to people with knowledge of the dispute. Several other engineers left Knox after the company fired Tate, according to former Steel Perlot employees.
After the Knox lawsuit, Ritter became more suspicious about employees working against her. In 2023, Ritter told others at the company she thought some of the traders at Steel Perlot were trying to build a competitor on the side.
In 2023, Ritter worked to cut more of Steel Perlot’s costs and told employees about how she was seeking to raise cash for the company from outside investors, including sovereign wealth funds and venture capital firms. The outside money never came through, though, financial records show, even though she told employees she had raised it.
“The joke in the office was that Michelle had raised $15 billion 15 different times,” a former employee said.
Meanwhile, some of its investments quickly misfired. Steel Perlot invested nearly $1 million in Hachi—a creator services platform that aimed to “revolutionize the content creation landscape,” according to Ritter. Hachi shut down in May, less than six months after it publicly launched.
Between its inception in 2021 and February 2024, Steel Perlot had $61 million in operating losses and generated less than $200,000 in revenue, financial documents show.
Packing Up
Last fall, Schmidt’s relationship with Ritter began attracting more public scrutiny, including in a Forbes story last October that first reported their business ties. Ritter told Forbes that Steel Perlot had multiple backers beyond Schmidt.
That wasn’t true, as Ritter’s recent email to staff about her inability to raise outside funding showed.
Early this year, Ritter and other executives sought additional funding from Schmidt’s Hillspire to fund operations, contingent on the startup hitting business milestones and raising outside funding, said a former executive. Hillspire declined, citing lagging business progress.
In May, the New York Post published photos of Schmidt at a social event with his wife and reported that he and Ritter were “on the outs.” Schmidt and his wife were together in Mallorca last month, vacationing with Barack and Michelle Obama and others, and last weekend were in Italy for Wendy Schmidt’s birthday, a person close to Schmidt said.
In an email to Steel Perlot employees earlier this month, Ritter blamed her souring romantic relationship with Schmidt for Hillspire’s lack of continued financial support. She told them she was proud of what they had built, which she called “an innovation engine where big tech meets big finance” and said the firm had generated “impressive returns” from its small early-stage VC fund, including investments in AI startups Hebbia and Pryon.
While sitting in the living room of Schmidt’s Bel Air mansion last month, Ritter said she was taking the next logical step to separate her life from Schmidt’s by preparing to move out of the Georgian colonial home, with its old Hollywood touches including a sweeping staircase, marble coffee table and well-tended gardens, complete with a koi pond.
During her time living there, Ritter had added some more modern features to the home, including a red couch in the shape of a pair of lips and a glass case holding her guitars. Outside, a large rainbow-colored “Love” sign that a friend of Schmidt’s created for one of their trips to Burning Man, the annual arts festival and bacchanal in the Nevada desert, stood near a wrought-iron gate at the end of the home’s driveway.
“I realize that some might just chock all of this up to the messy complications of mixing a personal and professional relationship, but I never pursued him in any way, nor did I expect anything from him other than to simply uphold the promises he continued to make in his efforts to convince me of a supposed future together,” Ritter said.