His actions and bad management hardly seem long term based thinking. While you could be right that is his intention, his actions to date, the bad management issues well documented, or his possible participation in fraud, to the antagonistic business practices hardly seem the best "long term" approaches.
He created this bro-themed caricature of a corporate culture, and he did so for no reason other than enjoying that sort of atmosphere, or being incompetent to stop it. Or both.
Let's not start some sort of myth of martyrdom around Kalanick by conflating these two. Although, yes, this strategy of braking local regulations and expecting to win a power struggle with every government anywhere was also on its last leg when he left, and would've gotten to him as well, sooner or later.
I mean, their whole model was to go places, ignore the law and continue operating until they either got thrown out, or they pumped money to the right places to get the law changed.
Scofflaw corps get nailed sooner or later, and a corp the is built on breaking laws might break some laws investors care about...
Regulatory capture doesn't do you much good if nobody cares when a business breaks regulations, though :)
I think American society does care about businesses following laws and regulations. I think a narrow segment of the press is wowed by 'outlaw cool' and investor funding, but that is not the same as America as a whole.
Obviously corps are gonna lobby, but I think we as a society should and do draw a distinction between lobbying to change a law that you are not breaking and lobbying to change a law you are breaking. I am pretty sure most legislators who aren't closet anarchists take a dim view of things like that. I will wager a large amount that a vast majority of regulators take a dim view of things like that.
While sexual harassment is, of course, indefensible, that story didn't really make Uber sound like the frat house implied by "bro-themed caricatures", it just makes them sound dryly indifferent to the employee's complaint. Are there other events that gave Uber that title?
By working with licensed drivers/companies or licensing their drivers, they would have avoided much of that problem, admittedly that would add to their revenue vs profit/yearly loss issues they have now. Lyft is in a similar boat, trying to lower loss-per-ride and get to a profitable state. It appears based on media reports that Lyft, despite not sharing many of the conflicting business approaches Uber used, is actually ahead of Uber at working its way to profitability.
...which is because the company was built on ignoring laws and regulations to
the detriment of both employees (not called employees by the company) and
outsiders (competitors) from the very start, so no wonder that nobody is
sympathetic to the company.
Why is that certain? Many people are interested in their own success at the expense of their companies. Kalanick in particular seems to celebrate selfishness.
But yes, Travis' interest is likely to be his own over Uber's if they come into conflict. I just think he believes that they're aligned. (And I also think he's wrong.)
I'm not saying Travis is a good person. I'm just saying that in a war between founders and investors, it is usually a safe bet to side with founders.
Incidentally from what I can make of their investments in Uber on crunchbase, they need Uber's market cap to be $31bn just to break even on their investment (13% of the business for $411m). That's probably what they're fighting for.
0.13*31BN = ~$4BN, still a 10X return if they've invested $400M.
I don't really think the urgency is there, though, VCs have been dealing with illiquid companies for decades, if they need to wind down the fund, they will either distribute the shares directly to the LPs or create a placeholder SPV and distribute partnership interests.
Can't edit it now, unfortunately.
I would 100% have expected Sequoia to sue me after I took their money if I had done the same.
We are not kings. At some point misalignment with your board is your responsibility. This isn't some Series B spat.
Consider his mental state during this time. He lost his mother for crying out loud and all these things were happening at the same time. Now the VCs want to pile on to that with a lawsuit. I lost my mom 3 years ago and I wasn't in a good place for months. I'm surprised he was able to even function whilst the weight of the world was on his shoulders.
I'm not saying that he should be CEO again just yet (he can take a break and recover) but to sue him at this time like he wasn't directly responsible for the billions they're now so eager to cash out on...?
Don't forget the toll entrepreneurship can have on someone's personal life: you know it from experience and you can also read on how Travis had to move back home in the early days because things didn't work out with initial projects. This is why I would always give first priority of investment to someone like Vinod Khosla who says, 'in 30yrs, I have never once voted against an entrepreneur in a board meeting'. He goes further to criticize most of these VCs as incredibly unsympathetic towards entrepreneurs because they don't know the pains of building a company. Benchmark are exactly the type of VCs Vinod Khosla warns entrepreneurs to avoid.
> I would 100% have expected Sequoia to sue me
Don't know much about Sequoia but I have never seen an article where they've sued an investee.
But Uber has grown to impact an incredible number of souls. Gurley et al. have a serious fiduciary duty to exercise here, one not just aligned with their own greed.
Separately, Khosla is not a paragon of founder-friendliness despite his public attestations. No VC is. It is silly to think that 100% alignment can ever exist with an investor — they legally cannot abdicate their voice entirely. At some point Travis needs to recognize that he consciously took risks that diluted his power in exchange for funding. Had he run a profitable business that would not have needed to happen. You can't have your cake and eat it, too.
There's no evidence he hasn't been anything but. I choose to trust him. If I had to choose between a VC leaving a company and the founder CEO leaving, I'd rather the VC left which is the mantra that Khosla advocates for. Before you say the VCs money is at stake, remember also the founders' and employees' sweat equity is also at stake - you can always make more money, but when time is gone, you can't recover it.
And there is, of course, evidence that Khosla is not 100% founder-friendly, as there is data for every other VC and every other founder out there. Every conflict is gray.
But choose as you wish, of course. That's capitalism.
I wonder how often Kalanick has used that phrase.
There are different intentions in lawsuits; You seem to think they're seeking damages, but it seems more likely they're just trying to prevent the torturous interference of uncertainty he is causing as news breaks that he wants to be CEO again.
Leaks of backchanneling directly affect their investment and exit strategy. Whether he is CEO, on the board, or "a trusted advisor" the investors and company want to have an appearance of solidarity and confidence.
"What do with all the Uber fragments I can't keep in my arms grip!?!?"
So what do? How harvest. (Think of this as a thought experiment)
As an outsider, what are perceived assets and what are perceived risks/liabilities
What are perceived opportunities: how to harvest them NOW??
Uber shall die in x months; thus need to take action y now, at cost of x with projection z... resulting in A. What is A?
Uber will not die but morph... Ned to take action x at y cost resulting in A?
Uber won't die at all - and will continue perpetuitiously - A - how profit?
"Kalanick [aquired] a self-driving startup that, according to a confidential report not disclosed to Benchmark (the "Stroz report") allegedly harbored trade secrets from a competitor . . . "
The Stroz Report was created when "Otto and Uber jointly hired an outside forensic expert Stroz Friedman. Friedman interviewed employees, including Levandowski and Lior Ron, reviewed their digital devices like mobile phones and cloud storage, and prepared a report recording the results of the investigation. . . Uber dangled a huge carrot for Levandowski to be truthful . . and agreed to indemnify him for any prior bad acts he confessed to committing. In other words, if Levandowski told Stroz what he stole, then the high priests at Uber have absolved him of his civil sins and Uber will pay for any resulting lawsuits or penalties"(1)
Maybe I'm reading between the lines, but it seems like they're saying in black & white that the Stroz report contains incriminating evidence that Levandowski DID "harbor trade secrets" from Google which will materially impact the outcome of Ubers broader legal woes . . .
EDIT - Reading further in the actual complaint ""if the contents of Stroz's interim findings had been disclosed to Benchmark at the time, they would have had a material impact on Benchmark's decision to authorize the board seats . . ." (2)
Sounds quite a bit like a smoking gun, that Benchmark probably realizes now is going to come to light.
It is common in parts of the programming world — especially when dealing with untrustworthy clients — to keep a way to take their IP/disable their website/turn off their domain/etc unless they pay you on time.
they would have had a material impact on Benchmark's decision is probably the weakest possible complaint.
Looks like a grudge match to me. Apparently unhappy with merely removing Travis from the CEO's chair they want to make certain he's never allowed to ever enter the building.
Benchmark's stake in Uber is worth $9.1b -- many, many times the size of their fund. They will do anything they can to protect this investment.
They very likely believe that the best way to protect their investment is to keep Travis out, and this is part of the process. Decisions like this aren't made at an individual partner level. The entire partnership decided to file this lawsuit, and that means it's a calculated decision.
But that's precisely what happens. It is human nature. Money makes people emotional, greedy, envious, and short-sided. It takes exceptional and very rare discipline (see Warren Buffett) to not be emotional in investing/business.
I don't get it - their stake in Uber is part of their fund isn't it? So how can it be worth more than the whole fund?
Fun fact: Gurley has himself being sued by some founders of a startup (Epinions) in the past for misrepresenting material information  prior to a merger.
 "Mr. Gurley has remained one of Mr. Kalanick’s few trusted advisers, and the two communicate several times a week ... "
"Yet in many ways, Uber now epitomizes many of the excesses Mr. Gurley has publicly condemned, ..."
I don't think "The VC company will sue me if they suspect I've committed fraud" is something many founders need to be concerned about.
Your not being a party to the ongoing case, this doesn't surprise me. I don't think any of us knows enough to judge.
Furthermore, "weeding out fraud" could certainly be seen as "gain[ing] power and control," but it's not the most charitable interpretation.
Sueing their CEO for no real reason but just as powerplay to get back control feels like an act of pure desperation from a mediocre VC but not Benchmark.
Would love to know which partner at Benchmark triggered this. Then we have a name to this insanity (Gurley?).
Travis wasn't removed from CEO chair. He resigned temporarily due to passing of his late mother. He himself said multiple times once he is done greaving, he plans to come back.
is how the NYT put it.
anyways Travis said himself he is leaving Uber because his mother just died, which was not a lie. And I believe when your mother dies you need time to grief and its perfectly fine to take time off.
If someone without the relevant information reads it your comment could thus spread misinformation.
And so people downvote. The other replies that got downvoted after that I don't know about though.
Enacting a coup while the king is absent from the castle is a common tactic.
The suit revolves around the June 2016 decision to expand the size of Uber's board of voting directors from eight to 11, with Kalanick having the sole right to designate those seats. Kalanick would later name himself to one of those seats following his resignation, since his prior board seat was reserved for the company's CEO. The other two seats remain unfilled. Benchmark argues that it never would have granted Kalanick those three extra seats had it known about his "gross mismanagement and other misconduct at Uber"
I never understood this practice of investors/founders having such wide discretion when it comes to controlling board seats. It always seemed to me that board representation should be roughly proportional to equity ownership. If a founder/VC controls 30% of the equity, he should be given control over ~30% of the board seats. Such an arrangement seems like the best way to ensure that incentives are aligned, and to prevent drama/shenanigans like whatever led to this suit.
If you lose control of the board as a founder, you basically are another employee at the company, at the mercy of your investors, who can choose to bring "adult" supervision anytime they seem it is fit to them.
Having the founders control of the board did well to both facebook and google on the long term.
On the other hand you have Twitter where nobody is in real control of it, and it ended up with no clear direction.
This is something that seems to be missing in the US.
Any stats or info on this? Would be interested to find out more.
You may just be good at getting funds and collecting dividends / next round money and that's totally cool. You may not have any plan for the future, and you may not want to go in jail when something goes bad.
* Uber has 31,537 employees as of August 2017.
* New hiring is down from 1000 per month in 2016 to 500 a month in 2017. July was the lowest month since the start of LinkedIn data which is August 2015 @ 440 hires.
* There are currently 8,000 job openings. Operations and Engineering are the two largest categories.
* With every 100 people that are hired. ~80 people are departing the company.
Hiring managers I have talked to say that it is very challenging to attract strong candidates to Uber and it is demoralizing because their best people are leaving.
That is kinda hilarious.
If that's the number you are getting from LinkedIn, then you can consider the LinkedIn numbers to be absolutely worthless. That number is 2x to 3x the actual value.
Where did you get the 2x to 3x data point? Also, does your data source show anything different on the other issues around slowing of hiring and additional churn this year at Uber?
It is possible that the top line # might be problematic because it requires self reporting, but there is still signal in the # of people that are self reporting joining and leaving.
You're sourcing Linkedin for employment data and using that to say there's a churn problem at Uber?
At some point, you will learn to try to extract signal from imperfect data. It’s a key skill. If you wait for perfect data, you will miss the trends until they are in the rear view mirror.
Unless you believe that there has been a sudden mix shift in vendors vs. employees, the general analysis of churn and hiring still hold. You are only debating the multiplier on numerator and denominator.
Those are less important.
Uber now has about 14,000 employees.
This is interesting. I thought HNers were saying Kalanick had the biggest stake, which is why the board couldn't fire him.
How does this work? If someone only has 10% equity, why was it so difficult to remove them? This is a useful tool for founders, so it's worth understanding.
Even if a worker sells only 10 percent of his or her stock back to the company, that worker agrees to give Mr. Kalanick the voting rights to 100 percent of his or her stock. Each share of Class A stock comes with one shareholder vote, while each share of Class B comes with 10 votes.
Uber had 545.8 million Class A shares at the end of last year, which included 43.4 million employee stock options that had been issued, according to financial statements obtained by The Times. If all of the early employees who owned those options sold even a small part of their stock to Uber, Mr. Kalanick could control the votes of up to 43.4 million shares, or an additional 7.9 percent of that stock class.
Uber also had 459.7 million Class B common shares at the end of 2016, which included 9.9 million employee stock options that had been issued. If all of the holders of those options sold even part of their stock to Uber, Mr. Kalanick could control the votes of up to 9.9 million shares, or an additional 2.2 percent of that stock class.
Mr. Kalanick does not control those votes until he issues something called a “voting notice,” which requires the employee to vote all of his or her remaining stock in accordance with Mr. Kalanick’s wishes on all matters submitted to a vote of stockholders, according to the agreement. If Mr. Kalanick issued such a notice to a Class B shareholder, the stock gets only one vote a share, which goes to Mr. Kalanick.
Wow. I knew about the super-shares, but giving Travis (not even Uber's CEO but Travis personally!) control over the voting rights of any employee who sells any of their stock back to the company seems pretty fucked up. Is this done at any other company?
Though honestly it seems that a lot of the stories were because of Kalanick's leadership. It wasn't a single instance of bad behavior, it was that the bad behavior persisted and became part of company culture when in most companies it would have been dealt with immediately, or at least without a pattern.
Rehashing the stories like that when the old leadership was out and new leadership was on its way in would be less newsworthy.
Buyer's remorse! Investors think they deserve so much power because they put capital upfront and understand how to play the legal system to their benefit, while more industrious actors are busy actually building the value of the company.
Yeah and I can tell the folks at Benchmark about a bunch of guys I knew who wish they never would've gotten married. Oh well, when you take your vows... Till death do you part ;)
Though from what I know Benchmark's rep is pretty solid. Particularly as a king-maker, with Uber and Snap.
What makes you think that?
I expect a tooth-and-nail battle, with much of it leaking into the public.
2) Softbank investing in US rideshare market
both are large events, and the outcomes of both events will be much worse in the case of an ongoing legal battle between shareholders and founder/ex-CEO.
All in all when your biggest, earliest investor sues you, despite you having built them a fortune, you have probably been grossly negligent in some respect.
The reality is that when it comes to fraud or other potentially criminal activity, you've got to bat 1000 as a CEO. For even lesser offenses you don't get too many freebies. Welcome to the game.
And wtf are you arguing anyways? Because I invested in Enron and they made me money, in 1999 I should have been happy even while alarm bells were starting to be rung? Your argument would've lost conscientious investors a great deal of money in the end game. You've got to think longer than just right now.
Unless you have proof that the claims by Benchmark are literally fictitious, you're on the losing side of how this one'll play out.
Maybe it changes the charges and the sentencing, if there is no indication that the person sought to personally profit or steal from the investors, but lying is lying.
The question about fraud was in the context of the misappropriation of capital from investors for a purpose different from what was initially agreed to, and not as a general catch-all term for posturing or affectation either by politicians or the general populace.
Your blanket statement "this is never is justified" was my primary objection.
How are we seeing this so differently?
the fund is not the police or courts, though... right? it's not their "job" to ensure the law is asserted upon the land - at least not beyond their own avoidance of wrongdoing.
> not indemnify criminal actions
IANAL, but the state is the plaintiff in criminal cases. this case just seems to be benchmark asking that newly added board seats be removed.
Such as enforcing that people contracted to carry out work on their behalf do so in a manner that conforms to their ethical stands?
A fund policing the habits of an investment is literally the people who own the business policing the actions of their employees -- I think most of us agree that a business has the right to enforce ethical standards on employees.
> not the police or courts
Both of these institutions are primarily complaint driven -- the fund filed a complaint that people they employed violated the rules of their employment and is asking the courts to make it right. (Slight more convoluted, but that's the gist of it.)
> state is the plaintiff in criminal cases
That has nothing to do with indemnifying someone from the financial consequences of their actions -- a third party can offer to pay your penalties.
> seems to be benchmark asking that newly added board seats be removed
Are there no prior cases where board actions to create board seats were reverse because of fraud? I'm skeptical.
But more to the point -- so what? We have well established law that you can revisit agreements made on a fraudulent basis and they're asking the courts to mediate just such a dispute.
I'm actually unsure how you think any of this should work based on your objections, aside from that corporate managers shouldn't be liable, even to the corporate owners, for their actions.
this seems to be equivocating on "policing".
> That has nothing to do with indemnifying someone from the financial consequences of their actions
you stated "criminal actions". if kalanick committed a crime, it is the state that pursues this in court. afaik all that is occurring is that benchmark is pursuing a civil case.
> Are there no prior cases where board actions to create board seats were reverse because of fraud?
are you referring to criminal or civil wrongdoing?
> I'm actually unsure how you think any of this should work based on your objections
it just seemed to me that you were suggesting private entities pursue criminals and "fight crime", perhaps as some form of vigilantism. ...perhaps like batman?
That's actually not how it works -- there can be both civil and criminal proceedings for a case, and very often criminal proceedings follow a complaint by a victim. The criminal proceedings deals with punishments related to breaking the law; the civil proceedings deal with damages caused to people (or businesses) by the crimes.
Also, indemnification has nothing to do with prosecution versus civil suit -- it's an agreement to pay the damages and fines related to the person's actions.
> suggesting private entities pursue criminals and "fight crime", perhaps as some form of vigilantism
They absolutely should!
By filing complaints and suing for damages that result from the actions of criminals -- which is what the fund is doing here.
A criminal may still be liable for damages via civil suit even if there's a lack of prosecution or an acquittal. People can (and should!) make use of the courts to pursue criminals.
The fund alleges that they were the injured party, because Kalanick lied about and/or didn't disclose facts which were material to their decision.
Besides, it's common practice at that level to inform law enforcement when crimes are suspected. See, for example, Pepsi calling the FBI when they were offered CocaCola's recipe.
Seems very thin on the ground given there is no ruling in a court of law against Kalanick in any of those.
The VCs have done this to themselves. They put up all the money, they should have never allowed themselves to be put into this situation.
Decades ago, when I was at startups, this was 100% clear, cut and dried. The Golden Rule. People who have the gold make the rules.
I'm sure this won't be a popular opinion, since more HN readers are founders and employees than are VCs. But don't simply downvote. Explain. Articulate why, after taking billions of dollars in VC money, you feel like you're still owed control.
The legal question is whether the various scandals that followed show in some way that Kalanick made that deal under fraudulent conditions. It has nothing to do with a supposed generic truism that VCs always deserve to control the companies they fund. Uber is actually a great counterexample to your rule. They appeared to be such a good investment, and so many VCs wanted in, that they were able to dictate very favorable terms.
I agree. Given what was negotiated, the default starting position for the lawsuit is that Kalanick is owed control.
so many VCs wanted in, that they were able to dictate very favorable terms.
That is what I failed to fully appreciate. There is so much dumb money sloshing around that it forces smart VCs like Benchmark to agree to dumb things.
Here's now a Fortune pundit described the investment a Saudi Arabian sovereign wealth fund made in Uber last year:
Uber needed the money, and where else are you going to get $3.5 billion? No doubt, it must be tough to fundraise after you've already tapped out venture capitalists, private equity firms, mutual funds, hedge funds, Wall Street high-net worth clients, and strategic corporate and other sovereign wealth funds (yes, including from noxious Qatar).
I haven't been privy to details of many VC funded companies, but the ones I saw definitely had the VC General Partners investing their personal money side by side with money from their Limited Partners. That was reflected in the names on the preferred stock certificates from day one. (Probably don't do paper stock certificates any more).
I agree with your statement that "it's not that obvious" as to who should have control, and there are good arguments both ways. My personal inclination would always remain that the people putting up the money should have the final say.
This is how reporters know a firm is raising another fund (beyond just expecting them to every 2 years). The amount/percentage of the total fund that the partners pay in themselves varies by firm and fund.
Here's the records from Benchmark's Fund 7
Partners put up $80mm of their own cash, in a vehicle named Benchmark Founders' Fund VII, L.P.:
They then raised $425mm from LPs through a vehicle named
Benchmark Capital Partners VII, L.P.:
So the Benchmark partners have 16% of that particular fund, though keep in mind VC funds have different economics than just a straight up equity split. 16% is pretty high compared to some other firms I've reviewed, but I admittedly haven't taken the time to sample widely.
That may not be the case in this particular instance, but in general, both parties are adults, reasonably smart, and not operating from a position of duress.
So if you negotiate a deal that has a governance structure of that form, you are stilled owed control.
Maybe Dropbox will get acquired after their failed IPO. Snapchat could also get filed away in a similar fashion, but it may be too late.
I wonder why they invested so much in a taxi company. It only makes sense if all cars are replaced with Uber autonomous vehicles, but what are the odds that will happen? Uber only makes sense in larger cities.
The "brain" trust may as well get started on teleportation or something else deserving of billions in blind/naive/"stupid" faith.
Is this the mobile bubble forming and collapsing live? As suggested by historical timings (8 <= year_ipod - year_founded <= 12), IPOs for all "big bets" should technically happen within the next year. I strongly doubt it's going to be pretty.
Lol. Please share some of your wisdom with us. Leaving aside taxi companies like Uber and useless things like Airbnb, can you tell us what companies do anything special these days Master Foo?
I think AirBnb and Redfin are the big bets that have worked well so far.