Benchmarks in a bind and at war with travis; they need to liquidate their stake in next year or two. Softbank deal to buy out their shares fell apart in part b/c no CEO. Benchmark wants safe-hands leader who will cost-cut firesale their way to quick IPO. travis + allies being more long term; blocking benchmarks CEO picks (meg). so board civil war continues with benchmarks dirty tricks like this sour grapes lawsuit and selective leaks to undercut and force mgmt's hand in cost cuts (the lease car data earlier this week)
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.
Not to defend his actions, but to consider his possible mindset in doing them: His actions could be explained as pushing hard to build a defensive moat against a world allied against Uber as quickly as possible. If regardless of what you do you lose a bit of PR here and there, you get kicked out of cities here and there, and you have to pay a few hundred million in settlements here and there, you might as well throw caution to the winds so that you still have plenty of market share left when you lose those things, right? It would seem that's the Uber way. Of course, breaking laws and conventional morality to do so is a slippery slope, and he severely underestimated how much those extremes would splash back on him personally. I hope that other excessive CEOs treat this as a wake-up call - limits and laws are there for a reason.
I was gonna say. Surely Travis and his allies are interested in Uber's long-term success, yes, but that's a very different claim from them being good for Uber's long-term success.
From crunchbase (https://www.crunchbase.com/organization/benchmark/investment...) it looks like Benchmark made three investments in Uber, the last of which was in 2013. The funds that VCs raise normally only operate for a specific term of eg 5 years, so now is the kind of time they will want to get out.
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.
I don't think this is just one party. Kalanick has rubbed a lot of people the wrong way. The only reason he has been around for so long is because people have been waiting to use him as the fall guy for all of Uber's misconduct. Apparently that day is now here. His voting rights aren't worth the paper they are printed on unless he can raise more money so my guess is he will be signing those away shortly if he wants to walk away with anything.
A humiliating year of PR that makes it impossible to fill the empty executive ranks, followed by a crippling power struggle because I submitted a resignation I didn't mean?
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.
"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.
RE the stroz report: from what I've heard, AL did take a bunch of files, and he planned to use as leverage against google/waymo to get his 120m bonus, and Uber told him more or less "dont let that shit touch anything we do". He also had some kind of big google earth photo taking kit at his house for long after he quit google.
The way to read it is, there is a report, Benchmark (the board) was not aware of it. It's an acknowledgement of the report - as it is from the court case - but not about its content.
If actual fraud is not found what sort of message does this send to entrepreneurs that Benchmark is founder friendly?
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.
There's way too much money at stake here for this to be driven by grudges, emotions, or even reputations.
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.
> There's way too much money at stake here for this to be driven by grudges, emotions, or even reputations.
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 think it's more like Bill Gurley not fully looking out for the interests of Benchmark [0] while dealing with Travis when he held the board seat at Uber on their behalf.
Fun fact: Gurley has himself being sued by some founders of a startup (Epinions) in the past for misrepresenting material information [1] prior to a merger.
[0] "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, ..."
Fwiw, Gurley is legally obligated to make board decisions on behalf of all shareholders not to look out just for benchmark's interests. I don't know that it is relevant in this case but just correcting the common misconception that a board member's job is to look out for his employer's interests.
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?).
> Apparently unhappy with merely removing Travis from the CEO's chair
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.
"Travis Kalanick stepped down Tuesday as chief executive of Uber, the ride-hailing service that he helped found in 2009 and built into a transportation colossus, after a shareholder revolt made it untenable for him to stay on at the company."
The key point of conflict appears to be the following:
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.
Board seats are part of bargaining chip during funding rounds.... they are very very important.
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 gets especially interesting when you start to expand into Europan countries, and suddenly large amounts of the board seats are elected by the employees (usually a similar amount is chosen by investors and by employees).
This is something that seems to be missing in the US.
Control requires time, knowledge, judgement and implies liability.
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.
It's interesting to see how all the chaos at the board and management level has affected employees. Data from LinkedIn paints a troubling picture both in terms of hiring and retention.
* 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.
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.
Yes, that is directly from the LinkedIn dashboard for Uber [1] which has company employment data. I am assuming that they are dependent on people listing their employment as Uber for it to be correct. I believe you have to be a Premium user to get the data.
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.
Many of the 30,000+ employees are non-tech. Uber needs lots of hires for driver recruitment, training, support. They have people on the ground in every region they operate.
Before Travis got booted some Techcrunch article or other was submitted here on an almost daily basis about him and other issues Uber were having, some days two! I thought to myself: 'Boy! Techcrunch really have it in for Uber and Travis' (mit einen kleine schadenfreude, me being no fan of either). Once he left though, the posts seemed to me to end rather abruptly even though there were still newsworthy shenanigans at Uber. Has anyone else noticed this? Why? Cui bono?
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.
TechCrunch is owned by AOL, which also owns the Huffpo. Arianna Huffington is a board member of Uber - she stepped down from editorial work at Huffpo/AOL media group in 2016, but I"m sure she has a lot of influence on her namesake. This is totally unsubstantiated but there's generally a lot of mucking about at the board level of high profile companies like this.
If you or others have links to resources on board politics and how that world works, I'd love to learn more. Having never held a board seat, it is a fascinating, yet still mysterious world to me, and it seems like the truthful accounts of what happens in that world are kept as private as possible.
Who in their right mind, except for the utterly desperate, would accept money from Benchmark? Talk about letting the fox into the henhouse, you can't trust those guys whatsoever.
You're fucking high if you think any VC is going to choose to protect their "founder-friendly" reputation over their $9BB investment. Any institutional investor would be making the exact same decisions as benchmark here.
Care to provide details ? I don't live in the valley so i'm not up to date with the latest gossip. Last time i heard about this firm, it was pretty complimentary
Readit News
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.
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.
Deleted Comment
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.
"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)
---
Uber collapses:
As an outsider, what are perceived assets and what are perceived risks/liabilities
What are perceived opportunities: how to harvest them NOW??
Experiment 1:
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?
2:
Uber will not die but morph... Ned to take action x at y cost resulting in A?
3:
Uber won't die at all - and will continue perpetuitiously - A - how profit?
4:
???
5:
Profit.
Deleted Comment
"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.
(1) https://medium.com/@nikhilgabraham/why-anthony-levandowski-h...
(2) https://www.documentcloud.org/documents/3922911-67730336-DE-...
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 [1] prior to a merger.
[0] "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, ..."
from
https://mobile.nytimes.com/2017/03/18/technology/bill-gurley...
[1] https://mobile.nytimes.com/2005/01/26/technology/founders-of...
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.
http://blog.ericgoldman.org/personal/archives/2005/02/ravika...
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?).
Deleted Comment
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.
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.
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.
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.
[1] https://www.linkedin.com/company-beta/1815218/
Uber now has about 14,000 employees.
https://www.nytimes.com/2017/06/12/technology/uber-chief-tra...
That is kinda hilarious.
Deleted Comment
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.
Though from what I know Benchmark's rep is pretty solid. Particularly as a king-maker, with Uber and Snap.