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.
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.
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?).
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.
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.
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.
On paper.
* 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.
Uber now has about 14,000 employees.
https://www.nytimes.com/2017/06/12/technology/uber-chief-tra...
That is kinda hilarious.
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.
https://www.nytimes.com/2017/06/12/technology/uber-chief-tra... ---------------------------------
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?
https://www.cnbc.com/2017/06/12/uber-chief-travis-kalanick-g...
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).
http://fortune.com/2016/06/02/ubers-no-good-very-bad-deal-wi...
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.
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.
"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-...
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.
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?
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.
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.
Seems very thin on the ground given there is no ruling in a court of law against Kalanick in any of those.
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.
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 ;)
https://techcrunch.com/2017/08/10/benchmark-sues-former-uber...
