Benchmark’s Uber Suit Signals End of Era for Imperious Founders

Benchmark’s Uber Suit Signals End of Era for Imperious Founders

click photo for more information
Benchmark’s Uber Suit Signals End of Era for Imperious Founders
When Uber Technologies Inc. backer Benchmark Capital filed a lawsuit against the startup’s founder Travis Kalanick for using allegedly fraudulent means to pack the board with his loyalists, it sent a strong signal that Silicon Valley’s so-called founder-friendly era is coming to an end. Going back years, venture firms have given Kalanick and his peers […]

When Uber Technologies Inc. backer Benchmark Capital filed a lawsuit against the startup’s founder Travis Kalanick for using allegedly fraudulent means to pack the board with his loyalists, it sent a strong signal that Silicon Valley’s so-called founder-friendly era is coming to an end.

Going back years, venture firms have given Kalanick and his peers outsize control and influence over their companies. Critics say this has led founders to take a freewheeling approach to running their companies, loading up on shares for themselves and their friends and presiding over toxic workplaces.

At the heart of the Benchmark lawsuit is a provision that venture capitalists say stands out for its deference to Kalanick, and is highly unusual. It allowed the Uber founder to personally appoint three new members to Uber’s eight-seat board, effectively letting him slant the board his way after he resigned. 

According to Benchmark, Kalanick got investors to sign off on the measure “fraudulently,”  by, among other things, hiding “gross mismanagement” at the company. Jimmy Asci, a spokesman for Kalanick, said the lawsuit is “completely without merit and riddled with lies and false allegations.”

On Friday three other investors sent a letter to Uber’s board, shareholders and Benchmark, saying the suit was designed to “hold the company hostage” and asked Benchmark to step down from the board. The investors are Sherpa Capital’s Shervin Pishevar, Yucaipa Companies’ Ron Burkle and Maverick’s Adam Leber. They didn’t immediately respond or couldn’t be reached for comment. Members of Uber’s board, not including Kalanick or Benchmark’s Matt Cohler, said they were “disappointed that a disagreement between shareholders has resulted in litigation,” according to an emailed statement.

Kalanick is far from the only founder deemed to have abused investors’ trust in him. Other examples include Jawbone Inc. founder Hosain Rahman and Tanium Inc. Chief Executive Officer Orion Hindawi, who were both given considerable autonomy or control by boards and then disappointed in their leadership. Rahman led Jawbone into bankruptcy and has now launched a long-shot bid to become a player in medical devices. Hindawi was forced to apologize after past and current employees described abusive behavior that prompted a talent exodus. 

In the 1990s, it wasn’t unusual for venture firms to replace founders as CEOs, usually because the investors believed the company needed a leader with more experience. That practice fell out of favor but has resurfaced in recent years.

Take GitHub Inc., the developer platform. In early 2014, a former Github employee, Julie Ann Horvath, complained that co-workers—going right up to company’s co-founder and CEO, Tom Preston-Werner—had harassed and discriminated against her. Preston-Werner ended up resigning after an internal investigation; in a more forgiving time, he might have taken a leave of absence and returned.

The following year, Parker Conrad, founder and chief executive of Zenefits resigned after news broke that he was using unlicensed brokers to sell health insurance in several states.

In those cases, the founders agreed to step down. In other instances, VCs have discovered that the relatively recent practice of ceding voting control has made forced resignations impossible.

At venture-backed company Theranos, once valued at $9 billion and now worth next to nothing, disgraced founder Elizabeth Holmes controls 98 percent of voting shares. That has allowed her to continue as chief executive even after it turned out her vaunted blood-testing technology didn’t work, putting the company’s future in peril.

One reason VCs tolerated over-privileged CEOS—at Theranos, Uber, Snap, and other companies—was because so much money flooded into tech, making it easy for founders of the most promising startups to shop around. Last year, $41.6 billion was raised by venture firms, the most since the dotcom era, according to the National Venture Capital Association.

In an extreme case, at vegan food maker Hampton Creek Inc., most of the board, not founder Josh Tetrick,  was forced to resign after directors lost all rights due to the voting control they had allowed Tetrick to amass.

But once again, venture firms are wising up.

Today, while more late-stage private companies are creating classes of shares with extra voting power, only 27 percent of recipients of those shares are founders and management, according to a study by law firm Fenwick & West. Three years ago, 43 percent of recipients were founders and management, rather than investors.

For a long time venture firms were loath to crack down on founders for fear they’d go elsewhere for capital. But that theory doesn’t really hold up, says angel investor Keval Desai, a backer of Optimizely, The RealReal and others. “Benchmark’s reputation has been built over many decades, and other entrepreneurs who have taken money from them will be proof that Benchmark isn’t in the business of suing their entrepreneurs,” he says. “Benchmark will be fine.”

    Read more: https://www.bloomberg.com/news/articles/2017-08-11/benchmark-signals-era-of-imperious-startup-founder-is-coming-to-an-end

    Price-gouging ‘Pharma Bro’ Martin Shkreli arrested for securities fraud

    click photo for more information
    Price-gouging ‘Pharma Bro’ Martin Shkreli arrested for securities fraud
    The most hated man on the Internet may be going to prison. Martin Shkreli, the 32-year-old CEO of Turing Pharmaceuticals who became infamous for boosting the price of alife-saving drug more than 5,000 percent, has been arrested by the FBI for securities fraud, reports Bloomberg News. Shkreli’s arrest has nothing to do with price gouging, […]

    5 Things Women Want Most (You Won’t Believe They Don’t Have)

    click photo for more information
    5 Things Women Want Most (You Won’t Believe They Don’t Have)
    There are a lot of articles out there (and one disturbing Mel Gibson “comedy”) about what women want. These lists usually include “a man,” “a baby,” and a lot of weird sex techniques. And a lot of women do want those things, but it really varies from person to person. Some women want women, some […]

    Dog Left To Die With A Taped Mouth And Legs Cant Stop Wiggling His Tail After Being Rescued By Plumbers

    click photo for more information
    Dog Left To Die With A Taped Mouth And Legs Cant Stop Wiggling His Tail After Being Rescued By Plumbers
    Carillo and his friend rushed to cut the pooch free. “He seemed OK,” said Carrillo. “He was very loving and liked the attention. He was probably just there for a day or so.” It turned out the dog was in good health despite having heartworms, for which they started a treatment. “His tail won’t stop […]

    10+ Touching Tributes To Late Carrie Fisher By Artists Around The World

    click photo for more information
    10+ Touching Tributes To Late Carrie Fisher By Artists Around The World
    “No matter how I go, I want it reported that I drowned in moonlight, strangled by my own bra.” The world lost another star with the passing of Carrie Fisher, best known for her role of Princess Leia in Star Wars. The 60-year-old died this Tuesday after suffering a heart attack four days earlier. Show […]

    Parents celebrate ‘huge step forward’ in fight to keep baby’s gender off ID, allow child to discover it

    click photo for more information
    Parents celebrate ‘huge step forward’ in fight to keep baby’s gender off ID, allow child to discover it
    Straight guys this weekend received more dating advice than they likely wanted about their supposed “right” tobe exclusionary of trans women partners, but parents of a baby in British Columbia are hoping their child’s health ID is the first step toward achieving a universal human right to be free of assigned gender labels from Day […]

    Dude Who Doesn’t Realize He’s On ObamacareGets Roasted But Won’t Have Insurance to Treat Burns

    click photo for more information
    Dude Who Doesn’t Realize He’s On ObamacareGets Roasted But Won’t Have Insurance to Treat Burns
    Read more: http://cheezburger.com/9000968448/fail-man-on-obamacare-happy-to-see-its-repeal

    52 Couples Share the Strange and NSFW Things They Do When They’re Alone That They Wouldn’t Dare Tell Their Friends

    click photo for more information
    52 Couples Share the Strange and NSFW Things They Do When They’re Alone That They Wouldn’t Dare Tell Their Friends
    Keep it weird people.  rd delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 thetrent delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919 delouchrey919

    All the Things You Can No Longer Buy if Youre Really Boycotting Trans-Friendly Businesses

    click photo for more information
    All the Things You Can No Longer Buy if Youre Really Boycotting Trans-Friendly Businesses
    More than a half-million people have signed on to boycott Target for its transgender-friendly bathroom policy. But why stop there?”> The American Family Association (AFA), a fundamentalist Christian nonprofit that is considered a hate group by the Southern Poverty Law Center (SPLC), claims to have gathered more than 517,000 signatures on its petition. First of […]

    WIRED Endorses Optimism

    click photo for more information
    WIRED Endorses Optimism
    WIRED has never been neutral. For nearly a quarter of a century, this organization has championed a specific way of thinking about tomorrow. If its true, as the writer William Gibson once had it, that the future is already here, just unevenly distributed, then our task has been to locate the places where various futures […]

    I Was Diagnosed With Schizophrenia At The Age Of 17, So I Started Drawing My Hallucinations To Cope With It

    click photo for more information
    I Was Diagnosed With Schizophrenia At The Age Of 17, So I Started Drawing My Hallucinations To Cope With It
    I have always been an ‘artist’, I just didn’t realize what that meant until my mental illness appeared. I despise the term ‘mentally ill’; it implies that who I am as a person is fundamentally corrupted and broken. Unfortunately, as soon as I tell people what I struggle with, I feel like that’s all they […]

    25 Things Every Woman Should Have By The Time She Turns 25

    click photo for more information
    25 Things Every Woman Should Have By The Time She Turns 25
    1. Enough confidence to no longer feel the need to justify what she eats, who she dates or what she wears, not only to other people, but 2. The goal of a bank account with a fewmonths’ living expenses in it, if she doesn’t have that already. Just in case. 3. Only the phone numbers, […]

    Illumina wants to sequence your whole genome for $100

    click photo for more information
    Illumina wants to sequence your whole genome for $100
    The first sequencing of the whole human genome in 2003 cost roughly $2.7 billion, but DNA sequencing giant Illumina has now unveiled a new machine that the company says is expected one day to order up your whole genome for less than $100. Illuminas CEO Frank deSouza showed off the machine, called the NovaSeq, onstage […]

    Playgrounds for Senior Citizens? Pure Genius.

    click photo for more information
    Playgrounds for Senior Citizens? Pure Genius.
    As we get older it’s extremely important to stay fit to stay in good health. But let’s be honest. Most of us aren’t huge fans of exercising. It’s boring, it’s a hassle to get someone to join us, or we just don’t know what to do. Spain was among the first place to implement playgrounds […]

    Best Friends Plan To Carry Their Buddy Across Europe

    click photo for more information
    Best Friends Plan To Carry Their Buddy Across Europe
    There’s an old saying that goes, “No man is an island.” It means that we can’t go through life by ourselves; even the strongest man and the most independent woman need the support of their family and friends every once in a while. Our friends are the ones who stick with us no matter what […]

    Girl, 2, defends her choice of doll to cashier

    click photo for more information
    Girl, 2, defends her choice of doll to cashier
    (CNN)When 2-year-old Sophia was told she could pick out a prize for finishing her potty training, she knew just what she wanted. She and her mother, Brandi Benner, visited a Target near their South Carolina home, where Sophia spent 20 minutes looking at all the dolls in the toy aisle. “She kept going back to […]
    load more posts