Benchmark Capital Sues Travis Kalanick for Fraud

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)

Among the complaints of bad behavior:<p>&quot;Kalanick [aquired] a self-driving startup that, according to a confidential report not disclosed to Benchmark (the &quot;Stroz report&quot;) allegedly harbored trade secrets from a competitor . . . &quot;<p>The Stroz Report was created when &quot;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&quot;(1)<p>Maybe I&#x27;m reading between the lines, but it seems like they&#x27;re saying in black &amp; white that the Stroz report contains incriminating evidence that Levandowski DID &quot;harbor trade secrets&quot; from Google which will materially impact the outcome of Ubers broader legal woes . . .<p>EDIT - Reading further in the actual complaint &quot;&quot;if the contents of Stroz&#x27;s interim findings had been disclosed to Benchmark at the time, they would have had a material impact on Benchmark&#x27;s decision to authorize the board seats . . .&quot; (2)<p>Sounds quite a bit like a smoking gun, that Benchmark probably realizes now is going to come to light.<p>(1) <a href="https:&#x2F;&#x2F;medium.com&#x2F;@nikhilgabraham&#x2F;why-anthony-levandowski-has-almost-nothing-to-lose-eef1116fea5e" rel="nofollow">https:&#x2F;&#x2F;medium.com&#x2F;@nikhilgabraham&#x2F;why-anthony-levandowski-h...</a><p>(2) <a href="https:&#x2F;&#x2F;www.documentcloud.org&#x2F;documents&#x2F;3922911-67730336-DE-Verified-Complaint-FINAL.html" rel="nofollow">https:&#x2F;&#x2F;www.documentcloud.org&#x2F;documents&#x2F;3922911-67730336-DE-...</a>

If actual fraud is not found what sort of message does this send to entrepreneurs that Benchmark is founder friendly?<p>Looks like a grudge match to me. Apparently unhappy with merely removing Travis from the CEO&#x27;s chair they want to make certain he&#x27;s never allowed to ever enter the building.

The key point of conflict appears to be the following:<p><i>The suit revolves around the June 2016 decision to expand the size of Uber&#x27;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&#x27;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 &quot;gross mismanagement and other misconduct at Uber&quot;</i><p>I never understood this practice of investors&#x2F;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&#x2F;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&#x2F;shenanigans like whatever led to this suit.

It&#x27;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.<p>* Uber has 31,537 employees as of August 2017.<p>* 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.<p>* There are currently 8,000 job openings. Operations and Engineering are the two largest categories.<p>* With every 100 people that are hired. ~80 people are departing the company.<p>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.

Direct link to complaint: <a href="https:&#x2F;&#x2F;www.documentcloud.org&#x2F;documents&#x2F;3922911-67730336-DE-Verified-Complaint-FINAL.html" rel="nofollow">https:&#x2F;&#x2F;www.documentcloud.org&#x2F;documents&#x2F;3922911-67730336-DE-...</a>

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: &#x27;Boy! Techcrunch really have it in for Uber and Travis&#x27; (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?

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&#x27;t trust those guys whatsoever.

Techmeme summary: <i>Benchmark Capital sues Travis Kalanick for fraud, wants invalidation of the June 2016 stockholder vote to expand board, which would also remove him from board</i>

wonder what this means for the CEO search, softbank funding etc. My assumption is that both parties will settle quickly but I could be wrong. Also not noted in the article is that while travis owns 10% of the equity stake, he has super-voting shares, such that him, Ryan Graves, and Garret Camp as a trifecta hold controlling interest IIRC.

So the board agreed to create 3 new board seats over which Kalanick would explicitly have full control to appoint people. And now they&#x27;re suing him because they regret that?

I do not know Travis well enough to say if he is a &quot;good&quot; or &quot;bad&quot; person but playing devil&#x27;s advocate for a second: is it really a crime to organize a board in your favor? I imagine this is done all the time.

Uber should IPO unless they are waiting until they decimate traditional taxis but I don&#x27;t see that happening in key markets. They could buy up medallions on the sly though. Economically, Amazon loses money in expansion and they have no real competitors online so I don&#x27;t see why uber can&#x27;t do the same.

will never, ever talk with Benchmark for any fundraising again. suing the CEO who made them ~ten billion dollars. what the actual fuck.

<i>Stakes: Per the complaint, Kalanick currently holds around a 10% equity stake in Uber, which most recently was valued at around $70 billion. Benchmark holds approximately 13 percent.</i><p>This is interesting. I thought HNers were saying Kalanick had the biggest stake, which is why the board couldn&#x27;t fire him.<p>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&#x27;s worth understanding.

&gt; Benchmark argues that it never would have granted Kalanick those three extra seats had it known about his &quot;gross mismanagement and other misconduct at Uber&quot;<p>Buyer&#x27;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.<p>Yeah and I can tell the folks at Benchmark about a bunch of guys I knew who wish they never would&#x27;ve gotten married. Oh well, when you take your vows... Till death do you part ;)

As an aside.. the dude&#x27;s face on the TechCrunch article about this is heartwrenching, if you stare at it long enough.<p><a href="https:&#x2F;&#x2F;techcrunch.com&#x2F;2017&#x2F;08&#x2F;10&#x2F;benchmark-sues-former-uber-ceo-travis-kalanick&#x2F;" rel="nofollow">https:&#x2F;&#x2F;techcrunch.com&#x2F;2017&#x2F;08&#x2F;10&#x2F;benchmark-sues-former-uber...</a>

Agreed. Fuck Benchmark. Travis makes each partner $1 billion personally and this is how they treat him? They should be blackballed by every great founder out there. I had respect for benchmark but not anymore. They are greedy assholes.

I don&#x27;t know about this infighting, but don&#x27;t you think that someone like Meg Whitman would suck badly at being Uber CEO, not that she did wonders at HP. If anyone has opinion, I would be interested to hear.

There is nothing new here other than Benchmark Capital thinking they can choose and pick a shareholder decision to revert based on the recent Uber gates.<p>Seems very thin on the ground given there is no ruling in a court of law against Kalanick in any of those.

In my best Nelson Muntz voice: &quot;Ha-ha&quot;.<p>The VCs have done this to themselves. They put up all the money, they should have <i>never</i> allowed themselves to be put into this situation.<p>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.<p>I&#x27;m sure this won&#x27;t be a popular opinion, since more HN readers are founders and employees than are VCs. But don&#x27;t simply downvote. Explain. Articulate why, after taking billions of dollars in VC money, you feel like you&#x27;re still owed control.

Uber, AirBnb, Snapchat, Dropbox, etc will all crumble. They may continue to exist, but they&#x27;ll be more like Twitter than Facebook. None of them are anything special.<p>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.<p>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.<p>The &quot;brain&quot; trust may as well get started on teleportation or something else deserving of billions in blind&#x2F;naive&#x2F;&quot;stupid&quot; faith.<p>Is this the mobile bubble forming and collapsing live? As suggested by historical timings (8 &lt;= year_ipod - year_founded &lt;= 12), IPOs for all &quot;big bets&quot; should technically happen within the next year. I strongly doubt it&#x27;s going to be pretty.