Yesterday, Benchmark, the highly effective venture company and a majorUbershareholder, filed a lawsuit from the companys recently ousted CEOTravis Kalanick at a remarkable move. The lawsuit seeks to eliminate Kalanick from the plank, while removing three additional board positions that it says Kalanick hunted (and won) consent for last calendar year, partially by withholding crucial information from the plank.
The central problem: When Kalanick resigned as CEO, he also resigned from his board chair, but he immediately re-appointed himself into one of these outstanding and fraudulently secured chairs, says Benchmark. It now alleges that Kalanick finally hopes to package the plank to facilitatehis desirable re-appointment as Ubers CEO, also it aims to prevent that move.
The lawsuit casts Kalanick at a highly unflattering light yet again. However, if I were an investor at Benchmarks funds, Id be just as mad with the venture company. What was Benchmark believing, giving Kalanick three new board seats and carte blanche to do with them anything he enjoyed? Its beyond belief that the company wasnt acutely mindful of Kalanicks management fashion a year ago when it agreed to the crummy thing. It had front row seats into what was occurring at the company not to mention unfettered access into the endless media policy that Ubers contentious corporate culture has obtained since its first launch in San Francisco. AFebruary blog article by former Uber engineer Susan Fowler might have put off the series of events leading to the second, but nothing fresh transpired between this past year and this season besides intensified media scrutiny combined with growing public outrage.
It seems somewhat to me like they painted themselves into a corner, and now theyre crying about it, says succession expert Jeff Cohn of Benchmarks lawsuit. It had been poor and unusual governance practice, and now its come back to bite them. Adds Cohn, There was always doubt around Kalanicks style.
We reached out to Benchmark before this morning. The company hasnt responded to our request as of the writing.
Despite the unprecedented nature of the lawsuit Benchmark has been sued in the past with a former portfolio company but hasn’t sued one of them, as far as we understand it isnt surprising, looking back in the last decade or so.As one institutional investor with several years of experience (along with a penchant for solitude) tells us, devoting away three board seats is far away from normal operating procedure, but as youve seen as time passes, the leverage has shrunk from investors to creators, and now theres this worship of the genius entrepreneur founder who will do no wrong.
The issue, continues this individual, is that, thats bullshit. It started with the Google guys, subsequently Mark Zuckerberg. Now we’ve Breeze, that gave shareholders no voting rights at all, and is also backed by Benchmark, especially.
Asked if Benchmarks own investors may have the stomach to sue Benchmark, this individual jokes that each and every VC now could probably be sued by [their particular institutional investors] for their too relaxed approached in managing startups.
In any event, he believes that Benchmarks lawsuit which he calls that a misstep is a wholly obvious outcome of all this excess and absurdity of the recent years. Its like when youre a parent and you spoil your child and he turns out not to be what you hoped. Are you going to love him or cut him off?
Benchmark has clearly made its choice cutting off ties to Kalanick with this lawsuit but the move puts Benchmark at a particularly precarious position.
Not only does the lawsuit feel disingenuous, but the six-person partnership considered one of the top firms in the world and a exceptional alternative to fierce rivals such as the sprawling Andreessen Horowitz, as well as the more metrics-driven Sequoia Capital has now made plain that when push comes to shove, it will be so founder-friendly whatsoever.
For apparently thick-skinned Kalanick, that has to sting. Given Benchmarks reported 10 percent stake in Uber, its partners every stand to make hundreds of millions of dollars from the business in carried interest.
They were riding the gravy train, and now theyre sticking it to him, says that the institutional investor of Benchmark. The optics, he notes, arent great. These men are all billionaires anyhow, but this could definitely taint their standing.
A second institutional investor who also believes Benchmark should shoulder more of the blame, agrees that creators may become wary of the company following its recent activities. However he notes that even this worst-case scenario isnt going to flip off Benchmarks backers.
Every [limited partner] will still re-up with Benchmark, says the second investor. Between Benchmarks early stakes on Uber and Snap, also as Benchmarks early investment at the co-working juggernaut WeWork, currently valued at $20 billion, the fund that owns a standing in Uber [and these other] remains one of the best funds ever.
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