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One entrepreneur's lesson from Travis Kalanick: Investors only respect you if you treat them like assholes

By Sarah Lacy , written on May 5, 2016

From The Travis Shrugged Desk

Yesterday, I saw a link on Twitter to a “must read” interview transcript between VC Evan Nisselson and entrepreneur Lane Becker.

Neither are household names. Neither are billionaires. And that was kinda the point: It was an interview about the frustration and lessons from playing the game and losing. The far more common narrative of startup life that rarely gets told because those people don’t headline conferences or-- if they do-- they are too proud to be brutally honest about what really happened.

Witness the acquihire. An entire classification of “exit” was created to help everyone save face when it comes to failure, never mind the phony insistence that failure is such a great part of Silicon Valley life.

As this interview laid bare, failure as an abstract is different from failure when it’s your own life and your own company. Becker has done three companies, all experiencing differing levels of success and clearing thresholds many thousands of others do not. And still, he’s not hugely wealthy. And he’s been at this for decades and is in his 40s, exhausted and in some ways heartbroken, with no big success or enduring company to his name.

This is the life of most entrepreneurs-- even the lucky ones who live in the Valley, are connected to VCs, and can get companies funded relatively easily.

I know Becker decently well, so I expected a brutally honest account of the everyday pain of startup life when I clicked the link. A story of how he got ousted from his third company Get Satisfaction, how a succession of CEOs did things he didn’t agree with, how ultimately he and his co-founders and the early investors were left with nothing when it sold.

What I didn’t expect and hit me like a ton of bricks was the lesson he took from how you manage VCs, comparing his own experience with that of an early Travis Kalanick.

In the interview, Becker describes when he and his co-founders essentially got kicked out of the company to bring in “adults.” They did the mature and reasonable thing of putting the company first and complying. Nisselson asks what he would have done differently.

Becker’s answer spoke volumes of the take-away that entrepreneurs have in an age of Uber. In it he refers to Rob Hayes of First Round Capital, an investor in both Get Satisfaction and Uber:

Lane Becker: I would just tell them to fuck the hell [off] . Seriously. And you know what? I think that’s kind of what they wanted me to tell them. I actually ended up having a conversation with Rob Hayes years later about Travis Kalanick, who, let’s be honest, is like clearly the most successful asshole billionaire in the industry, right? Really plays it to the hilt. [This] is long before Uber is in any other city besides San Francisco. Rob Hayes, to his credit, was one of their seed investors at First Round, so nice work Rob. He told me the story about Travis Kalanick that really stuck with me, and this is after I had left Get Satisfaction, so it was probably in 2010.

Evan Nisselson: You left and you were still on the board or you weren’t?

Lane Becker: I left. I got pushed off the board first with the series A round and then or got pushed [off] the board in the series B round. Rob tells me the story about how there’s a board meeting he needed to reschedule because he had a conflict so he has his assistant call Travis. Travis probably didn’t even have an assistant at that time. Call Travis and say that Rob needs to reschedule the meeting and Travis says, “Fuck you. We’re not rescheduling that meeting. I’m putting my time and energy into this. He needs to put his time and energy into this, too.” Rob was like, “I have so much admiration for Travis for doing that.” And I realized, “Oh, that’s how we fucked up.”....

[REDACTED]

...[Becker’s co-founder] Thor’s take on it is that your investors are always testing you. And that was the test. In that sense, we failed that test because in that moment, we weren’t forceful or aggressive enough. We weren’t doing the things that they needed us to do to see that we were passionate or committed. And I actually think, as fucked up as that is, it’s also totally, totally true. 

Wow.

I actually redacted the most evocative part of his argument because Becker's specific description of Hayes was gross and offensive. In fact, I hesitated in even writing this piece because the quote turned so unnecessarily personal. (I should note I also reached out to Hayes for comment.)

But the rest of the quote is too important to ignore. I hope VCs reading this take a moment to internalize what Becker is saying here, because several things about it are so important for the Valley to realize. The first being it backs up other reports we’ve heard that Kalanick is every bit as abusive and disdainful to his board and investors as he is to drivers, riders, the press, and lawmakers. We’ve heard second hand accounts of him bragging to other entrepreneurs that his board meetings are no more than half an hour long, because he has nothing to learn from his investors and he and co-founder Garrett Camp control the company.

And last week, I argued that Bill Gurley’s long essay cautioning against the exact financing strategy that Uber has taught a master class in wasn’t gross hypocrisy, as others have alleged.

The key in his essay was this:

This is because these companies have raised so much capital that the early investor is no longer a substantial portion of the voting rights or the liquidation preference stack. 

As I wrote at the time, “until there’s any real liquidity these are the internal screams of a man watching a trainwreck in slow motion, unable to act.”

Every time Uber does something unconscionable, people shriek, “Where is the board?” The simple answer is, as Kalanick has bragged before, the board has little power. That we knew. What Becker says above is shocking in two respects. The first is it confirms that from the earliest days when Uber was only in San Francisco, Kalanick dominated his board, and that his investors respected him for it. We’ve heard this before too: The justification from VCs that Kalanick has to be a certain way for Uber to succeed against taxis.

What VCs should internalize is that the lesson entrepreneurs are taking from this is: This is the only kind of entrepreneur you respect and anything other than interacting with your board this way is failing a test of leadership.

Uber may go public and go on to become the next hundred billion dollar market cap success or it may collapse under the weight of its untenable valuation and burn rate, and ultimately lose against Tesla, Google and Apple when this battle moves to self driving cars. Either way, Uber is one footnote in Silicon Valley history. Dominant, unstoppable companies of an era who have numbers no one has ever seen before, fall from grace all the time. eBay. Yahoo. Netscape. The fastest growing company in then- startup history, Groupon.

But what lasts is the cultural reverberation, even of flameouts, has beens and failures. The impact of Netscape wasn’t the technology or the business, as amazing as those were at the time. It was the ethos of company building that came out of it, the idea that in 18 months something could be worth so much. Secondarily, it was the people and their connections that have gone on to produce and fund so many of the world’s most valuable companies. The way of doing business that came out of Netscape.

A more stark example: This entire cult of the founder insistence that a founder should control the board emanates mostly from Facebook. Sure, it was a reaction to the late 1990s. But it was Mark Zuckerberg-- backed by Peter Thiel who drew on his own experience with PayPal-- that set an actual template of a 20-year-old founder being able to retain total control. And the biggest reason Zuckerberg insisted on that? The experience of Sean Parker with his epic failure, Plaxo.

Forget the runaway success of an Uber, and how VCs holding up and lionizing the way Kalanick has done business and the impact that could have on the culture of startups for decades. Look at the deep cultural impact of a failed company and then failed entrepreneur.

Two years ago-- well before Uber went after my family and we even saw the nastiest sides of this company-- I wrote a long piece about Silicon Valley’s asshole problem and how it was different this time.

From that piece:

Here’s the problem. Every venture capitalist, in every interview they’ve ever done will tell you the same casual lie: That they invest in people first and ideas second. They’ll tell you they invest only in people they’d want to work with. They’ll tell you that they have the luxury to say no to companies that don’t do things in line with the way they like to work, the way they like to treat people.

You don’t have to look too far into this year’s frenzied pace of dealmaking, and at the price tags of those deals to know that’s complete bullshit. In all too many cases, what venture capitalists are investing in is assholes.

It’s weighing on those who’ve been in the business for decades, and I've been having conversations about it all summer. A senior partner at a top firm recounted a partner meeting at breakfast recently.

“Why are we backing this guy?” he said to a younger rainmaker at the firm. “He’s an asshole.”

His partner replied: “Hey, you gotta get over it. It’s no longer about whether someone is an asshole it’s about can he make money.”

That conversation happened a year ago. Said this multi-decade veteran of the business: “It didn’t use to be that way.”

As an industry we need to think about what that means. Think about what the line is—either in terms of bad behavior or opportunity. Decide when an asshole is a functional asshole or just an asshole. Own it even. But most of all we need to stop lying to ourselves: This is an ecosystem with many successful nice guys, but they didn’t get funded by being nice…

...And behind each of these are more reports of fucked over partners, promises made and then broken, and a general attitude that there are no repercussions for bad behavior. In fact, if you look at the valuations of Snapchat and Uber, it appears to be rewarded these days at higher and higher prices. 

I know Rob Hayes and I think he’s genuinely one of those nice guys in the industry, who is probably troubled by a lot of this behavior. I think Becker’s critique of him is partially unfair. And as an entrepreneur, I find that the lesson you draw from a failed company is “trust a board less and be more antagonistic to them the next time” may not result in greater success.

But that’s the lesson nonetheless. And the VCs who’ve defended entrepreneurs like Kalanick while they sat by and did their “fiduciary duty” of not rocking the boat only have themselves to blame for what comes next.