Pando

It’s more than the fate of just Uber: The cult of the founder is at risk and a lot of VCs are thrilled.

By Sarah Lacy , written on February 28, 2017

From The Travis Shrugged Desk

Another day, another disturbing Uber scandal. Three actually.

First, was the bombshell that Uber’s SVP of engineering Amit Singhal is out, after it came to light that he’d left Google under accusations of sexual harassment, and allegedly didn’t tell Uber that. This wasn’t the result of Uber’s rapid and “independent” investigation… it was the result of recode calling Uber and telling them this.

Still, it is the first time I’m aware of that Travis Kalanick has fired someone -- anyone -- as the result of a scandal.

And then Casey Newton of the Verge reminded us of why no one believes Uber when they deny something: Because they have a long history of lying. This time? Lying to the DMV in emails about how it was operating its autonomous vehicles in San Francisco.

But Monday wasn’t done with Uber. Under the pseudonym of “Amy” another woman claiming to have worked in Uber’s engineering ranks came forward with even more disturbing accounts of her time there. From the manager who suggested she wear heels to make her butt look better to private chats where men wrote sexual fantasies about colleagues there was plenty to be horrified about.

But many of the notes were consistent with The New York Times account of Uber’s culture and Susan Fowler’s post. The casual racial and homophobic slurs. Drugs and sex at company events. Most of all, HR’s justification that they could not possibly fire anyone in Kalanick’s protected class.

From Fowler: “Upper management told me that he "was a high performer" (i.e. had stellar performance reviews from his superiors) and they wouldn't feel comfortable punishing him for what was probably just an innocent mistake on his part.”

From the New York Times: “One group appeared immune to internal scrutiny, the current and former employees said. Members of the group, called the A-Team and composed of executives who were personally close to Mr. Kalanick, were shielded from much accountability over their actions.”

From “Amy”: “Travis is well known to protect high performing team leaders no matter how abusive they are towards their employees.”

While “Amy’s” account is in some ways more extreme, it’s not substantially out of line with the other two. And that’s why even the sometimes dude-centric, Hacker News was mostly giving her story the benefit of the doubt, and even bloggers like Daring Fireball’s John Gruber wrote up the piece saying, “Ordinarily I wouldn’t link to an unverifiable anonymous story. But for me, Uber has lost the benefit of the doubt.”

Even Business Insider-- long one of the biggest Uber apologists-- wrote a piece saying Kalanick was Uber’s “biggest asset” and “its biggest liability.” Also on that HackerNews thread, commenters were calling for Kalanick to be removed.

This is not just a shift in sentiment around Uber and Kalanick. Something else hangs in the balance: The cult of the founder, the defining characteristic of the Web 2.0 and mobile eras.

This is a reaction to the dot com era, where founders were frequently shoved aside in exchange for “grown up CEOs” and boards were naively stacked with “independent directors” from the industry who were ultimately more loyal to VCs.

There were a few people responsible for popularizing this. Peter Thiel early on argued that founders should never be replaced. More than a decade ago, he and I spoke about the early social media flameout, Friendster. And Thiel said that even with Jonathan Abram’s flaws, he shouldn’t have been replaced because even a failing founder has a better shot that a manager who doesn’t fundamentally “get” the company on the same level. Better to let it fail, he argued at the time. A whole spate of firms adopted the “founder friendly” mantle in reaction.

Sean Parker was another father of the trend. His bruising experience with Mike Moritz at Plaxo, was a cautionary tale to a young Mark Zuckerberg, who didn’t take money from Sequoia for that reason. It was also the reason that Zuckerberg was adamant about maintaining control of his board.

And that became the template for the Y-Combinator generation. Paul Graham has been a huge proponent of founders maintaining board control, setting the expectation in founders’ heads that that is the norm. Said one VC to me last week about the Uber situation: “I blame Paul Graham for all of this.”

Indeed, Paul Graham once Tweeted about Uber:

You might paraphrase that today to say: You can tell how invested someone is in the cult of the founder by how they defend Uber no matter the scale of the scandal.

Back in 2014, I pinpointed this obsessive “Cult of the founder” to a lot of the new “asshole” culture in the Valley.

From that piece:

Founders are gods within the four walls of their companies.

“They have no respect for the fact that they are taking other people’s money—and it’s not my money, it’s pension and endowment money,” said one prominent VC who has struggled with the shift, but didn’t want to be identified for fear of getting a bad name with the new entrepreneur establishment. “The attitude is ‘You gave me the money now go away.’ Sorry, but that’s not my job. My job isn’t to run the company, but it’s also not to just go away.”

Also in that piece:

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.”

The cult of the founder is also behind the increasingly anti-shareholder structures around the biggest IPOs, the most extreme yet being Snapchat where shareholders won’t even get a vote.

My understanding is that Kalanick and his co-founder Garrett Camp have control of the board, so it would take extreme measures to oust Kalanick. But management and investors could give the board (which includes Kalanick and Camp) an ultimatum. It’s possible too if these scandals continue, Kalanick’s own greed might outweigh his ego.

There’s some recent precedent for this: Zenefits. Another company wrapped up in the ego and pride of its founder, Parker Conrad. Another company that was breaking the law. Another company where sex and drinking fueled the fratty culture. And a company where the founder and his senior team were unceremoniously kicked to the curb with no face-saving defenses.

Now Zenefits is nowhere near as large or as complex as Uber, and its successes weren’t as tied into Conrad as Uber’s successes seem to be tied to Kalanick’s same combativeness. It’s hard to imagine what an Uber without Kalanick might even look like.

But that is increasingly looking preferable to what is easy to imagine: An Uber where more and more of these scandals keep coming out, destroying the company’s credibility, moral, and brand even further.

The cult of the founder came from a good place-- many VCs did overreach in the late 1990s and treated founders like shit. Mark Zuckerberg has proven that a 21-year-old kid doesn’t need a grown up CEO to run his company. But that doesn’t mean that founders are gods who should never be challenged.  

If these scandals continue-- and the New York Times piece, Fowler’s piece, “Amy’s” piece, and our own reporting for years all argue there are many, many more women who could come out with stories like these-- investors and the board will have to chose between the company and the founder. Two things that have been considered one in the same for the last decade.