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Cash flows before bros: Inside Bill Gurley’s pivot from Uber apologist to board dissenter

By Sarah Lacy , written on June 14, 2017

From The Travis Shrugged Desk

At Uber’s all hands meeting yesterday, the company was repeatedly saying one thing, at the same time they were doing another, whether it was “thanking” Susan Fowler, a person they haven’t actually thanked, or saying they would have zero tolerance for sexism, in a meeting where a board member made a sexist joke.

Liane Hornsey joked about the team “taking shots” when she used the word “bloody.” Revealing Freudian was Bill Gurley saying Uber had “touched more people (than any other startup in history).”

There was mandatory “hugging” that apparently went on so long that Hornsey-- the HR chief, mind you-- requested it and then had to say, “OK, I think that’s enough.”

When David Bonderman (who resigned later on in the day) made that sexist joke about his fellow female board members “talking too much”, Arianna Huffington-- the would-be “champion” of women at Uber-- laughed, before gently chiding him.

Huffington blamed the press as the reason Uber employees were always having to defend why they work at the company… not the actual behavior of the company’s executives that the press is writing about.

And every single word was pretty much leaked real time to The New York Times.

If this is “Uber 2.0”, so far the only thing that seems different from Uber 1.0 is the absence of CEO Travis Kalanick.  

It’s hard to convince the world you are serious about change when the boldest action includes changing the names of conference rooms.

It’s notable that Bonderman’s joke didn’t even become a problem until the audio hit the press. If nothing else, the staff at Uber has gotten one message about “Uber 2.0” loud and clear: You want change? Don’t go to HR: Go to the press. Bill Gurley urged the company to “self-police” but as was clear from the meeting itself, action will still only be taken if the company is publicly embarrassed.

Reading about the meeting, I was more heartened than some about the changes. Changing the “War Room” to the “Peace Room” is silly and stupid, but sadly it also represents progress at a company this broken that reflects a broader troubled culture in tech. Explicitly saying that values like stepping on toes, working all hours of the day and night, being expected to partake in late night drinking binges were part of the problem challenges the very nature of what people are told to “suck up” if they want to be at a startup. A rejection of that-- even just in words-- is, sadly, radical positive change here.  

But when you hear the audio of the meeting, it’s hard to even maintain that tepid “well, at least…” analysis.

“As of this minute we’ve eliminated those values,” Hornsey said. “You can read about it online.” Surely she doesn’t actually think that’s how culture or human beings function right?

One of the notable things from actually hearing the audio is it’s the first time in a scandal ridden 2017 that we’ve gotten to hear from Uber’s board. There’s been a lot of criticism of the board for its inaction, and the response to that criticism is typically, “What are they supposed to do?”

As we’ve detailed for years, Uber’s founders control the board. And Uber’s history is littered with investors -- like Chris Sacca and like First Round’s Rob Hayes-- who’ve been excommunicated from Kalanick’s inner circle for questioning him. In some cases, he’s never spoken with them again.

Both the leaks during that Sunday evening meeting and the audio of the all hands were a glimpse into the dynamics of the Valley’s most mysterious and ineffective board.

So what have we learned?

Unsurprisingly, Huffington and Garrett Camp are firmly wedged into Kalanick’s pocket. Recode reported that neither advocated for Kalanick to take leave, with Camp arguing he should stay and Huffington saying it should be up to him.

It’s harder to know where Ryan Graves -- who was rumored to be a fall guy of the investigation-- stands and if he’s still as thick with Kalanick and Camp as he once was. He’s after all been demoted several times by Kalanick, and is said to be MIA around the company of late.

Based on yesterday, Bonderman obviously shouldn’t be anyone’s guru on building a gender inclusive environment. Bonderman also noted during the meeting, that things that were acceptable when Uber was a company of hundreds of people weren’t now that it had grown. In other words: His objection to this culture is how many people are in it, not the actions themselves. So something like that gross “Miami letter” where Kalanick laments he can’t get laid at the company retreat because intra-team sex is only for those who aren’t in a chain of command is presumably fine because the company was under 1,000 people then.

The Saudi representative’s board seat is still mysterious, but presumably not the board’s greatest advocate for women.

That brings us to Bill Gurley of Benchmark, the sole venture capitalist still on the board at a company that has raised record amounts of venture capital and unprecedented valuations. Obviously Gurley has done something different from other backers in retaining his place in Kalanick’s orbit. But the two have also publicly disagreed on several things.

Most notably: Uber’s absolute refusal to go public. I called this blog post by Gurley about the evils of putting off IPOs, escalating burn rates, and raising bloated rounds of capital from sovereign wealth funds and foreign entities something between an open letter to Uber and the internal screams of a tortured man watching what should be the largest home run of his career just lag around third base, refusing to cross the plate.

On the other hand, it was hard to know if Gurley objected -- at all -- to the moral lapses of the company. He reportedly was the one who introduced Emil Michael to the company, for one thing. And he’s said before that a company like Uber could not have been formed without the aggressive, combativeness of a man like Kalanick. That would seemingly give his moral lapses cover.

But strangely, in recent days, Gurley seems to have emerged as the closest thing that the Uber board has to a conscience. And by “closest thing” -- let’s be clear-- he still seems to be pretty much an apologist for the company who isn’t demanding much real change. But according to press reports, he was the one pushing for Michael’s dismissal and pushing for Kalanick to take a leave of unspecified time.

There were more clues of this in the all hands yesterday, when he spoke of why Uber needed to have an even higher bar than other tech giants when it comes to how it treats people. Two of the reasons: A reputational “deficit” and the fact that its raison d’etre is physically moving customers around the real world.

So Gurley is the closest we’re seeing to an “other” on the board. Someone to hold management-- maybe?-- accountable.

Here’s what I’ve been debating since yesterday with folks: Has he played this brilliantly or foolishly?

Here’s the foolish case some would make:

The reason that VCs like Gurley are so loathe to question, strip rights from, or overrule founders in this “cult of the founder” era is that Mike Moritz of Sequoia paid so mightily from screwing over Sean Parker. Most VCs feel like one investment simply isn’t worth the reputational risk to a VC’s social game of being branded “non-founder friendly.”

As the only VC on the Uber board, Gurley has clearly been willing to play that game until now. He has sat there silently going along with the company, even when he clearly didn’t agree with its strategy in the name of watching that stake grow and grow and grow in value. There were so many points before now where he could have spoken out or agitated for change or even made the statement of quitting the board in protest, as the Financial Times have argued he and others should.

And now, he throws that founder friendliness away, when it’s frankly too little too late.

I see the argument, but I am in the camp of he’s played it brilliantly. Between the departure of so many senior executives, Uber’s unquestionable fall in valuation it’ll take at its next fundraising, its DOJ investigation, the lawsuit with Waymo, and even more coming out about its culture, this is going to get a whole lot worse before it gets better, and at some point, someone on the board needs to look like a professional. A board does have a job to do. And, frankly, if any of these allegations turn into criminal cases, the board may well be implicated.

With no one else questioning Kalanick, there’s an opening to distinguish yourself as the one board member willing to stand up to him as the company threatens to implode. Gurley seems to have seized it.

Remember, he has his limited partners to answer to as well. Should Uber go to zero, they may well ask what ever happened to that super unicorn in his portfolio? Where was he as the company was self-immolating?

Meantime, even the most fervent adherents of the cult of the founder, acknowledge there are a handful of times that the founder CEO has to go. One is when they lose the faith of the team. And with the A-team around Kalanick finally departing, we may be nearing that point. Inside accounts from Uber employees show a mixed picture. The most pro-Kalanick employee Buzzfeed reporters could find said: “I’d prefer him around even if he’s an asshole.”

The situation at Uber is so extreme-- particularly with the reports that Kalanick considered using a rape victim’s medical records to smear her and a competitor-- that Gurley can look any nervous founder in the eyes and argue why Uber was an extreme case.

To be clear, I think Gurley should be ashamed as a human being for abetting this behavior for so long. But as an investor, it's a shrewd move. 

Gurley began his career as an analyst, and as a Wall Street guy he’s adept at knowing when to hold and when to dump the stock. When it comes to his actual illiquid stock in Uber, he has very few options. But his reputational stock as an Uber board member is another matter.