Pando

Benchmark vs Kalanick (featuring Pishevar): A modern Silicon Valley morality play

By Sarah Lacy , written on August 21, 2017

From The Travis Shrugged Desk

How appropriate that the battle over the future of Uber’s board and soul has come down to a public fight, full of high-minded rhetoric as everyone tries to look like the most righteous player.

There’s Benchmark’s open letter to Uber’s employees:

We know that many of you are asking why Benchmark filed a lawsuit against Travis last week. Perhaps the better question is why we didn’t act sooner. As you know, Travis resigned in June at the request of a large group of shareholders which included Benchmark. It was a rare and extremely difficult step for us. But we acted out of a deep conviction that it would be better for Uber, its employees, and investors to have a fresh start. We believed then, as we believe now, that failing to act would have meant endorsing behavior that was utterly unacceptable in any company, let alone a company of Uber’s size and importance. 

There’s ousted CEO Travis Kalanick’s legal response, pointing out-- rightly -- that ousting a CEO who should have been ousted years ago just as he was mourning his mother wasn’t a good look:

"It executed its plan at the most shameful of times: immediately after Kalanick experienced a horrible personal tragedy."

Both sides blamed the other for making fraudulent statements. And Kalanick-- strangely-- rebutted the idea that the board-- mired in a lawsuit and seemingly unable to hire any C-level employees-- was dysfunctional:

There is no uncertainty regarding the validity of actions approved by a majority of the board. Nor is there any other independent, impending source of potential harm to the company or its stockholders."

Then there’s Shervin “Bro, let me do you a solid…” Pishevar who butted into the fight with not one, but two open letters to Benchmark:

Naturally, we share your concerns about the problems that the Company has confronted in recent months, but we are greatly concerned about the tactics employed by Benchmark to address them, which strike us as ethically dubious and, critically, value-destructive rather than value enhancing.

Each person wants you to believe they are the moral actor working in the best interest of Uber employees, while the other party is doing something fraudulent or amoral. A modern allegory of good and evil for our times, right?

Wrong. This is all about all sides securing their place in Silicon Valley’s constantly jostling hierarchy. Regaining it, or maintaining it.

All the lies, the sexism, the smear campaigns against reporters (hi!), the aleged trade secret theft… all this horrible behavior only became an issue once Uber started to erode financially. And if Uber is indeed going down from it’s nosebleed $70 billion valuation perch, the main players want to be on record blaming someone else.

Loudly.

It’s exactly the way a battle for the soul of Uber should go down, because Uber itself has always been a company more about marketing and positioning than technology. As we’ve argued again and again, Uber vs Lyft is more like Coke vs Pepsi than Facebook vs. Google. They have the same product, almost identical apps, and the same drivers in most cases. Two things have moved the needle: Brand and cash.

And brand and cash is all that matters in the public, ugly, unprecedented case of Benchmark v. Travis Kalanick.

Despite Benchmark’s apology for not doing anything sooner, nothing in this fight is about morality. None of this is about the “bad” things Kalanick did. Without the Waymo lawsuit-- when Kalanick was “merely” creating a toxic environment for drivers and women and threatening journalists-- no one on the board felt compelled to do a damn thing.

This is about money. Things have gotten so bad that Uber may lose its future in self-driving cars. Things have gotten so bad that it’s a struggle to find a CEO. Uber hasn’t even had a CFO during the largest accumulation of venture capital and valuation for in Silicon Valley history.

And as stories like obtaining health records of rape victims filter out, it’s clear that the board may well wind up having some very real liability issues, should things be -- somehow-- even worse than anyone realizes right now.

So we all know this has nothing to do with “doing the right thing” or any kind of respect for the issues highlighted by Susan Fowler, right? Ok.

So what is going on with each of these players? For reasons that will be obvious to most Pando reasons, it’s been a while since I spoke to the three main players in the current fight -- Pishevar, Gurley, and Kalanick-- but there was a time when I knew them all very well. Before I became Uber public enemy #1, two of those three had actually been to my home. Pishevar and current Uber board member and Benchmark partner Matt Cohler were both early investors in Pando.

So here's my informed speculation based on a) knowing the players and b) reporting on everything they’ve done prior to now...

Here we go:

Kalanick’s motivation is obvious: He wants to destabilize the process so that he can return as CEO. He didn’t want to leave to begin with and according to Re/Code told friends he is “Steve Jobsing it.”

It’s hard to know where to begin with his tough talk in his legal filing that Benchmark was threatening a “smear campaign” against him. Um…. are we supposed to be morally outraged? If so, why are smear campaigns a hallmark of how Uber goes after critics? It’s Trumpian level projection. See also the idea that Uber has a functioning board right now. Functioning boards tend not to sue each other for fraud and leak every moment of the drama to the press.

But these kinds of Steve Jobs Junior attempts at “reality distortion” are vintage Kalanick. Throughout his ousting, I’ve believed exactly one thing that Kalanick has said in several different statements: “For the last eight years my life has always been about Uber.”

For many years Kalanick and Uber were seen as a package deal, as one thing you had to jointly take or leave. Kalanick is the only one who fundamentally still sees it that way. What is good for him is good for Uber and what is bad for him is bad for Uber.

I would guess at least part of him would rather Uber fail than it succeed without him. That sort of has to be true, for him to be engaging in this much infighting with the board at such a vulnerable time for Uber.

Consider Sean Parker-- another entrepreneur who is frequently described as brilliant but flawed. Even Parker stepped away from his board position at Facebook and a good chunk of his equity as founding President rather than distract the company with board-level battle to oust him.

Benchmark’s motivation is more interesting: We’re lucky to have Bill Gurley’s own words on video to describe why the firm hasn’t acted until now, despite so many scandals.

In our PandoMonthly interview with Gurley, he described this as the firm’s motivation for most things:

“Good judgement comes from experience which comes from bad judgement”

Benchmark experienced both extremes during the dot com bubble, backing eBay which was one of the great homeruns of its day and also WebVan which burned more money than anyone except Amazon. (And obviously, had far less to show for it in the end.) But far worse than the money lost on WebVan, Gurley says, was the money the firm never made on Google.

Gurley spoke again and again on not getting Google, being put off by its valuation as many were back then. “[We are] looking for positive black swans if you think you see one any price is kinda any price,” he said of the mounting valuation mania around unicorns. “The Google round-- because I was there went down--  $80 million-$90 million [pre-money valuation] with no revenue and it seemed crazy. You can only lose one time your money the real losses are the missed outcomes. You have to teach yourself to be more optimistic than maybe you were programmed to yourself because there’s way more cost to a false negative.”

This “retraining” to be endlessly positive, this paranoia of failing to make money explains why part of why he’s looked the other way as Benchmark companies like Snap, WeWork and Uber have made mistakes of character and valuation.

But there was also this: His acknowledgement that saying yes to those potential black swans at “any price” is only part of it. They have to want you to be their investor. To that end, Gurley said everything a VC ever says is “marketing”:

“I’m going to qualify my own comment and every other comment you ever hear from a VC by telling you: Every time a VC opens their mouth they are speaking to the entrepreneur they haven’t met yet, regardless of who they are talking to and what the topic is.

Their biggest concern is that they are going to miss the next Google and so they are constantly, constantly marketing to the entrepreneur they haven’t met. So everything they are going to hear-- including what I’m going to tell you-- have that in mind.” 

“Perhaps the question is why didn’t we act sooner?” … because you were marketing, Benchmark, as you plainly told us you always would be. And you knew suing a portfolio company carried a Sean Parker and Plaxo level risk.

That’s why it took Uber actual beginning to erode in value for you to finally act. That Benchmark took this step points to how unstable the company is… or how potentially damning the evidence in the Waymo suit could be. Some financial or legal risk finally became greater than marketing to the next potential Google.

And Pishevar’s motivation is the most sad: It’s no secret that Pishevar has long hitched his success to Uber, in particular, his tight bro-mance with Kalanick. It was his investment in Uber that gave him the klout to leave Menlo Ventures and start his first fund. It was Uber’s logo (along with a few others) that he once shaved into his hair.

And sure, Uber would be a colossal win for any investor… should they be lucky enough to ever sell shares at anything like the last venture valuation. Career making, or at least career defining. Even for a firm like Benchmark, Uber would be one of the first five companies they would mention they’d backed early on-- right up there with eBay.

But Uber won’t make or break Benchmark in any meaningful way. It will make or break Pishevar’s career as a VC, especially now that Elon Musk appears to be taking steps to compete with Pishevar’s bro’d out take on building a Hyperloop.

Pishevar definitely needs Travis to be at Uber for the future of his career and personal brand more than Benchmark, and he may even need it more than Kalanick himself, who will always get credit for having built it.

You can see it in how he signs the letter:

Shervin Pishevar

Personal Investor, Advisor and Former Uber Board Observer (2011-2015) Coordinator, Uber Shareholder Alliance

“Strategic Advisor and Board Observer at Uber Technologies” is the second thing he lists in his bio on his own site, just after his job at Sherpa.

He’s used his Uber bona fides to get meetings with none other than Vladimir Putin, and bragged about it on social media.

Pishevar is well aware that Sherpa is just another venture firm, and he himself hasn’t had a large win. Uber is what opens all the celebrity and political doors that fill so many of his social media feeds.

You can see it in how he’s -- now twice-- butted into the fight, despite not having any formal role at the company nor being one of its major shareholders. (His original investment was done via Menlo, not his firm.)

As sources told Re/Code of Pishevar’s letter:

“It’s a stunt,” said one person familiar with the situation about Pishevar’s public efforts. “It’s laughable.”

Damn.

There you have it. A modern Silicon Valley “morality play” in three acts. The “once was” versus “the establishment” versus the “wants to be,” all using the courts and high minded rhetoric to protect or regain their hard fought standing.