Doing The Heavy Lifting
Most venture capital investments are made, over time, by syndicates. This means a group of venture capital firms develops around a company, usually built over multiples rounds. Some of the firms in the syndicate agree to (or require) having a partner from their firm join the Board of the company.
If you look at the roughly dozen boards I am on, most of them have multiple venture capitalists on them. Some also have independent directors, something I believe strongly in and have written about frequently.
Not all venture capital firms in your syndicate will be the same. Not all of the VCs on your board will be the same. Some will be challenging to deal with. Some will be unproductive and distracting. Some will be nice to have around but won’t do much. A few will roll up the sleeves and do the “heavy lifting.”
It is this latter group that is super valuable. You saw it in action last week when the partners of Benchmark apparently negotiated a change in leadership at Uber. That is hard, painful work. But someone has to do it. And I have seen the partners at Benchmark do it before. They don’t shy from the tough stuff. Nobody enjoys doing things like that, but they know when it is needed and they step up and do it.
I was talking to another VC I work with yesterday about a completely different situation. The company is doing great. We have some important decisions in front of us, all good choices to have to make, but selecting the right ones will matter a lot. This VC has been deeply engaged in the process, providing a lot of super valuable advice, and saying things that need to be said, even if they are not popular. I feel incredibly lucky to have someone like that in a syndicate with me. And I told him that yesterday.
You can put together a list of the top VCs by returns. That is done annually. It’s all nonsense. There are a ton of shitty VCs on that list. Returns matter, for sure. But what really matters is who shows up when the hard conversation has to be had. What really matters is who provides the right advice at a critical time. What really matters is who puts aside their own personal interests and does what is in the best interests of the company. What really matters is who steps into a vacuum and provides leadership when it is badly needed.
When you are picking investors, you should call around and check references. Ask about this stuff. Find out who does the heavy lifting and who goes along for the ride. Pick the one who does the heavy lifting. Because you will need it, frequently.
Investors who have consistently done heavy lifting have mental muscles and market clout to help steer founders that those who haven’t don’t.In the same way, founders who’ve done heavy lifting don’t shy away from putting in the grind necessary to make products and processes better for everyone involved.
Ability to heavy-lift is directly correlated to a strong internal compass on doing the right things for a portfolio company and feeling some level of personal responsibility in driving to the best possible outcome for all parties involved (not just for the VC firm you are a part of).This is really where the culture of the VC firm (who and how they hire, core values, how they select and pass on deals, and most importantly, how they treat founders and nurture investments, especially the ones who need help, etc..) comes into play.Culture is everything, not just for startups, but also for VCs.
.Venture capitalists are investing OPM. That OPM carries with it a fiduciary duty, which is legally the highest level of trust under the law.That OPM came from pension funds (as an example) whose beneficiaries earned that money through long years of faithful service.The pension fund has a direct, fiduciary duty to its members.This duty is not an arbitrary or selective duty. It is not a matter of values. It is a legal obligation.Today it is fashionable to celebrate “culture” as part of the business environment, but the duties one undertakes are the result of hard duties spelled out under the law.If you use OPM, you owe a fiduciary duty and you better do it. Duty is what one does when one doesn’t want to do it.Supposed “heavy lifting” is simply doing what you agreed to do — act only in the best interests of the beneficiaries of the money, the owners of the money.JLMwww.themusingsofthebigredca…
You are of course correct.Sadly some cultures don’t respect responsibilities and duty whereas happily others do.
Yes, very true. But strong values and culture increase the probability of success and frames the business in a larger context beyond making money for LPs.At the end of the day, VCs and founders are people first and foremost. People go above and beyond if they feel they are a part of something bigger that can make a genuine positive impact on the world.Missionaries will always be >>>> mercenaries for the reason that the human spirit is always seeking a way to expand itself. Ironically, it also turns out to the smarter way to make more money and build solid reputations that attract better deals.Fred himself is a wonderful case in point.
.”Strong values and culture” are essential to success.The juxtaposition of fiduciary duties and values/culture is not an “either or” proposition. It is a “both and” proposition.It starts, however, with the recognition that the fiduciary duty is a legal obligation undertaken by both the law, but also the agreement. It is the first duty.Culture and values are part of the vision of the founder.It takes team work to make the dream work.There is absolutely nothing wrong with being mercenary — meaning keeping careful score using the financials — either at the company or moral level.One can do infinitely more good works WITH financial success than without it.JLMwww.themusingsofthebigredca…
We all like and want it to be both. But the paradox of human nature is that it often is not. Missionaries are rarely mercenaries and vice versa.The evidence of the last two decades shows that missionaries ( especially with founders) can often build larger businesses that eventually make more money for investors. I believe this is also true for USV, Benchmark, and Foundry, all of which have delivered great returns for LPs, but have been very thoughtful and disciplined about their culture, values, and philosophy.Maybe there are people who can do both effortlessly, but in general there is a dichotomy. People need to consciously grow in to the other area to be successful in the long term.
Internal compass is a great word. I use the term that person has lost their moral compass.Your internal compass is what keeps you aligned.
Did heavy lifting of organizing all-day Practical AI workshop for women in SF because:(1.) AI needs more female talent;(2.) Data sets and algorithms are biased and this hasn’t been made visible to folks — even those who are PhDs in AI.Results:(1.) Our turn-up rate was 49% which compares with typical turn-up rate of 30%, including events that are mostly male.(2.) 60+ women attended, which is the largest number of women at any AI workshop in Bay Area.(3.) An African-American attendee shared aloud that the workshop had helped her to “completely overcome her fears” she wouldn’t be able to build or make anything with AI.Ah and now we have video of the specific bias issues with Stanford GloVe and Google Word2Vec word associations that affect search results, product recommendations and employment opportunities. For example, it explains this type of behavior by the algos: https://uploads.disquscdn.c…https://www.youtube.com/wat…
It was a thoroughly worthwhile event from every angle. The diversity in the group (experience, age, background) was heartening. It was far beyond being a “women’s workshop” which made it an easy setting to ask for help and to provide advice/comment/technical assistance. Am certain that the world of AI has new recruits & contributors – including myself.
Thanks for flying all the way from Vancouver and your feedback, Sarah.It’s already been suggested that next time I organize an … IoT hackathon!
Work to me is all about making decisions, invariably without enough data.Having people from outside the team that executes that can participate is essential and often we don’t.We don’t need advice from outside thrown in, we need partnership.That is what I think you are speaking about here.
Very true that the heavy lifting is needed in both good times & bad times. It is arguably harder to make decisions when things are going well.
Yup. I always found you would see the true character of someone when they were losing money. Did they do the right thing then? Always easy to do the right thing when you are making money. On the trading floor we called them “standup guys”.
When doing the right thing is profitable, most people would do the right thing.Doing the right thing when it neither profits nor hurts…is still the right thing to do. Recognize it, applaud it.But when somebody does the right thing when they are down and doing it hurts them – that is the measure of character.
.Nobody knows their own values until they confront the price tag. Until then, they are just ideas.What you live and pay for, those are values and they define character.JLMwww.themusingsofthebigredca…
true character of someone when they were losing money. Did they do the right thing then?There are many people (family let’s say) that loose or gain based on character. Having character is great but what if it doesn’t allow you to pay for your college tuition or your own living expenses? Then is it admirable or stupid?To me the only side of that concept that matters if if the guy who definitely can loose does the right thing because he can. The guy who has to feed his family should put his family first over a stranger unless of course the reputation hit is detrimental in a long term way.This is why I take issue with the press calling people ‘heroes’ that jump onto train tracks and save a complete stranger. What would happen to their family if they got killed? What about them? To me taking a chance like that so you can have some fake glory and your name in the paper is stupid.
.There are people in this world who never even think at moments like that. They just do.JLMwww.themusingsofthebigredca…
You made a trade. It went against you. You are having a bad day, bad month, bad year. Do you own up to it or not? You walk in the door at 6 am. You lost money the previous day. (Or even if you made money the previous day). Your Outtrade clerk tells you that you are sell vs sell on 50 lots 10 points higher than where the market is trading right now. Do you bust your trade, make em buys and take the hit?The pit ethic is “your word is your bond”. It’s an iron law. There are no exceptions.There is no “pay for your college tuition” bullshit. It’s nothing personal but it’s the way the business is done. I saw guys lose lifetimes. One time, I felt really uncomfortable with a spread I had. I walked into the pit and asked for a bid. My friend bid and I hit him. By the end of the day, he lost huggge money. Mid six figures. He took em. We are still friends.If you are a stand up guy, someone somewhere might give you another chance. If you “carp the trade” and break your honor and people find out you will be run out on a rail and never be able to return.In one pit I traded in, I was long a four lot. I wanted to get out. A broker came into the pit and yelled “Half Bid!!” I said, “SOLD”!!! Another trader said “Sold!!” The pit edicate was if you didn’t put a number on it, they could give you the whole order. Broker said, “You sold 50, and you sold 50.”Gulp. Swallow hard. I only wanted 4. There was no getting out of the trade.Another trader immediately bid 60 on 10, 70 on 10, 80 on 10, 90 on 10. I was new. I was out $16,000 in the blink of an eye. I sat there, and told a buddy that it was an expensive lesson but one well earned. I wouldn’t forget.That guy told me to spread em off and helped me do it.By the end of the day I was up $2000 on the trade. I covered. Me and that guy are still friends to this day. I am friends with the broker. I don’t think anyone can ever afford to lose $16k, and believe me it hurts.But, your honor and reputation are way more important than making money on any one trade. I’d rather go out of business than lose it.
Well nothing in the above indicates anything other than the fact that in a reputation based business (that you were in) these were lumps that you had to take.I fully understand that and no disputes there at all.
Life is a reputation based journey.If taking the lumps makes business sense, everybody would do it.Character is something else.
Success doesn’t change people, it amplifies them.Failure doesn’t change people, it reveals them.
A unrelated youtube link where Carlos Ghosn (Renault-Nissan Alliance) talks about management — “asking people to do things that they don’t want to do”[4:58] https://www.youtube.com/wat…
Most jobs have a “heavy lifting required” warning on the application. Not this one. Warning signs appear over time, and not in black and white.
This is not the easy stuff especially when it’s played out in the national press. Why’d they wait so long? There’s a lot of cash at risk here and it will now require a home run to put them back on track.
There really should be two terms.A word for VCs like you that sweat the work, that show up for five or ten years in a row for a company that hasn’t taken off (yet), and then another word for VCs who are actually a sort of early-stage banker, happy to take credit for the good calls, but scarce when they have something they ought to contribute.Fifteen years ago, I saw you quietly show up for every single one of the companies that got funded by Flatiron pre-bubble. It would have been easier, much easier, for you to walk away, but you didn’t.The emotional labor of sticking with what you helped start is hard work. Thanks for doing it, Fred.
.Every successful enterprise is a combination of hard work (which subsumes time), skill, capital, and leadership within a business engine and in a market.Leadership subsumes vision and vision requires emotion to inspire people to go somewhere they wouldn’t get without leaders and leadership. A bunch of people milling around are not a company until some leader steps up and lays out a vision.There are times when one or the other are more important, but the emotional investment is constant.In the end, one is backing a jockey, a horse, and a course.JLMwww.themusingsofthebigredca…
There is a term, they are “activist” investors. The other types he refers to are passive investors. “Activist” has pluses and minuses. In this case its a plus, they did what they had to do due to the CEO’s behavior. Most of the time, “activist” is a bad thing imo.
I think there’s a distinction between “active” and “activist” investors. “Active” investors attempt to make contributions, sometimes welcome, sometimes not, while “activist” investors often have a hidden and/or personal agenda (e.g., pump and dump). “Active” investors are more about brand building, while “activist” investors are more about blowing things up, again sometimes justified, sometimes not.
Heh. I agree but my definition is different. I prefer the investors to be ATMs rather than actual tellers I have to talk to. Anybody I have to talk to after I take their money is active. 😉
Not an expert, but activist investors tend to be short term opportunists, usually with a financial engineering bias, not a company building bias.
.Jana Partners — the guys who took a stake in Whole Foods and demanded they revamp their board and look to unlock value.WF got sold to Amazon shortly thereafter for a 30%+ premium over market.Good or bad?WF had declining sales for 7 consecutive quarters.JLMwww.themusingsofthebigredca…
Good, but not a company builder.
.I mentioned them only as an example of an “activist” shareholder. As shareholders, they had nothing to do with management.In my view, WF outran its shadow and was a company in need of new leadership. John Mackey carried them a long way, as far as he could.JLMwww.themusingsofthebigredca…
Amen to that dedication!
Well said, there are too many VCs who hop in and out. The “right” money gives you more than just that.
I just love seeing you people interact.Thanks Fred & Seth
To William’s point earlier, it does seem that it’s much harder to do serious heavy lifting when things are going well. Related to Uber, I agree that Benchmark – finally – had the hard conversations, but only after things at Uber had deteriorated to such a point where to not do so could have bordered on negligence. Prior to last week, things were apparently still “good enough” to avoid a decision that many, bystanders and insiders alike, felt was long overdue.I was thinking about Uber’s situation a week or two ago – only a few days before Travis left the company – and wrote a blog post about my many attempts a few years ago, including letters to Travis, to get “noticed” so that I could be “chosen” to tackle the broken driver culture that I thought might bring an otherwise genius idea to its knees. It’s here if interested: http://bit.ly/2t1ndpl. I have been obsessed with transportation since I was little… and ride-sharing ala Uber and Lyft seems to be only the tip of the iceberg of where we will be in 10 years’ time.Hopefully the heavy lifting of allowing Uber to continue revolutionizing transportation while also, as importantly, being a company that is in touch with humanity begins now. Here’s to the drivers and many others who do their own form of truly heavy lifting each and every day.
We need Heavy Lifters in Congress, where it matters most, but seems required the least. Sam Ervin and Howard Baker were heavy lifters during Watergate and, it seems, Sen. Richard Burr now leading the Intelligence Committee.A family tradition of military service might be a lodestone for one’s personal compass.
.Actually what we need in Congress is people who will undertake the core mission of the enterprise — to legislate. Congress needs to run its assigned lane.The no-evidence-Russian-investigation is a waste of time and all of it happened when the previous President had his hands on the levers of power.What is amazing is that it’s been going on for so long and the WashPo and NYT have not been able to manufacture any evidence or that the Deep State has not found any to fabricate and leak.We have very few institutions that still conjure up any sense of duty or character. “The military is one of them,” said the VMI educated veteran.I have met plenty of dipshits in the military, but at least they know what duty is.JLMwww.themusingsofthebigredca…
The caveat emptor for all this is an entrepreneur/CEO who allows the VCs to partake in the heavy lifting. There are cases where the VCs/investors know what the next path might be, but if they don’t find a willing partner in the CEO, the heavy lifting becomes a moot topic.
.Seems to be a misarrangement of the cart and the horse. These are not partnership relationships. That word is too loosely used.Shareholders vote for and determine the Board of Directors.The number one duty of the Board is to retain management. Secondarily, it is their duty to review, approve, and oversee the plans prepared by management.A leading indicator of future problems is the absence of these plans. If a Board doesn’t insist on high quality planning, then the chances of future difficulties are astronomically greater.When people wear multiple hats, the roles overlap — a CEO who is the largest shareholder is the largest shareholder and entitled to act thusly.I am in favor of entrepreneurs controlling their enterprises to the maximum extent possible and VCs have to be aware of what role they can play under that arrangement IAW with the Articles of Incorporation, the Bylaws, and any Shareholder Agreements (including any term sheets).I applaud Zuck for having done just this through the multiple classes of FB stock. I don’t think it is sound corporate governance, but I applaud his being able to force it upon the investment bankers and shareholders.At the end of the day, VCs are money providers (I resisted the temptation to use the word “pimps”) who buy their way onto the Board and into the company.A smart CEO does not confide his troubles in people who can, arguably, fire him. More and more CEOs are wising up to this reality.If you want a good early indicator, tell me whether the CEO has an Employment Agreement.Last point — a CEO needs to understand that the best advice given by someone who has never been a CEO is like asking a guy with 1,000,000 frequent flyer miles how to fly the plane.The frequent flyer has spent a lot of time around cockpits, but he doesn’t really know how to fly a plane.,JLMwww.themusingsofthebigredca…
Startups under 500 employees have different board/CEO dynamics than larger or public companies which fit more your depiction. The VC is the entrepreneur’s partner during the initial company formation.
.One of the most important things a CEO can do is to run his company as if it were the ultimate size he wants it to be.”The way you practice is the way you play.”The problem with what you say is that an entrepreneur/CEO cannot suddenly re-negotiate things when he gets to 500 employees. He has to live with the deals he has already struck.The VC is never the entrepreneur’s partner — he is a shareholder and he can be a very good shareholder, but a guy who can fire you is never really your partner.Partners have buy-sell provisions in their agreements, not termination provisions in their Employment Agreements.This is why I tell entrepreneurs, founders, CEOs they need an Employment Agreement to spell out the basis upon which they can be terminated — for cause, not for cause, change of control.Each such arrangement has a different severance provision.It is so fundamental as to be like getting electrical service.JLMwww.themusingsofthebigredca…
But Fred, it could be argued that Benchmark very belatedly did heavy lifting…
Apparently Bill and Travis weren’t talkingI don’t know for how long that has been the caseBut it suggests to me that Bill had been saying what needed to be said and nobody was backing him upIt’s tough to be the naysayer in a group of yaysayers
That’s a very poor decision by Travis…..not talking to Bill.
Even doing what they did, when they did, they still had to rely on Travis to actually decide to step down. The combination of personal and professional crisis probably created the environment for him to make that decision.Now the question becomes, will he change his mind as his grief over his mom becomes a bit further removed? And can they stop him from changing his mind if he does? And will it matter in 6 months when this all happens?Make no mistake, as long as he holds control through his founder stock and as long as money makes the world go ’round, he can reverse his decision and will still have access to the capital markets to fund the company.People care a lot less about PR and treatment of employees and partners than you’d think when the potential financial gains are as enormous as they appear to be with Uber.I don’t think Travis views his decision as final.
Wow did you ever hit it spot on. What happened with Uber was a textbook example of ‘never let a good crisis go to waste’. Tragedy with mom combined with bad press created the opportunity to ram this one through.People care a lot less about PR and treatment of employees and partners than you’d think when the potential financial gains are as enormous as they appear to be with Uber.Exactly. And this is exactly why the opportunity was created in the first place. There is no question that the hard driving culture and scorched earth business practices probably (I mean I only know what I read) got them to where they are today. Now that the machine is built they don’t take issue with forcing him out especially given such an ideal window of opportunity.
I believe you are 100% right on the crisis not being wasted.
Travis has a huge financial stake. If the company flourishes, he will have no way to reassert himself.Spot on call by younger tier partners @ Benchmark, with obvious coaching from Bill Gurley.
Will the company flourishing diminish his voting stock? I know that there are other factors at play but that only other factor is money – specifically who will give you some when you need it at a price you’re willing to pay. There are lots of VCs that would still trip over themselves to fund Uber with Travis running the company, even amid all the chaos. I don’t see how he’d have a problem if he decided to reclaim that spot.But let’s put that aside. His control means that, should he so choose, he can essentially run the company from outside the CEO office. He’s the founder, with control, on the board. He has to CHOOSE to give up that influence and I bet he doesn’t. I bet part of his adviser’s advice was precisely this, it doesn’t matter if you’re the CEO or not because you still control the vote and you’re still the founder. Let someone else take the arrows and you can exercise your influence from the back room.It’s all an elaborate smoke screen. This isn’t the Google moment where they brought in adult supervision, it’s just meant to appear that way.
Schmidt was window dressing. No other adult would take the gig, as they read the founders as merely looking for a beard.You may be right here, but we are also talking about a company w no C level execs at the moment. That’s a lot for Ryan Graves to do.
I think we disagree how much influence Schmidt had at Google. He was the check and balance, that’s not to say that he had control, what he had was the respect of the founders and their buyin for the process. That’s shown by the fact that he’s still the Chairman all these years later.But this isn’t that. To be clear, there is a lot of opportunity for the right CEO to rebuild the culture of Uber but as long as Travis holds final control, which he does through his class of stock, Travis is the adult supervision.Any potential CEO is going to first have to figure out how to deal with a founder that has control of the company and was forced to resign. That’s a tough nut for anyone to crack.
When they interviewed Schmidt, they told him all the things he was doing wrong as CEO of his company. 90 days later, he reviewed his meeting notes and found they were correct on everything they predicted.That’s not a check, balance or buy-in: that’s being the Founders’ bitch.
I disagree. Travis took the company from nowhere to the stratosphere.That earns some consideration and a slow hook.
Sorry @fredwilson:disqus but Uber’s board waiting until a female engineer wrote a blog post about her manager inviting her to be in his open relationship on her first day, and having that be the straw that revealed their epic shit show, is the epitome of a board *not* rolling up its sleeves. It’s shameful how out-to-lunch they were, or more likely, willingly ignorant.
.I agree more with you than you do with yourself.JLMwww.themusingsofthebigredca…
The epic shit show was that he had done it before and he was not instantly fired on the second time, if you read her post that was the most damning.I as a CEO do not want to be blamed if I have somebody that is an asshole. It happens, bad hires happen.However, I fully will take blame if something happens and I have a culture where either I don’t care, or I don’t know (same thing), and it happens again.You can get he said, she said, you can get a bad moment at something like a Holiday Party, it happens. If you have employees it happens, maybe they stay or maybe they go, depends on the circumstance and the severity. But it does not happen twice.
I am a big believer in due process. A woman writing a blog post is not due process. Newspaper articles are not due process neither is trying something in the media.
.Agreed, but there are people who can recognize the difference between bullshit and birthday cake without having to take a bite of both.When handing out punishment, it is essential to undertake a fair process.When saving an organization from drowning, it is not essential to even know the names of those involved.This situation was a jug fuck (technical business term) and a blind man could see it.JLMwww.themusingsofthebigredca…
So what you are saying is it’s ok to tramp on rights when a financial decision needs to be made. I don’t disagree with that.But I also don’t like situations that people feel isn’t open to discussion or any questioning. And that women’s blog post was just one of those things that rose to the level where you couldn’t even say anything about it. Like Nazi atrocities and Bill Cosby.Of course ‘exhibit a’ will always be this (UVA Rape Case):https://en.wikipedia.org/wi…Also Tawana Brawley:https://en.wikipedia.org/wi…Not to detract from anything that has happened to women (my first wife had something bad enough happen to her that the man went to prison for 7 years). But you will never be able to learn and fix things that nobody will let you even talk about in any substantive way.
.May be overanalyzing the situation.When one uses the term “due process” it suggests a legal undertaking. I don’t see a “normal” allegation of workplace wrongdoing rising to that level particularly in an “at will” employment arrangement.An employer can fire someone for cause, or for no cause, or without cause.What I am saying is there is no necessity for an allegation of wrongdoing to require a legal process or for it to trigger any discussion in which the word “rights” would appear.There are legal implications — liability — for an employer who possesses knowledge of a hostile work environment and fails to take action.Therefore employers should be willing to investigate the veracity of a complaint by speaking to all involved and then taking immediate action without any further process.Problems should be solved at the lowest level and at the earliest point in time.The two examples you cite are really not comparable hostile work environment examples.JLMwww.themusingsofthebigredca…
Agree and I should correct what I am saying to remove the legal term because that is not what I meant. I am referring more to having a full set of facts prior to making a decision. After launching an investigation and review that is commensurate with the particular situation and how important it is.In the examples I gave the situation snowballed as a result of people not wanting to wait for the legal process and deciding that on it’s face what was written must have happened because of some past history in that type of environment. Just like they do now with cops who shoot people and many types of sex on campus.
.Right after the UVA report, I was talking to someone in Charlottesville and he had an immediate negative reaction saying, essentially, “rich frat boys don’t need to resort to raping girls in Charlottesville.”The convo went down hill from there.The woman President of UVA screwed it up. She failed to consider the honor of her institution and that, maybe, the report was wrong.Rolling Stone has been paying out millions in C’ville and to the Ass’t Provost. They got tagged as did the writer.In the end, it was a total fabrication which any credible editor would have caught when checking, doublechecking, re-checking the bonafides and evidence.JLMwww.themusingsofthebigredca…
Good. A keeper. That answers some of my questions about how to handle some cases of nasty workplace behavior.Then, how do law suits for “wrongful termination” get into the picture?
I am taking her at her word, but if you are stupid enough to send a woman on her first day chats that:”He was in an open relationship, he said, and his girlfriend was having an easy time finding new partners but he wasn’t. He was trying to stay out of trouble at work, he said, but he couldn’t help getting in trouble, because he was looking for women to have sex with. It was clear that he was trying to get me to have sex with him, and it was so clearly out of line that I immediately took screenshots of these chat messages and reported him to HR on her first day” You should be fired for stupidity on the spot. That is easily provable or disprovable.I’m not going to even go into the troubling nature of it, which is magnitudes worse. Fired on the spot.If HR didn’t do anything, go up the chain and anybody involved. Fired on the spot.You have to be kidding me. To top if off you were a repeat offender??? There is a good reason Texas has a three felony and you are dead rule.This after somebody looked into Sarah Lacy’s riding habits when she was critical?Again, the offense was much worse than the stupidity, but the stupidity alone is grounds to get fired on the spot.If you are Uber what is 30% of your business in wealthy cities (by my pole): KidsWho are half your riders? Women.Just stupid. Stupid.If I came up to you and groped you how would you feel? You could say you’d punch me but if I’m so much bigger than you and your boss, you might feel different.Bullshit.He didn’t get fired on the spot. They looked at what happened for months. That is a total failure of control.
Kalanick is obviously a tool. The more fine tuned point is when the Board should have known and acted, no?
I’m not going to debate when and how he was pushed out. I say if I take her at her word, which seems very credible, Justice was done.
Maybe you mean, they don’t get away with it twice and it doesn’t happen three times?And if it is consensual and not in the same chain of command? Consensual and in the same chain of command?”How about lets meet at the Blue Orchid and talk about your career?”.”I’m not married, and you?”
I’m close to scared totally shitless over that whole situation. Likely eventually I’ll have to hire some people. Then any and all of that total BS could happen:Any total idiot Rafe Testosteroni thinking below his belt can see a female with a pretty, smiling face or a pretty, swishing skirt and make an advance. Mom used to say the solution was for the female to carry a 6″ hat pin and USE it.But now we have laws. Somehow as CEO I’m supposed to know that three rows of racks back in the server farm Rafe will go after the cute summer intern reading some database output on a laptop and putting corresponding labels on LAN cables?Cute summer interns are always supposed to go around in mutually protective pairs?I’m supposed to have an HR TLC crying pillow group where all the females can get mutual support, march to my office, and demand retribution?It may be that otherwise Rafe is a good guy; so I’m supposed to have nearly no females around or have them only in certain jobs and physical locations where mostly Rafe can’t get to them?I’m glad to hire females, will try to help them do well, and hope that they do. I even tend to be protective of females. I’ll have to be careful not to let them wrap me around their little finger with just a tear or two.E.g., sure, in building the racks of servers, I’m sure the boy summer interns know about socket wrenches, torque wrenches, 6-32 hardware, and VOMs and can guess that mostly the girls don’t. So, okay, easy enough to learn that stuff, so make a special effort to teach the girls. Besides, on getting all the clerical details just right on the LAN ports, server LAN addresses, etc., likely the girls are much better than the boys. Also at documenting what we have just put in the server farm. E.g., later, the guy on the server farm bridge looking at some network data and seeing an IP address darned well needs to know that the records are correct.Glad to have the girls there; hope they do well. But I’m afraid I’m leaving myself wide open to spending 80+ hours a week with lawyers fighting EEO suits. That could come close to killing my business.Maybe some of the girls think Rafe is hot; it’s a fact of life that not all the attempts at hanky-panky are the fault of the boys.Maybe I need, early on, a 45 year old, 20 year veteran high school teacher, as office manager and then head of HR. Part of her job is to counsel the females to stay away from and protect themselves from any characters like Rafe. Maybe that will work. What DOES work?Or, I’ve got a group that’s been growing quickly and, then, discover that the group has two partitions, one, the in-group, has all the same racial, ethnic, religious, and/or gender (including gay, etc.) background and the other one, the out-group, doesn’t have that background. Somehow the people in the in-group get all the good performance reviews, work assignments, training classes, exposure to the rest of the company, conference trips, raises, and promotion opportunities, and all the people in the out-group are there just to take up space, clean toilets, and fill in the bottom of the rankings. Some people in the out-group tried really hard to do good work but got fired for whatever faked-up reasons. Maybe in total the group is doing their assigned work, but likely I’m wide open to one heck of an EEO suit. I didn’t want that situation. So, what the heck do I do?So, I’m supposed to have two chains of command, one the usual one and the other leading to the head of HR. The HR chain controls the situations that lead to EEO suits. The other chain handles the real work? Am I the first to think of this?In another group, there is more gossip from some employees about other employees than all afternoon on daytime soap opera TV, more than in the current NYT-MSM, Democrat propaganda machine, Goebbels style, about Trump.Gossip. As from Goebbels, repeat it often enough, and people will start to believe it. Including about me!How to stop the gossip?One of the possible problems is people fighting others in the company instead of helping the customers or fighting the competitors. How to stop the in-fighting?Another problem is some arrogant, totally cynical turkey who has big process binders, rules, and charts and uses those to block any movement and to cover his ass.My guess, for the work of that old group, quietly set up a parallel group, slowly give them the responsibility, save anyone from the old group I can, and then one day have a resource reallocation and fire everyone in the old group. Also some people in the management chain over the old group will need to go.Circulate some gossip about what happened, and let that gossip be a warning to any more such buddy-buddy, in-group empire builders.But, how the heck to keep that stuff from happening in the first place? E.g., what do good companies do? The US military?
Having a military chain of command doesn’t stop this kind of stuff from happening. You’ll still get gossip and the occasional “scandal”: https://www.reddit.com/r/Ou…. You’re basically trying to create an HR department that’s powerful enough to fight human nature. I don’t think that’s possible.I think the only thing you can do is avoid hiring the kind of people who are likely to cause problems, pick fights with the productive people in your company, or give the media a scandal to write about.
Thinking a little, maybe:(1) Have and state some standard rules about personal relationships between a supervisor and one of their subordinates.(2) State that everyone is supposed to behave in an appropriate manner. Use that with at-will employment to keep down the nonsense.When appropriate, let supervisors and some HR women pass around for, say, the case of female summer interns some basic rules, e.g., no touching and scream if touched. Borrow from what works in high school, colleges, the military, other companies.Likely have someone spend a few days in Google searching, reading, and finding credible experts.To retain flexibility and give lawyers less to use, write down as little as possible.Have the above cleared with some quite credible experts.I don’t know what the heck Uber did wrong, but it seems common enough to have person A tell person B, in the came chain of command or not, something about drinks after work, theater tickets on Saturday, backyard party, open marriage, lets have some drinks and talk about your career, do you and your spouse have any children, etc.
$68B market cap in 6 years is a tornado.If Bill Gurley knew about that engineer’s situation, he would not have being doing his job right at all.
Oh please. Did you read about the report? HR wasn’t even keeping records. This isn’t about the VC knowing about every case, this was about a poisonous culture. Everyone I know in tech knows at least one person who has left Uber due to their horrific culture.The board is in charge of oversight including HR and culture, and they did a shameful job, no matter how many voting rights Travis had. Every board member should step down.
Really.$68B.You don’t think that level of growth didn’t mean that every BoD meeting was chock full of growth related issues?Its easy to sit on the sidelines and say woulda, coulda & shoulda.When it became apparent that the rumours were based in reality, they acted. What more do you want?
A board is there to oversee a lot more than growth. They’re there to make sure the company is functioning properly. These aren’t rumors, these are employees leaving in droves due to culture for years.Anyway, seems we’re pretty far off in terms of what a board’s duties are.
I disagree – we are very close.Where we are far off is the reality of what an Uber BoD meeting was like in the last 5 years…..go, go, go.
.Good post as usual, but lauding Benchmark for their actions at Uber is like praising someone for bayoneting the wounded.Uber has been a train wreck for a few years now.They are currently looking for a CEO, #2 (former Emil Michael position), a COO, a CFO, a CMO, General Counsel and 20 persons in second echelon management terminated for hostile environment propagation as revealed in the Eric Holder investigation.TK used to call his company “Boob-er” and visit strip joints in Seoul, Korea with his direct reports. The warning lights have been on for a long time and nobody was watching them.What I think happened is that the VCs borrowed a pair of cojones when TK’s parents’ boat accident gave them the opening.I suspect they trimmed the value of Uber by $25B. Should have acted sooner.Profile in courage? Maybe not.Bad example, but the parable still works.JLMwww.themusingsofthebigredca…
My view is they were lucky. He didn’t have to go. He did it because he was “convinced”. While clearly his view of women and company culture is Trumpesque, despite his bravado, he “gave in”. My suspicion is there was more leverage being exerted than we know despite his voting shares. It could have been a lot uglier.
.On a personal level, Donald J Trump, apparently, likes to grab pussy. His own words. I believe him and he has married a few of the grabees.On a business level, he has hired, inspired, promoted, and mentored successful business women. Nobody has ever accused his organization of being a hostile work environment and, in fact, a number of women sing his praises.His campaign manager, Kellyanne Conway, was the first successful woman campaign manager in presidential politics. Focus on “successful.”Huge difference.The suggestion that the Uber (Boober) culture is Trumpesque overlooks a big point — Trump has made some money and Uber has not.BTW, what happened to all those women in the eleventh hour of the campaign who came forward threatening to sue him for sexual harassment? Let me get this one for you — they disappeared. Having served their purposes, they disappeared.Donald J Trump — admitted pussy grabber. Not a hostile work environment guy. At 70, his best pussy grabbing days may be behind him.Donald J Trump — bad.JLMwww.themusingsofthebigredca…
Fred -Thanks for writing this. Long-time reader, first-time caller:)You, likely more than anyone, could really move the needle for entrepreneurs if you were to publicly share this mental list you’ve made of who is and is not helpful. I’m curious about why you’ve decided not to? Sunshine is the best disinfectant.If you’re a founder (especially a first-time founder), collecting good data on this topic is a difficult exercise because (1) you don’t have much time between getting a term sheet and signing a term sheet (2) there aren’t that many people that have endured a truly difficult situation with a firm/partner and (3) even fewer who are willing to talk about it.Don’t get me wrong — the onus predominantly should be on the founder to do their diligence, but the venture community has a lot more data points than a founder will ever amass that would be helpful in the decision.Matt
For a startup taking equity funding, sounds like some very good advice.Corollary: If can be a sole, solo founder and 100% owner with no equity investors, an LLC with no BoD, that way, alone, with just own checkbook, get to nice lifestyle business profitability (e.g., $20,000 a month revenue with meager expenses), get to enough free cash flow for rapid growth funded from revenue and earnings, and build a really successful business that way, then DO THAT.E.g., avoid all that work in strategy, tactics, TLC, etc. in highly risky and opaque BoD care, feeding, sucking up, and mud wrestling.JLM has written at least here and also on his blog lots of very credible sounding advice on how to do better with the mud wrestling. To me, it still sounds like mud wrestling, risky, dangerous to the business and the founder, and always a very long way from success in business.For my startup efforts, early on, I read lots of advice. Some of the most credible advice was essentially the corollary above.Lots of main street businesses have no equity investors — pizza carryout, auto body repair, general auto repair, grass mowing, asphalt paving, roofing, kitchen/bath remodeling, independent insurance agency, rental property owner/manager, manufacturers’ representative, CPA, etc. Problem is, those businesses are labor intensive, with thin margins, and have little prospects for becoming big businesses. A good point about those businesses, and no doubt much of the reason they exist on nearly every main street in the US, is that they have a very strong Buffett moat from a geographical barrier to entry — they have essentially no competition more than 50 miles away.But now, for a sole, solo founder, self-funded, 100% owner, is a unique time in history due to Moore’s law, readily available infrastructure software, and the Internet (with astoundingly high data rates heavily due to tiny solid state lasers lighting optical fibers). So, in short, write some software for a mobile app, a Web site, or a cloud-based software as a service (SaaS). A biggie thing is, such a business can easily need less capital equipment than any of grass mowing, pizza carryout, auto body repair, etc. And, as we saw with Plenty of Fish, such a business can become worth $500+ million.Then, here’s the next bit of bad news: There is not enough money in the US for many $500+ million solo founder, 100% owner businesses. For $500+ billion, the number is smaller. So, such a business will be exceptional. So, either the founder is darned lucky or knows something, has some secret sauce.There is a long, well tested way to have some secret sauce — field crossing. So, take something from field A to field B and make a bundle. Example? Sure: Over time, eventually some people, somehow, did some walking between, I don’t know which direction came first, Europe and either India or China. Europe got silk from China and spices from India. All this was overland. Then, sure, each valley, river, etc. the overland traffic had to cross wanted a toll. The total of the tolls was huge. If can get rid of the tolls, then can make big money, fast.Due to military or commercial interests, there was good progress in open ocean sailing, where tolls are difficult to extract.So, for the field crossing, take A open ocean sailing to B the spice trade and make a bundle. One shipload of black pepper from India to England could have one fixed for life.Now, with Moore’s law and the Internet, there should be big bucks in software for providing people with new, desirable, powerful, valuable information and, then, on the same screen showing them some ads selected in part on what information the users are interested in.The information likely the most valuable is that with the desired meaning. So, how to do that, that is, how to work with, handle, recognize, analyze, etc. meaning?Sure, the computer science people are convinced, down to the centers of the cells at the centers of their bone marrow that the answer has to do with speech recognition, converting voice to text, understanding natural language in text, with artificial intelligence and machine learning. Totally convinced. Charging Serengeti herd of 5000 Wildebeest convinced.Of course, there is nothing, zip, zilch, zero, nichts, nil, nada, anywhere in the last 70 years of computer science that in any significant way says how to have machines learn, have machines be intelligent, or how to have computers work with meaning. So, on meaning, the computer science people make no progress and pump out lots of hype and nonsense. Hold conferences? Yes. Make progress? No. Nor will they within at least several decades. Borrowing from the US Space Program, they are The Wrong Stuff.On meaning, the computer science people are where the overland spice traders were before they understood open ocean sailing.Yes the computer science people know about BIOS code, virtual memory operating systems, quicksort, heap sort, AVL trees, Bachus-Naur form (BNF) specifications of programming language syntax, compiler writing, tree traversal, encryption, semaphores for locking protocols, relational database, have a long list of NP-complete problems, and have borrowed a lot from L. Breiman’s CART (classification and regression trees), etc., but meaning? Nope.Not many people know how to do the needed work with meaning. They are, did I mention, “exceptional”?Pursue good secret sauce? Sure. And now we learn that just the mud wrestling can involve “heavy liftiing”. Gads. Pursue risky, dangerous, useless BoD mud wrestling? Hopefully never.
Is it the VC’s responsibility to exert pressure for management change? Be that they are shareholders, I believe we should also contrast between a great board or a compromised one. The proxy to support workplace culture/behavior, whether good or bad is a consequence of the board’s action or inaction.
What do you see as best practices for VCs that lead rounds for token pre-sales?
.High levels of liability insurance?JLMwww.themusingsofthebigredca…
CONTRIBUTORS:OFF TOPIC ALERT!Formula 1 racing.Who enjoys formula 1 and who is your favorite driver.Currently for us: Lewis HamiltonPast: Ayrton Senna da Silva the Brazilian.’WTF?!’ — Vettel Fumes After Clash with Hamilton (via https://br.app.link/get-the… ) http://teamstre.am/2sFB2eT
CONTRIBUTORS:Fred and group are not thr norm.There is no amount of PR firms recrafting and changing the narrative on some Financier’s who were flat out Raiders.Every VC firm or Investor isn’t an Activist.They may fool you but we don’t allow history to be rewritten to favor those who have demonstrated how they hurt companies and don’t share any value for customers. Case in point Sears CEO Edward Scott “Eddie” Lampert.
Awesome post! It’s not only applicable to VCs. In any organization it’s crucial to know and support the ones who do the heavy, even unpopular lifting. Don’t settle and promote only the ones who are swimming with the stream and shy away from situations, where you need to make a stance. It’s great to see when this rare leadership surfaces from time to time.The ones who are willing to make a stance are the pillars for a sustained company culture and result in long-term, strong business performance.
It was worth reading this post just to see the term “shitty VCs.” Love it when you don’t mince words.
I agree with your post, just not the example. The Uber board has been asleep at the switch hoping success would cover management issues. Benchmark did the hard work but way too late. Yes they get credit for making it happen in the end. But maybe if they did the hard work earlier this would have never ended up this way. HARD WORK should never becomes public.
Insightful, honest money > gobs of funding.IRR cannot be the primary optimization KPI; there is a goodwill or rapport “social currency” of honest dealings and helpful feedback, mentoring and positive participation to fill-in the gaps. People also want to have a good time while working hard, and have a long-term relationship that extends to subsequent funding rounds, ventures and other opportunities.
at the risk of sounding disrespectful or asinine (not my intent), i think the phrase “heavy lifting” should be reserved for founders and their team. a good VC supports the founder/team who are doing the heavy lifting, and bad VCs either have a neutral, or even negative effect.