The VC Who Engineered the 2017 Uber CEO Coup Just Got Very Rich
(Bloomberg) -- When Uber Technologies Inc. went public on Thursday, investor Bill Gurley received one of the biggest personal payouts in venture capital history: an amount estimated to be more than $600 million, according to data compiled by Bloomberg. But the path to that payday was neither obvious nor easy, and included the purge of the company’s fiery founder and chief executive officer, Travis Kalanick.
Gurley’s crusade to oust Kalanick was highly unusual. Venture investors’ success depends on their ability to convince entrepreneurs to sell them equity in their startup. Crafting a reputation for being “founder friendly,” and remaining loyal to the original team, has become increasingly important in recent years as money from SoftBank Group Corp.’s investment vehicle and other megafunds has flooded the ecosystem and investors jockey to prove they’re good for more than simply writing a check.
“As an investor, your hope is to back the founder indefinitely. Replacing founders does happen, but it’s maybe 5% of the time,” said Shawn Carolan, a partner at Menlo Ventures which backed Uber just after Benchmark. Carolan said while other firms, including his, all signed the 2017 letter demanding Kalanick resign, it wouldn’t have happened without Gurley.
“Bill was the catalyst” for getting rid of Kalanick, Carolan said.
Through a spokeswoman, Gurley declined to be interviewed for this article.
A towering Texan at 6 feet, 9 inches, Gurley is a former jock known for his acid wit on Twitter and an easygoing, convivial demeanor in person. After graduating from the University of Florida, he worked as an engineer at Compaq Computer and tried (unsuccessfully) to get a job with then-hot venture firm Austin Ventures. But before rejecting him, the firm's partners also gave him some advice: Go to Wall Street. That lead Gurley to work on Wall Street for a few years as a tech analyst during the early 1990s, building a reputation for blending his technological know-how with financial modeling. He was the first to call Dell Computer’s comeback. The now-legendary investment banker Frank Quattrone was an early mentor of Gurley’s, convincing him to move to Silicon Valley to cover internet companies for his firm in exchange for helping Gurley navigate the region’s burgeoning venture scene.
“From the first time we met, Bill confessed that his long-term interest was in becoming a VC investor,” Quattrone wrote in an email. “I convinced him his best path to launching that career was by establishing himself as the most credible lead analyst on the best venture-backed internet IPOs.”
It worked. Gurley landed a job as a VC in 1997, and moved to Benchmark two years later.
Benchmark is famous for making early, disciplined bets on startups, and taking an active hand in building companies. The firm has an atypical approach to splitting profits, divvying them up evenly among partners (most venture firms vary titles and compensation levels). Along with the firm’s history of successful exits—it backed Twitter Inc., Instagram, Snap Inc. and Stitch Fix Inc. among others— Benchmark has a track record of fighting with founders.
“We were always the anti-Benchmark,” Andreesen Horowitz partner Ben Horowitz told the New Yorker in 2015. (Horowitz and Gurley have a checkered history: After backing his startup Opsware, Benchmark pushed to replace Horowitz as chief executive.) Added his partner, Marc Andreessen: “I can’t stand him. If you’ve seen ‘Seinfeld,’ Bill Gurley is my Newman.”
Some tussles with founders led to lawsuits. Following the dot-com crash, three co-founders of consumer review site Epinions sued Benchmark, Gurley and other investors in 2005 for failing to disclose financial information material to a proposed merger. The suit alleged investors deprived founders and employees of tens of millions. It was ultimately settled, with the judge forcing Benchmark and August Capital to pay co-founders, including AngelList’s Naval Ravikant, for the loss. Ravikant declined to comment.
Raj Abhyanker, an engineer and lawyer, sued Benchmark in 2011, claiming it stole his idea for a neighborhood social network—much like the Benchmark-backed NextDoor. The suit was later dismissed. Abhyanker declined to comment, citing a confidentiality agreement.
From the start of their investment in Uber in 2011, Gurley and his partners recruited talent; smoothed relations with regulators in new cities; and helped the team consider new strategies, like incorporating autonomous driving technologies and electric bikes and scooters. Gurley, whose friends described him as having a close relationship with Kalanick, joined Uber’s board in 2011 as part of the investment and was a loud champion for the company. Through a spokeswoman, Kalanick declined to be interviewed for this article.
“He is an extremely powerful ally. He thinks strategically and sees around corners,” said Matt Maloney, founder and chief executive of Grubhub Inc., where Gurley served on the board until 2015.
But as years passed, Kalanick told colleagues he had an easy way of dealing with Gurley: Ignore his phone calls, and their frequency would diminish. Gurley seemed not to mind, but didn’t give up trying to get on the board’s audit committee.
When he finally got his wish, in 2017, he learned about huge losses that Uber had been quietly sustaining. Gurley’s worry turned to panic, according to colleagues who spoke to Bloomberg Businessweek in 2018. That spring, he dug in, trying to right the ship.
Uber had made good on the mandate to grow fast, expanding to hundreds of cities around the globe while introducing a range of price options and new services including food delivery and micro-mobility. But it came at a cost. In a bid to accelerate its goal to automate driving, Uber acquired self-driving startup Otto. It was a bold move complicated by the fact that Otto’s founder, Anthony Levandowski, had been a leader of Waymo which housed Google’s own self-driving efforts. Google successfully sued Uber for knowingly stealing trade secrets, winning a sliver of Uber shares to settle the case.
And also under Kalanick’s leadership, a toxic company culture flourished, creating unequal compensation and work conditions, according to former Attorney General Eric Holder who Uber hired in 2017 to investigate claims of sexism and harassment.
It was at Gurley’s insistence that Kalanick fired Levandowski. And after hearing Holder’s report, Gurley supported Kalanick taking a leave of absence. It was Gurley and his partners who orchestrated Kalanick’s permanent departure, convincing other venture firms he had to go, and dispatching to Benchmark partners to deliver the news to the founder. The day after Kalanick’s forced resignation, Gurley quit Uber’s board, handing his seat to Benchmark’s Matt Cohler.
Gurley doesn’t speak about the dramatic episode publicly, but Quattrone said he was forthcoming during a private gathering of tech executives last fall.
“He was incredibly candid about his experience there, warts and all, displaying a humility and ability to learn from his mistakes,” Quattrone told Bloomberg. “In an environment where some leading VCs defer to founders to a fault, he was willing to stand up for the values he believed were right, even if it risked his relationship with founders more broadly."
There are other signs that the lessons of Uber’s tumultuous past continues to resonate with Gurley. During a September presentation he made to students at his other alma mater, the McCombs School of Business at the University of Texas at Austin, he offered practical advice on landing a dream job. He described dozens of relationships he’d had in the industry over the years; notably missing was any mention of Kalanick and Uber. When a student asked what the hardest part of his job was, Gurley let out a prolonged chuckle that lingered. He seemed to be deciding how to answer.
“Any time you’re unsuccessful in getting a founder to be successful, it’s tough,” he said, adding that the transition from startup founder to CEO requires significant work. “They don’t all make it.”
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