LSD, Cargo Shorts and the Fall of a High-Flying Tech CEO
(Bloomberg Businessweek) -- Justin Zhu, chief executive officer of digital marketing startup Iterable Inc., was walking down Broadway in San Francisco on April 26 when he was summoned to a surprise conference call and abruptly fired. His co-founder, Andrew Boni, and the company’s entire board told him he was losing his job, primarily because he had taken LSD before a meeting in 2019.
The incident had indeed happened—Zhu says he was trying to take a small dose to improve his focus and accidentally took too much—but he also was being fired for other reasons. For the previous 10 months, Zhu had been talking with a reporter from Bloomberg Businessweek about his experience as CEO, the challenges of being Chinese in Silicon Valley, and his disputes with two of Iterable’s key investors. He hadn’t cut off the conversations when investors asked him to, the final straw in a long-running feud.
Zhu's firing has blossomed into a bizarre saga that hits on many of the classic Silicon Valley cultural touchpoints: founders who don't act like conventional businessmen, the search for additional productivity through drug use, and the risks of talking openly about the pressures of the job. It’s also a story steeped in the tense ethnic politics that are currently roiling the tech community and American society at large.
“In the early days, they’re looking for weird,” Zhu, 31, says now about venture capital investors. He’d taken Iterable from an idea to a company valued at about $2 billion, a stunning success by most measures. But when a company reaches that stage, he says, the new mantra becomes: Reduce the risk.
Zhu started his career as a software engineer at Twitter in 2011. After two years, he and Boni, who is now 32, poured their life savings into a new startup, Iterable, that created marketing campaigns and notifications that target customers in highly tailored ways, such as via email or text alerts telling customers the status of their food delivery orders. Before long, it started winning clients, and investors clamored to sign on. By the end of 2016, Iterable was valued at $125 million.
In person, Zhu exudes quirkiness in a way that fits with the freethinking ethos of Silicon Valley. At a recent business lunch, he wore a planet- and star-emblazoned teal velour sweatshirt that he says he bought because it reminded him of Antoine de Saint-Exupéry’s The Little Prince. He likes to discuss the amorality of capitalism, the principle of cosmic debt, and the need for more love in the world.
Even as Iterable thrived, Zhu says he sometimes felt alienated and sad. He believed that he and the company were too focused on sales and money at the expense of altruistic goals. When he attended the 2019 wedding of one of his investors in Lebanon, Zhu met an entrepreneur who suggested he take small quantities of LSD to improve his concentration and overall well-being. Zhu researched the idea and found studies that linked microdosing with improved focus and lower stress.
Back in San Francisco, Zhu was preparing for an important meeting with a prominent investor group. Believing that limited quantities of LSD would improve his pitch, Zhu, who had never before used the drug, decided to try the microdosing plan. He took what he thought was a small amount of LSD shortly before the meeting.
It didn’t go as expected. When he tried to walk the potential investors through a series of financial projections, Zhu looked at the screen and saw numbers and images swelling and shrinking, making them impossible to discern. His body felt as if it were melting away, he says. After an awkward pause, a colleague stepped in. Zhu took a swig of his tea, decided to speak from memory, and pressed ahead. The pitch did not lead to an investment.
Zhu’s relationship with venture investors had already become strained. He wore cargo shorts and a T-shirt to a meeting with Geodesic, a VC firm founded by John Roos, a former U.S. ambassador to Japan. An Iterable board member later informed him Geodesic wouldn’t invest, implying it was partly because of his casual attire. A person familiar with the firm’s thinking says Zhu’s attire didn’t factor into the firm’s decision, asking not to be named discussing private business matters.
At another investor meeting, Zhu noted that the abbreviation AI, for artificial intelligence, sounded like the Mandarin word for love. Afterward, a colleague asked him if he was “becoming Adam Neumann,” referring to the ousted CEO of WeWork known for holding forth on similar topics. He says he later heard that an investor questioned whether he’d been high at the time. Zhu says he wasn’t, describing his foray into workplace microdosing as a one-time event. Boni told him he preferred the more circumspect version of Zhu. Using his given Chinese name, Zhu says he replied that he was finally showing the real Zhu HaoRan.
In late 2019, after Iterable succeeded in raising an additional $60 million, two of his investors, Murat Bicer, general partner at CRV, and Shardul Shah, partner at Index Ventures, took Zhu out to dinner to celebrate. At a corner table at the restaurant Hakkasan, the two VCs directed the conversation towards the topic of the company’s leadership. Shocked, Zhu asked them if they were thinking of replacing him as CEO. “This is still your company,” Zhu says Bicer assured him, but Bicer also asked him to consider the benefits of a more experienced leader.
Zhu, who was born in Shanghai, says he recalled an early conversation with an Asian investor who said that Zhu would probably one day be asked to step aside for a White executive. He told the investors he wanted to stay on, in part to set an example for other East Asian immigrants. “I didn’t feel any understanding,” he recalls. “They were like, ‘OK.’” Then, he says, Bicer changed the subject.
Asked about the dinner, as well as other details of Zhu’s account, Index Ventures declined to comment through a spokeswoman. CRV did not respond to repeated requests for comment, and Bicer did not provide comment.
In the early days of the coronavirus pandemic, Zhu lined up a $30 million loan to keep the business running in case the bottom fell out of the economy. To close on the loan, the bank wanted references from his board, and Zhu says Shah stalled. Eventually, Shah asked to meet with Zhu, co-founder Boni, and Bicer in San Francisco’s South Park, a VC hub. The men gathered on benches outside, and the investors again brought up the topic of finding a new CEO. “You’re just pattern matching,” Zhu recalls telling them. “Your last 20 CEOs who went public, they were probably all Caucasian guys.”
It wasn’t a wild assertion. Most Silicon Valley CEOs are White men; many are from India, but few are from China, Japan, or Korea. Still, both Index Ventures and CRV have backed notable East Asian CEOs. CRV was an early investor in DoorDash Inc., led by Nanjing-born Tony Xu. Index had invested in Zuora Inc. and other companies run by East Asian executives.
Some of the disconnect with Shah, Zhu felt, was because of his East Asian background. Zhu believes his preference to seek consensus instead of shutting down dissenting views or engaging in noisy debates is a cultural trait his investors mistook for weakness—a stereotype about East Asians that academics researchers have cited as a reason for their underrepresentation in leadership positions in the U.S. In a paper last year, an MIT professor and his colleagues wrote that the “bamboo ceiling” reflected “an issue of cultural fit.”
Over the phone later that week, Zhu says Shah asked him to commit to running his board meetings with “more presence” and “driving it harder”—habits Zhu says weren’t in his nature. Most of the board also wanted Zhu to commit to memorizing key company metrics as part of a performance improvement plan. Zhu says he went along with the plan and the loan came through with Shah’s approval. But the conversation didn’t sit well with Zhu.
“I run the company with Eastern values,” he says. “That doesn’t mean I’m not equipped to be CEO.”
Zhu says the dispute amounted to discrimination, even if it doesn’t fit the stereotypical image of racial bias. Bicer grew up in Turkey, and Shah is of South Asian ethnicity. And when Zhu was fired, the board replaced him with Boni, who was Iterable’s president and who, like Zhu, is of East Asian descent. (Zhu says he suspects the board sees Boni as a placeholder and will replace him, too.)
By late summer 2020, business at Iterable was booming again. It was time to raise more money. But by this point, Zhu had grown distrustful of Shah and wanted to minimize his involvement in the deal. With Shah’s cooperation, he arranged for the investment firm Silver Lake to buy about half of Index’s shares and take over Shah’s board seat, a part of a funding round that would value Iterable at $2 billion.
The issue of bias and violence toward Asians entered the national conversation after the murder of eight people in Atlanta in March. Zhu, who can remember fleeing from schoolyard bullies who beat him up and told him to go back to China, helped organize a campaign called Stand With Asian Americans. The effort garnered pledges of support by 7,500 Asian-American business leaders and allies.
Zhu became more convinced he needed to tell his story. He informed his board, which no longer included Index, that he had been talking with a reporter at Bloomberg, and for the first time told them about the microdosing incident. They asked him not to discuss that or his deliberations with his investors. Zhu said he wanted to tell all of it, even at the risk of his position. “The only reason to share this is to help founders who are suffering, and any person who’s going through the things I’m going through,” he says.
Toward the end of April, Zhu’s investors again asked him not to speak with the press. Shortly afterward, he got the call telling him he was fired. Zhu sat down in a park in San Francisco’s Financial District, absorbing the news. “That’s the price of justice these days,” he says. “I’d rather tell the story and even be fired.”
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