Kalanick had a lot on his plate.
In addition to the numerous issues occurring domestically, Kalanick also faced a tough challenge abroad: cracking the Chinese market proved to be much more difficult than expected.
China had been the apple of Kalanick’s eye for a while - the obsession stemmed from the fact that many of the software entrepreneurs he looked up to seemed to be unable to penetrate the country.
Guys like Brin, Bezos, and Zuckerberg all fell short of their targets.
Kalanick, however, would be the first. At least that’s what he thought.
Several factors prevented American tech companies from simply tapping into the world’s largest consumer base, including the suspicion the Chinese government held towards Western companies.
For Kalanick, a bit of hostility from China’s government didn’t scare him. After all, he’d faced all types of threats and harassment from local governments and his plan of blitzing both sides of the marketplace with incentives to stimulate enough rides where officials couldn’t control it had already proven successful.
In addition to China’s contempt for American companies, Kalanick had another problem as well: Didi Chuxing, the Chinese ride share app.
Didi had solid traction combined with government backing, and it didn’t hurt that Tencent and Alibaba were on the cap table.
Kalanick knew that he would have to spend an exorbitant amount of money at the Chinese market to even have a chance at success.
And that’s exactly what he did.
For a brief period, Uber was spending between $40M and $50M a week on subsidies.
The plan seemed to be working. Uber began to slowly take more and more market share from Didi.
In just nine months, the number of trips taken to Chengdu and Hangzhao were 400 times the amount taken in New York City when the markets were the same age.
Investors were stunned.
But here’s the kicker.
They didn’t have access to the amount of cash Kalanick was spending.
And most of Uber’s Chinese rides were fake.
Scammers began to finesse the system in a variety of ways, including buying a bunch of cheap phones, creating multiple accounts for each phone, and then requesting their own rides through the passenger phones and “picking them up” with the rider phones, casually driving around the city with no actual passengers.
Although Uber’s CTO Thuan Pham and the “crisis team” were working overtime to minimize fraud, it seemed like every time they would patch a problem, a new one would arise.
Whether it was Didi sending undercover operatives to act as Uber employees and steal proprietary information or Tencent blocking Uber from WeChat, one major obstacle or another constantly seemed to be popping up.
Investors began to take notice and pleaded Kalanick to give up on the China plan. Kalanick refused initially, but after David Bonderman, a board member from TPG, began conversations with Didi’s investors, Kalanick eventually acquiesced.
Didi would take over Uber’s China business in exchange for a 17.7% stake in the Chinese company.
Kalanick had just suffered his first major loss—and it wouldn’t be his last.
Back in the States, Kalanick was facing another challenge: Google, after initially backing Uber, was now trying to undercut them.
Or, more specifically, that was Kalanick’s perception.
Sergey Brin had begun talking about rolling out a self-driving car. To Kalanick, that could only mean one thing… Google would eventually roll out a platform like Uber’s minus the expense of paying drivers, allowing them to provide the service at a much cheaper cost.
Kalanick could not sit back and play defense; he needed to go on the offensive.
Anthony Levandowski had previously been been the head of Google’s autonomous vehicle project but left after feeling constrained by the bureaucratic and risk-averse nature of his co-workers. He started his own company called Ottomotto, or Otto for short.
To convince his Google co-workers that he would not be a direct competitor, he envisioned the company as a way to make the trucking industry safer through the use of self-driving trucks.
After hearing about the company, Kalanick knew this was the perfect opportunity: not only would he be able to accelerate Uber’s self-driving capabilities, but it would also be a shot at Brin and Google by poaching one of their former bright minds.
The deal was quickly executed: Uber acquired Otto for $680M with an additional 20% profit sharing split for the profit created by the self-driving trucking business.
Uber was officially ready for war.
So was Google.
After hearing the about the acquisition, Larry Page was not happy. He’d not only lost the talented Levandowski but also many members of the autonomous vehicle team that had left with him.
Despite this, Google had been working on autonomous vehicles for years and was still the leader in the space. They eventually spun out the product into its own company and called it Waymo, referencing Page’s idea of “a new way forward in mobility.”
Page suspected that Levandowski had unlawfully used Google’s salary information to poach employees and sued him over it.
What was officially uncovered in the lawsuit revealed that this was just the tip of the iceberg.
Lewandowski allegedly downloaded more than 14,000 confidential files related to Google’s autonomous driving research directly on to his laptop.
This was also right around the time that Lewandowski launched a self-driving test in San Francisco without a permit and the vehicle was caught on video blowing through a red light.
Uber’s cap table came to quick consensus: Lewandowski had to go.
Although Kalanick typically loathed acquiescing to the demands of his investors, he knew he had no choice but to let him go.
For Kalanick, nothing seemed to be going right.
His reputation seemed to be worsening by the minute with the variety of problems that were accumulating.
It unfortunately continued to worsen.
He received the tragic news that his parents were badly injured in a boating accident. His father had five fractured ribs, a cracked vertebrae, a broken leg, and a collapsed lung. His mother was not as fortunate as his father and eventually passed away from the injuries she sustained.
Kalanick was crushed and immediately flew to Fresno, California where the accident occurred.
Simultaneously, the independent investigation that was being conducted into Uber’s workplace conduct—dubbed the Holder Report—had just been finalized.
There were several orders of business that derived from the report, but the most relevant was that Kalanick needed to step away from the company, at least momentarily.
Kalanick, obviously going through a lot, agreed without any real hesitation. He took some time off and gave himself time to recover physically and mentally.
But it was only a matter of time before he grew restless; Kalanick was a hustler and he could only not hustle for so long.
After a short period, Kalanick would frequently call his allies at the company and routinely attempt to make decisions through his proxies on both the executive team and the board.
He simply couldn’t help himself. In his eyes, Uber was literally his child.
What parent in their right mind would let someone else raise their kid?
However, from Gurley’s POV, he saw himself as the uncle who knew that he had no other choice but to separate the child from the father.
Not because he was a bad person or wanted to break the family up—only because he wanted what was best for the child.
Benchmark’s $11 million Series A investment was now worth billions after Uber’s $3.5B investment from the Saudis landed the company a $60B+ valuation. While this seemed like a surefire home run for Benchmark, Gurley had seen crazier in his lengthy investing career. It was his job to ensure that Benchmark’s LPs would be able to realize their upside and not see all of their paper gains fade away into the wind due to scandal.
Gurley knew the only solution was to can Kalanick. No ifs, ands, or buts about it.
Kalanick knew he would inevitably reach this fate; his cutthroat leadership style, endless pursuit of perfection, and willingness to win at any cost rubs nearly everyone the wrong way, with investors being no exception.
Because of this—in addition to the Ovitz situation—Kalanick seemed to be perfectly prepared for this battle. He made it a near impossible feat through clever schemes, like supervoting shares that ensured he maintained the bulk of the power in his company.
In addition, he had the “strength in numbers” advantage on his side: he still had the majority of the board on his side including co-founders Ryan Graves and Garrett Camp. Kalanick also still had the ability to appoint three additional board members at any time.
Gurley knew he had to be creative. More importantly, he knew he couldn’t do it alone.
And alone he was not.
Uber’s other institutional investors were in the exact same boat Benchmark was in: fortunate to have invested but worried that it would all come crashing down.
Lowercase Capital, First Round Capital, Menlo Ventures, and Benchmark banded together and came up with their plan: simply confront Kalanick, tell him he had to step down from CEO for good, and if he didn’t, threaten to take it public and air his dirty laundry. More specifically, they would call up their friends at the New York Times and publicize the feud, which would in turn hurt Uber’s valuation, which would lead to more investors demanding Kalanick’s departure, creating a flywheel effect.
The plan had been formulated. Now, it was all about execution.
By this time, Gurley and Kalanick were not on speaking terms, so Gurley knew he couldn’t be the messenger. To work around this, Matt Kohler and Peter Fenton, two Benchmark partners, would fly to Chicago where Kalanick was busy interviewing a COO candidate.
The day eventually came and the two men calmly walked into his private conference room, handed him the pre-written note, and waited for his reaction.
In a paradoxical sense, Kalanick couldn’t believe it but also knew this day would come eventually.
Kalanick was vindicated but in the worst way possible.
He had always known that investors could not be trusted—they swore to be founder-friendly, but at the end of the day, if they needed to kick you to the curb to satisfy the wants of their LPs, they would do it in a heartbeat. He’d simply thought he’d done enough to prevent that from ever happening.
After years of relentlessly fighting politicians, Big Taxi, local transportation officials, Lyft, Didi, the Chinese government, the media, and the general public, Kalanick seemed to be burned out. He simply didn’t have the willpower—given state of his personal life—to fight back.
He agreed to step down.
It was officially the end of an era.
As if it couldn’t get any worse, after receiving the news that the feud would not get leaked to the press, Kalanick awoke one morning to see the NYT saying he resigned after investors began to revolt over legal and workplace scandals at the company.
He’d been betrayed one last time. It was only fitting.
Uber would eventually hire former Expedia CEO Dara Khosrowshahi and would eventually IPO a few years later at a valuation of around $80B—far less than the initial goal of $120B that was originally floated around.
About 6 months later, Kalanick officially announced he would be stepping down from Uber’s board and severing financial ties through the sale of his stock. After a memorable ten year ride, it was all over.
In an interview with famed angel investor Jason Calacanis, Kalanick describes why he seemingly abandoned his fighting spirit in his final battle:
KALANICK: If an investor is running a political oppo campaign against you every day for six months straight, it’s going to wear you down…and then you know… [*emotionally trails off*]
CALACANIS: Your mom passed.
KALANICK: That’s when they went in for the kill…I just couldn’t hang…bottom line, I just couldn’t hang.
Being ousted by the board is nothing new for CEOs, even for the most successful ones.
In fact, Elon Musk was infamously booted from the helm of PayPal in 2004, receiving the phone call while on vacation (something he usually never did) in Sydney to watch the Olympics.
But the timing of this story makes it even more brutal.
To be forced out of the company just a week after his mother’s passing is a whole new level of being kicked while you’re down.
Whether Kalanick is the hero unjustly wronged by his enemies or the villain who received the justice he deserved can be debated.
But what cannot be debated is that he labored with knowledge and skill, yet left his property to one who did not labor over it.
This is vanity and a great misfortune.
Then I considered all that my hands had done and the toil I had expended in doing it, and behold, all was vanity and a striving after wind, and there was nothing to be gained under the sun.
Ecclesiastes 2:11
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Very interesting and informative