In September 2012, New York City’s taxi and livery regulators expressly told Uber not to launch its cab-hailing service. Uber did it anyway. The city vowed to penalize drivers caught using the app, but Uber pressed forward, offering aggressive discounts to riders and sending street teams out to recruit cabbies. After six weeks, the company had to leave the city. “Such is life as a transportation technology innovator, boldly going where no man has gone before,” CEO and cofounder Travis Kalanick wrote on the company blog. In an interview at the time, he acknowledged that Uber “came at New York pretty hard and fast.” In a roundabout way, you could say it worked. Less than a year later, Uber took New York.
By then, it was clear that “hard and fast” was Uber’s style, and venture capitalists were loving it. The Outline spoke to an early Uber employee, who recalled how investors were attracted to Kalanick’s “brashness” and intoxicated by the company’s growth. Whatever Kalanick was doing, it seemed to be working. “Basically it’s just a matter of ‘Oh, he’s getting results,’” this employee said. Whenever Kalanick clashed with colleagues, or gouged customers, or made inappropriate statements in public or internally, investors and other supporters forgave him. “It was like, ‘Roll your eyes, that’s Travis being Travis. He’s getting results, the company is growing, it’s the best thing for the bottom line.’”
On February 19, a former engineer wrote about her experience being sexually harassed throughout her year at the company. Finally, something broke. On February 20, Uber ordered an independent investigation that resulted in more than 20 firings and a slew of institutional changes. In light of the report, Kalanick — who also recently lost his mother — announced this week that he’d be taking a leave of absence. “If we are going to work on Uber 2.0,” he wrote in a letter to staff, “I need to work on Travis 2.0.”
But Travis 1.0 was shameless, strong-willed, and brash. In other words, exactly what Silicon Valley wants in a startup founder.
Adrianne Jeffries discussed Travis Kalanick's investor appeal on our daily podcast, The Outline World Dispatch.
A common refrain in Silicon Valley is that investors invest in people, not ideas. And what sort of person do they invest in? One trait that comes up a lot in blog posts by investors and startup advisers is headstrongness; the willingness, or even need, to bulldoze obstacles. A successful founder “is competitive and has a burning desire to win,” wrote a principal at Maven Ventures, a small VC fund and incubator in Palo Alto. “Being a founder and entrepreneur takes a thick skin. You have to be able to push through the naysayers, haters, and other negative Nellies, and that takes simple persistence,” wrote serial entrepreneur Kevin Sandlin.
“He’s getting results.”
This headstrongness is often accompanied by a maniacal conviction in one’s own righteousness, which is the end that justifies all means. Introducing new technology often means disrupting the status quo, and that means the successful founder is one who makes his own rules. In 2010, Paul Graham, the founder of startup incubator Y Combinator, laid out his philosophy in a blog post titled, “What we look for in founders.” One trait was “naughtiness.” “Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye,” he wrote. “They're not Goody Two-Shoes type good. Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter.” Or as Kalanick put it himself in an early interview: “I like pissing people off.”
Kalanick checks a lot of boxes for venture capitalists, who are looking for someone who can survive the psychological trial that is creating a new business. They are looking for someone like Steve Jobs, who was notorious for bullying, or Elon Musk, who shamelessly overworks his employees.
“I think that type of personality is helpful at the beginning because investors want to have religion,” said Joshua Baer, founder and executive director of Texas venture capital firm Capital Factory. “Entrepreneurs by definition are unreasonable, don’t take no for an answer, don’t think the rules apply to them.”
Kalanick has these traits in spades, Baer said, but he’s too extreme. There was the thing about spying on journalists. There was the thing about dodging the police. There have been many stories about how Uber mistreats its drivers, refusing to acknowledge them as employees. There was the executive who went to India to get a copy of a rape victim’s medical records.
Baer is based in Austin, which arguably gave Uber the most pushback out of any U.S. city. Austin passed legislation that would require Uber drivers to get the same background checks required of cab drivers, which prompted the company to give up on the city for a year. The state overruled those regulations, allowing Uber to return at the end of May.
Uber is still popular because of its usefulness. The company quickly gained ridership in Austin, Baer said, and at least one local competitor has shut down. But Uber has now sown so much ill will that Baer thinks people don’t want to see it succeed. “You can only get so far being an asshole all the time,” he said.
According to The Third Wave, the 2016 book by AOL cofounder Steve Case, headstrongness is becoming less and less relevant as Silicon Valley tackles industries beyond the internet. Instead, he argues, founders will be more diverse, more experienced, and less adversarial toward government.
The “screw-the-system, ignore everything, break everything” approach won’t work for things like government, healthcare, and transportation, Baer said, “where it’s not just pure capitalism at play.”
Meanwhile, the same qualities that once made Kalanick attractive to the money men are now making him a liability. For years, no one wanted to tell him no. He was helming a unicorn, a billion-dollar business that had revenue from day one and seemed unstoppably popular with users. Investors were scrambling to get equity in the company, and by now, most of them have. There are 81 separate investors in Uber, according to Crunchbase, which tracks startup investment.
“Entrepreneurs by definition are unreasonable, don’t take no for an answer, don’t think the rules apply to them.”
“Everyone got a piece of Uber,” said Baer, who is not invested in Uber. “Everyone is in that deal.”
Given that most of the Valley is invested in Uber, it’s understandable that not many venture capitalists have spoken out against Kalanick, which could be seen as a breach of fiduciary duty and a blow to their potential payout. Who in their right mind would reprimand Kalanick for his “abrasive style” or bother to look at company culture?
Are Uber’s investors secretly angry that Kalanick, who embodies the naughty, strongheaded entrepreneurial ideal, got pushed out over what could be seen as political correctness? Investors have differing opinions about Kalanick’s ouster (with so many of them, how could they not?) Based on off-the-record conversations, there is the sense that there are real issues — the company’s business appears unsustainable from the outside, with major changes needed to get Uber on track for an IPO — and it may be time to pull in a more experienced leader.
“I think they all get it,” Baer said of Uber’s investors. “Kind of like Trump and the Republicans. They don’t approve of what he’s doing, but they feel like they can’t come out against him without hurting themselves.” There is also the feeling that Kalanick is the victim of a media-driven witch-hunt that blew his missteps way out of proportion. Many believe he should stay with the company, if not necessarily as CEO. “He is a visionary,” Mitchell Green, founder of Lead Edge Capital, said on CNBC. “He has built an enormous business that is changing the way people live.”
“Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye.”
At least two of Uber’s investors have taken a stand. Freada and Mitch Kapor publicly criticized the company in February, saying they had witnessed “toxic patterns” and “tried for years to work behind the scenes to exert a constructive influence on company culture.” Meanwhile, board member Bill Gurley reportedly pushed for Kalanick to step away, at least temporarily.
Among employees, the mood is different. “Today was the single most amount of hope that they’ve had in a very long time, because people could see a future without Travis,” the early Uber employee told The Outline after Kalanick’s leave of absence was announced. “That’s the only way the company is going to evolve.”
It remains to be seen just how absent Kalanick will be. At a meeting on Tuesday about the results of the independent investigation into sexism and harassment, board member David Bonderman remarked that having more than one woman on the board would lead to “more talking.” He apologized and stepped down immediately after the remark was made public. Employees soon got an email from Kalanick, supposedly on leave, who promised “we” would be making more changes in “the coming weeks and months.”