Uber is the world’s most valuable startup — and may be the most dysfunctional

March 20, 2017, 3:38pm

When Uber introduced incoming president and former Target executive Jeff Jones in a blog post last year, CEO Travis Kalanick said that he and Jones had debated “how Uber could improve its reputation.” But in the wake of recent scandals ranging from alleged intellectual property theft to sexual harassment to the evasion of regulators, news broke on Sunday that Jones had left the ride-hailing giant after just six months on the job.


Efforts to rehab the Uber brand clearly did not go as planned — and now the world’s most valuable startup also appears to be one of the most dysfunctional.

“It’s important to note most companies go through periods of relatively high turnover during their growth phase… it’s called hyperscale turnover,” said Nabeel Hyatt, an investor at Spark Capital who invested in Cruise Automation, an autonomous driving startup that GM acquired for more than $1 billion last year. “But these executives [who have left Uber]… these were the folks who were supposed to be the thoroughbreds for the next stage.”

The recent series of scandals at Uber, Hyatt says, are “pretty unprecedented.”

The same day news broke that Jones had left, Uber disclosed that mapping chief Brian McClendon, previously the head of Google Maps, was leaving the company to pursue political aspirations in his home state of Kansas. Other senior staffers who have left include product executive Ed Baker and software chief Amit Singhal, whose departures were linked to sexual misconduct accusations.

And in February, after an ex-employee published a blog post alleging severe gender discrimination, the company launched an internal investigation, hiring former U.S. Attorney General Eric Holder to help lead it. The investigation is ongoing.

Uber is by far the biggest player in ride-hailing, but it’s also poised to become an early leader in autonomous driving technology, which is expected to be part of 76 million cars sold worldwide through 2035. That means the management turmoil will likely have consequences that extend beyond Uber itself.


Shahin Farshchi, a partner at Lux Capital who invested in the secretive billion-dollar self-driving startup Zoox, points out that Uber faces a real challenge attracting and retaining skilled workers. The fight for “technical talent” — engineers and others who aren’t in the executive ranks — in the self-driving space is extremely competitive; signing bonuses, Farshchi says, “are well into the six figures.”

Uber has raised tens of billions of dollars and has, says Hyatt, “not had any really material financial problems,” meaning it can afford lavish compensation for its employees. But compensation isn’t everything.

A recent Google lawsuit alleges that Uber’s current self-driving team lead, Anthony Lewandowski, stole proprietary information from Google before quitting and launching his own startup. That company, Otto, was purchased by Uber for $680 million last year. If Google wins the lawsuit, and Uber has to pay for the right to license Google’s technology, then the ride-hailing giant may lose a significant amount of technological freedom. This, in turn, would make it more difficult for Uber to attract and retain the talent it needs to succeed in its fight against Google, Lyft, and just about every automaker in the world.

“There are those… who are less concerned about compensation, and more concerned about seeing what they build,” Farshchi said. “If you develop the technology, you might have little say over how it’s deployed. So they go to places that have control, and they are willing to forgo ridiculous compensation packages.”


The good news for Uber, as described in a recent New York Times piece, is that the company has a long list of influential investors who will not let the company fail. And Bill Gurley, a Benchmark Capital investor who is venerated in Silicon Valley, is perhaps the most notable.

Last year, when Uber was engaged in a damaging price war with ride-hailing competitor Didi Chuxing in China, Gurley was reportedly the one who struck a deal for Uber to sell its China business to Didi in exchange for an equity stake. It was the best possible outcome for Uber investors, who are also deeply involved in the search for a Sheryl Sandberg–like figure to serve as Uber’s COO and help right the ship.

Gurley, Uber’s board, and other investors who must manage the fallout of the last few months have a difficult job ahead. In a statement provided to VICE News, Jones said that “the beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber,” a public parting shot that’s rare in Silicon Valley. (“We want to thank Jeff for his six months at the company and wish him all the best,” an Uber spokesperson said in a statement regarding Jones’ departure.)

Yet despite all the dysfunction, neither Hyatt nor Farshchi, who have both funded direct competitors of Uber, believe that the company has yet suffered a knockout punch.

“They’ll have to redeem themselves,” Farshchi said. “Given Uber’s reach and footprint, they’ll have a shot at doing that. This is something they can recover from.”