Why did a group of Uber’s biggest investors push CEO Travis Kalanick out? A nice narrative would be that they demanded a real consequence for the culture he enabled, which led to the harassment scandal that has embroiled the world’s most valuable startup.
The truth is something else: Investors have put millions into the ride-hailing giant, and they believed that keeping Kalanick around could hurt their return.
Kalanick’s resignation — which is a firing, really, despite a laudatory tweet from Benchmark Capital’s Bill Gurley, who reportedly advocated for Kalanick’s exit — does not appear to be about accountability for the failures in the company’s corporate culture or management that were revealed in last week’s report issued by former U.S. Attorney General Eric Holder.
Instead, Uber and its investors are more concerned about what comes next for Uber, and its bottom line. In a statement sent to VICE News, the company said that “by stepping away, [Kalanick is] taking the time to heal from his personal tragedy while giving the company room to fully embrace this new chapter in Uber’s history.”
The stakes have never been higher for Uber. Valued at nearly $70 billion and swollen with $8.8 billion in venture capital and private equity investment, investors are aching for the company to go public and for Uber’s business to finally live up to the promise of its rapid growth. In the first quarter of 2017, Uber narrowed its losses for the second consecutive quarter from nearly a billion in 2016 to $708 million in the first quarter of 2017, still a huge river of red but moving in the right direction.
For Uber’s investors, cutting those losses brings it closer to an IPO, and brings them to a multibillion-dollar payday. But had Kalanick remained at Uber as CEO (he will stay on its board of directors, and he and his allies still reportedly control a majority share of the company), it is possible that the public controversy surrounding Kalanick would have imperiled its business future.
A recent study from the consulting firm cg42 surveyed 1,502 ride-hailing customers and found that many Uber users are leaving the service: 26 percent are actively exploring alternatives and will use Uber less frequently, and 4 percent have already made the decision to switch services, with more than half saying they did so “because of the negative news that brought poor business practices and ethics to light.”
In addition to the culture crisis that set in motion the events leading to Kalanick’s ouster, this is due to the the viral #DeleteUber campaign, its messy lawsuit with Google’s parent company over alleged intellectual property theft, and ongoing bad press from its disputes with its independently contracted drivers.
Another recent survey, from the firm Second Measure, used anonymized credit card purchase data to showed that Uber’s U.S. market share fell from 84 percent at the beginning of the year to 77 percent, with most of that loss going to its primary competitor, Lyft.
This is the nightmare scenario for Uber’s backers: a torrent of scandals slowing down the company’s growth, which is the foundation on which the $70 billion still-technically-a-startup rests.
Because Kalanick exerted so much influence over every aspect of Uber, and with at least a half-dozen senior executive positions still unfilled (including CFO and COO), even keeping Uber on autopilot will be a heavy lift for whoever comes in next. But Uber’s board apparently believes the greater risk to Uber is the status quo.
Correction: An earlier version of this article misstated the percentage of Uber users who have switched ride-hailing services.