“I would love to understand what insecurity or concern prompted this joint letter,” Garg wrote to Newman, Activant Capital’s Steven Sarancino, L Catterton’s Michael Farello, and Nicholas Calamari, Better’s general counsel. Roughly 70 people—all or nearly all of Better.com’s investors—were copied. In the email, Garg suggested that Pine Brook Partners was a thorn in the company’s side and accused the firm “blackmailed me on 5 pm [sic] on a Friday afternoon and held the company hostage til I invested $5mm of my own personal money into the company around this time 2 years ago to prevent a potential event of default on our credit lines.” (Newman, Sarancino, Farello, and Calamari did not respond to multiple requests for comment. Pine Brook Partners did not immediately respond to a request for comment. Motherboard has no reporting to suggest that Pine Brook Partners did anything unusual in its dealings with Better.)
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Better.com CEO Called Top Investor ‘Sewage,’ Said Making Company Money Would Earn Employees ‘Freedom’
Months before laying off 900 employees over a Zoom call, Vishal Garg disparaged a top venture capital investor, which later sued Better.com. He also monologued about why declaring Indigenous People’s Day a company holiday would be a waste of money.
Vishal Garg was angry. It was April, and the CEO of Better.com was preparing to take his pseudo-tech mortgage startup public. The company had recently hired Kevin Ryan, a Morgan Stanley executive, as its chief financial officer, and Morgan Stanley was advising the company. An initial SEC registration form had even been drawn up. But the plan fell apart. The company decided instead to list itself on the stock exchange directly, by way of a merger with a special purpose acquisition company, or SPAC.
Some of its core investors weren't on board with the new SPAC-tacular plan. In April, three major investors, led by Howard Newman of the investment firm Pine Brook Partners, wrote a letter to Garg expressing concern with not going the more traditional IPO route, according to emails obtained by Motherboard. Garg exploded at Newman, calling him "sewage" on the "rocket ship" that was his company and an "ingrate and a thug and a miserable miser." Garg then demanded he divest from the company.
“Are you dissatisfied with the return you have received since then Howard … when you got someone at a major investment bank to vouch for you and your bonafides that you weren’t just another old private equity Neanderthal,” Garg wrote, adding that he wanted Newman to “tender your shares to the company and the other investors who actually care about its mission and growth.”
Garg then asked the broader group of Better.com investors for help in getting rid of Newman and the other investors who didn’t want to SPAC: “Even a rocket ship needs a garbage disposal bin and a shitter. Can you please help me take out the barnacles and the sewage. We are in orbit and we still haven’t been able to take care of these issues.” “Howard, I am done with getting triggered by you and wasting my time with you,” Garg wrote in a follow-up email 30 minutes later. “You are an ingrate and a thug. And a miserable miser. And I appreciate that your misery loves my company, you have robbed me of the joy of building this unbelievable company for the last time. I am blocking your email. Anything you have to say to me you can say to our general counsel. Bye bye Howard.”Soon after Garg sent these emails, Pine Brook Partners sued Better over the terms of its SPAC deal. The case was settled in November.
"Vishal is focused on doing everything possible to make access to home ownership more inclusive and less expensive," a spokesperson for Better.com told Motherboard in an email. "He has strongly held views on what it takes to get there and a strong track record in achieving results. He absolutely shares his perspective with board members and investors.""Newman and the fund he founded, Pine Brook Partners, sued Better in July 2021 for breach of contract," the spokesperson added. "It was a dispute over a technical provision in an investment contract with Better, and it was settled on mutually acceptable terms in early November."Better is a highly rated and digitally oriented fintech startup that offers a range of creative services in areas like mortgage lending and title and homeowners insurance. The company aims to make “homeownership simpler, faster—and most importantly, more accessible for all Americans,” and was listed as LinkedIn’s top U.S. startup in September, the second year in a row it received the designation. But current and former Better.com employees told Motherboard that Garg’s run-in with Newman was emblematic of Garg's management style, which they described as unpredictable and sometimes vindictive. Last week, ahead of the company's official SPAC, Garg laid off more than 900 Better employees over a Zoom call. The company closed the office on Wednesday, the day of the layoffs, and sent out an email invite at noon to the soon-to-be laid-off employees for a 12:15 p.m. meeting, according to three current employees and two employees who were laid off.
“If you’re on this call, you are part of the unlucky group that is being laid off,” Garg said on the Zoom, adding that "about" 15 percent of the company’s workforce had been axed, though a spokesperson later told Motherboard the number was actually 9 percent. But not all employees who were laid off were on the call. Some laid-off employees lost access to their company-issued devices before the layoffs and were unable to join Garg’s Zoom meeting, according to three laid-off employees."I wasn't even aware I got fired," one now-former employee told Motherboard. "Some people were locked out of their computers before the meeting even started and had no idea what was going on or that they were laid off. I had to call a friend and break the news to her,” a current employee said.IT employees told workers on Slack at the time that they were "looking into issues" with people losing access to their computers, according to screenshots viewed by Motherboard. "We will update shortly," they added.On the call, Garg said laying people off made him feel bad. But during a separate "town hall" call with surviving employees immediately afterward, Garg struck a different tone.“You will not be allowed to fail twice. You will be encouraged to fail once. But not allowed to fail twice. Not meeting deadlines will not be acceptable,” he told his staff during the digital town hall, according to a video of the meeting obtained by Motherboard.
“Today we acknowledged that we overhired and hired the wrong people, and in doing that we failed. I failed. I was not disciplined over the past 18 months. We made $250 million last year and you know what, we probably pissed away $200 million. We could have made more money last year and been leaner and meaner and hungrier,” Garg continued. “We lost $100 million last quarter. That was my mistake. We should have done what we did today 3 months ago.”“All of you are critical to advancing our decision. We are relying on you to drive harder and faster than you have before. If you felt in the past that people weren’t looking, well, everyone is looking now.” Ryan, the CFO, added, “This is all about offense. It’s darkest before the dawn. 2022 comes and there will be a lot of carnage in this industry, and we’re going to be capitalized, lean, mean.” Soon after the town hall, on the anonymous tech company-focused social media forum Blind, Garg criticized the laid-off employees, saying in messages viewed by Fortune that “at least 250 of the people terminated were working an average of 2 hours a day while clocking in 8 hours+ a day in the payroll system? They were stealing from you and stealing from our customers who pay the bills that pay our bills. Get educated.”“Leave now and save us both the trouble. You’re likely super well paid. Email me directly and we will pay you to leave early so we don’t sit here waiting for you to show up with your end of the work that needs to be done, and then get left holding the bag,” Garg said in messages to an employee who was upset about the layoffs. These messages were first reported by Fortune and corroborated by Motherboard. Garg confirmed that he wrote the messages to Fortune.
Some employees, he said, “just weren’t pulling their weight relative to the compensation they were being paid.” He then added, “I am sorry if you were in the wrong place at the wrong time with the wrong manager and weren’t able to put your best foot forward - again, we will be hiring for so many functions going forward, please reach out.” Following the Zoom fiasco, three top Better employees resigned from the company: marketing head Melanie Hahn, PR head Tanya Hayre Gillogley, and VP of communications Patrick Lenihan. Garg apologized to his staff over email on Tuesday for the way he “handled the layoffs,” saying that he “failed to show the appropriate amount of respect and appreciation for individuals who are affected and for their contributions to Better.” (The resignations and email were first reported by Insider.)“I own the decision to do the layoffs, but in communicating I blundered the execution. In doing so, I embarrassed you,” Garg wrote in the email, which was also seen and verified by Motherboard. “I realize that the way I communicated this news made a difficult situation worse. I am deeply sorry and am committed to learning from the situation and doing more to be the leader that you expect me to be.”
Garg’s often unprofessional behavior has been well documented in the past, particularly by The Daily Beast and Forbes, which have detailed his “scorched-earth management style.” But Garg’s behavior over Slack has led to exasperated frustration as well, according to Slack chats reviewed by Motherboard. Earlier this year, around Indigenous People's Day, Garg pushed back against a letter sent to him by employees that asked for the company to give employees Indigenous Peoples' Day off. Garg said “Better has ZERO obligation to do this” and argued that company’s payroll “runs about $5mm / business day” and that he had a “duty” to “all of you as shareholders and partners to not spend capital towards a purpose” that did not work toward the company’s stated goals.
“I respect the advocacy. And i too believe that the genocide of the native peoples of the Americas was a terrible event. So for those whose ancestors were affected, as an indian (from a part of india that was both ruled and colonized by the british and before that for 7 centuries of mogul invaders) myself, i feel deep sympathy,” he wrote “How do you feel that celebrating indigineous [sic] people day as a company holiday will result in actions that correct this historical wrong? It is not economic reparations, it is not political power.”
He added that those “adversely affected directly by the colonization of the Americas” should have “taken the day off if they wanted to . But just like we don’t take Diwali , or the day of the mutiny of 1857 or the boxer rebellion off, we won’t be taking this as a company holiday without a discussion of how else the company could spend those monies, to actually effect the change we seek.”“Thank you for your activism. Happy to have a dialogue,” he continued. “But in the interim, there is no power without capital. So please continue to help our customers and earn us our capital, and therefore our freedom. Thank you.” (When someone suggested “knowledge of what is actually happening in the world” was important too, Garg replied, “you can read books. We don’t need a day off that costs the company $5mm.”)
"In response to employees petitioning for Indigenous People Day, Garg offered to have the company do a Day of Service or donation matching," a Better.com spokesperson said. "In addition, Garg highlighted the company’s unlimited PTO policy for employees who wanted the day off."That "capital" is the most important key to freedom is something Garg has said regularly. In an email to staff on Feb. 1, the beginning of Black History Month, Garg stated, correctly, that Black homeownership lags behind white home ownership, and that many Black people face mortgage and housing discrimination. Garg stated that Black customers make up only 5 percent of the company’s customers and that “we’re not reaching nearly as many Black customers as we should be.”
He then went on to write “Without equality of access to and use of capital, there is no equality of power. And without power, there is no value to rules. Rules are simply suggestions for some and bars and chains for others … Capital, human and house, will help us make the world a better place for blacks. [emphasis his]”At another point, he asked if anyone on Slack was interested in buying a “modern farmhouse” in Garrison, New York. The house had still not been built, and Garg was interested in partnering with "a modern home builder. Its going to be beautiful. If you want a pool, you can let us know." The house cost $1.55 million without a pool, $1.7 million with a pool, Garg said. This was ostensibly to test the company’s new startup mortgage product, which gives startup employees “the opportunity to buy a home by pledging vested and exercised Better shares in places of a cash down payment,” Garg said in an email first announcing the program. That meant prospective homeowners could put zero percent down, but would be required to make a monthly $9,500 payment. “Or you can do 250k down and it’s $6100 per month,” he added. Employees said this was far out of touch—that very few people in the company made anywhere near enough money to afford such an expensive home.“ill take it with 500% DTI,” one person wrote in response. This was presumably a reference to debt-to-income ratio. The employee added a crying-face emoji, as did 43 other people (22 chose an exclamation emoji instead).“I would try to do this in a market that is more aligned with the budget of most of our staff,” another person responded. A Better.com spokesperson said this was part of a "pilot" program that is in "an early phase of a larger initiative that aims to help people use equity to obtain a home. And, Better is piloting a similar effort with Carta for some of their employees." "Construction in New York is expensive," Garg said. "We are going to work out a discount with the builder as much as we can. We aren't trying to make any money on it."