by Isaac, Mike
Kalanick and Michael had another advantage, due mostly to luck and timing. From the earliest days of Silicon Valley, the funding ecosystem had been a relatively small one. Local VCs invested in local startups. Venture firms had investment partners with technical chops, those who could appreciate the complexity and logic of their portfolio companies. VCs picked their companies wisely—or at least due to a kind of logic and overarching investment thesis. This dynamic persisted through generations of boom-and-bust cycles.
But the rise of technology companies attracted a different kind of bankroll. Outsiders were starting to have “FOMO”—fear of missing out—as tiny startups began to yield outsized returns. Over two years beginning in 2005, YouTube raised about $10 million in VC capital; by 2006, Google acquired the startup for more than 150 times that amount. Mark Zuckerberg spent $1 billion on Instagram when the company had just thirteen employees. No one wanted to miss the waves of tech money flooding in.
Mutual funds, investment bankers, overseas sovereign wealth funds, and foreign governments noticed the enormous wealth being created by IPOs held by Google, Twitter, and Facebook in Silicon Valley. And they saw that the most obscene wealth accrued to the early investors who bought before the companies went public.
Traditionally, hedge funds stuck to markets they knew and invested across a range of publicly traded companies. But slowly, institutional investors from these funds—the T. Rowe Prices and Fidelity Investments of the world—started to trickle over to Silicon Valley. Hedge fund portfolio managers who oversaw hundreds of millions of dollars knew they had to be invested in tech, lest they miss the boom. And of all the private companies raising money in the Valley, Uber was the most important. Uber was the unicorn to end all unicorns, and investors were desperate to land a share.
Kalanick took advantage of that demand. He still harbored wounds from his early experience with Michael Ovitz, the venture investor who betrayed him when Scour was sued by the entertainment industry. After that experience, Kalanick never trusted investors again. So as a condition of allowing them to offer him money, Kalanick offered them miserable terms. Private companies aren’t obligated to make their internal statistics public, but investors with a significant ownership stake are generally given insight into the company’s financials. Kalanick, however, over time stripped some major investors of all “information rights,” and limited the degree of detail offered to others. Moreover, investors had to agree that Kalanick would continue to hold his supervoting shares while newcomers only received shares with weaker voting power. Every supervoting share Kalanick held counted as ten votes in the company, whereas every common share only counted as one vote. Kalanick also had the allegiance of Garrett Camp and Ryan Graves—his two early co-founders and strong allies who also held their own cache of supervoting shares.
In effect, Kalanick had created a powerful cabal that supported his power as chief executive. No investors could meddle in how he spent Uber’s money, no shareholders could tell him who to hire, who to fire, and so on.
Uber was Travis Kalanick’s company—and if you were lucky, he would let you invest.
Google Ventures hustled to be invited to buy into Uber. But at every step, Travis Kalanick kept asking for more.
David Krane, a longtime Google employee turned venture partner, had spent months stalking this deal. He had heard Uber was raising capital again. Krane just needed a chance to get himself in front of Kalanick to charm the entrepreneur into taking his money.
Krane made headway whenever he could. In early 2013, the investor spotted Kalanick at the annual TED Conference at the Long Beach Performing Arts Center. Kalanick was sharing a laugh with Cameron Diaz, starstruck at the actress’s fame. Sensing an opening, Krane sidled up to the conversation and politely nudged Diaz aside, inserting himself in front of Kalanick. Krane had done some big deals for GV in the past—including Nest, the smart thermostat company, and Blue Bottle, the boutique coffee chain—but Uber was the whale he dreamed of landing.
The TED moment had left an impression on Kalanick; he liked the idea that a company as vaunted as Google was pursuing him. Later that year, Krane and the other top partners at Google Ventures spent months courting Kalanick, hoping to get a piece of Uber’s Series C round of venture financing. As the two teams sized each other up, Kalanick sent over the usual, blunt demands: “Your firm comes to our building,” Kalanick said, “and you present an investment proposal to us. Then, we decide if we want to let you in.”
The Google guys weren’t used to this. Getting an investment from Google Ventures was a privilege, not something an entrepreneur had to think about. Though Google Ventures hadn’t been around as long as storied institutions like Kleiner Perkins or Sequoia, an investment from GV was a strong signal that your company was legit.
Krane and his partners made a first-class presentation to Kalanick and Michael at Uber headquarters. They vowed to give Uber all kinds of support, be it by helping to recruit talented executives from GV’s vast network, or offering GV’s deep strategic experience. All of that, plus a yachtful of money. Krane and his partners did well. They convinced Uber to do the deal.
Then Kalanick gave them the numbers: Uber, he said, wanted to raise $250 million from a single investor, valuing the company at a whopping $3.5 billion.
The Google guys bristled. This was a staggering amount of money, even for venture capital. Google Ventures hadn’t typically been doing investment rounds of that size, usually opting to focus on early and “growth-stage” rounds. They felt more comfortable writing smaller checks to companies, in the realm of single- and low-double-digit millions. And GV usually invested earlier in a company’s history for a larger amount of equity ownership. Seed investing meant taking on more risk. It also meant more reward if the company turned out to be a home run.
But this Uber scenario was different. Google Ventures was being asked to write a quarter-billion-dollar check—a substantial chunk of the capital in the entire fund—to just one company. And it was being told it should be grateful for the chance. Krane and his partners were not used to this.
After a prolonged back and forth, Krane convinced his partners to bite the bullet. They cut the single biggest check GV has ever written to a portfolio company—and they were treated just like everyone else.
As he had done with previous investors, Kalanick shut Google Ventures off from receiving regular, detailed information about Uber’s progress. The sheer size of the check only managed to buy an observer seat on Uber’s board of directors—a much coveted, if limited, spot for such a high-profile company. Normally, the guy who leads a large investment like this one gets a seat with voting power. But Kalanick brushed Krane aside for someone higher in the Google hierarchy: David Drummond.§§§
Kalanick gave Drummond a proper seat on the board, which was no small matter. Drummond had started working with Google in its infancy. He had been a partner at Wilson Sonsini Goodrich & Rosati, the high-profile Valley law firm, when he first met Larry Page and Sergey Brin. After helping Google raise some of the company’s first investment rounds and bonding with the co-founders, Drummond joined Google full-time in 2002 to help lead the company through its eventual IPO. Having arrived early, Drummond rose to become one of Larry and Sergey’s most trusted lieutenants, eventually landing such lofty titles as “Senior Vice President of Business Development” and “Chief Legal Officer” at Google. He was also given purview over Google Ventures’ investments, as well as investments through Google’s other major investment arm, Google Capital. In short, Drummond was what they referred to in the Valley as a “BFD”—a big freakin’ deal. He was strategic, well-connected, and highly prominent. To Kalanick, having David Drummond join Uber’s board would signal that the company enjoyed the full strategic power of Google. Drummond acquiesced, agreeing to join the board.
Kalanick also managed to sneak in another last-minute surprise for Krane. Up until the day the deal would close, Krane knew
Google Ventures had been competing with another, unidentified, firm for the investment spot. And Krane was led to believe that Uber ended up choosing GV over that other firm. But at the eleventh hour, after Krane and Kalanick had spent weeks hammering out the deal terms, Kalanick informed Krane he wanted to include another investor in the round: TPG Capital.
Krane was pissed. TPG Capital was one of the world’s preeminent private equity firms, having participated in some of the most high-profile leveraged buyouts of companies in corporate history. In 2007, TPG partnered with Goldman Sachs to buy out Alltel, then the world’s fifth-largest cellular carrier, for roughly $27.5 billion. At the time, it was the largest leveraged buyout in the telecommunications industry. Google Ventures was one of the biggest fish in the Bay Area, but Kalanick wanted the swagger and global connections that came with taking money from TPG Capital. The firm also offered him a trip on its corporate jet, a creature comfort that came with only top-tier firms.¶¶¶ Though he worked with David Trujillo, a TPG partner, to put the deal together, Kalanick wanted a bigger name from TPG on the Uber board—David Bonderman. A legend in private equity, Bonderman was a founding partner at TPG who harbored connections with celebrities, executives, regulators, and heads of state around the world. Just as Drummond’s name sent a certain message to the tech world, Bonderman’s participation telegraphed Uber’s importance to the broader business community. And in the end, Kalanick just wanted the investment.
In the end, despite investing some $258 million in the round, Google Ventures and Krane had to acquiesce. TPG ended up purchasing $88 million in shares directly from Garrett Camp, who was willing to sell some of his stock.**** There was nothing Krane could do to stop the sale.
And Kalanick wasn’t done asking for things. He then demanded the most coveted sugar-plum status symbol in Silicon Valley: a meeting with Larry Page.
Chapter 10 notes
††† Ex-Tellme staff would have wide influence the next generation of internet development. Mike McCue, its CEO, went on to found Flipboard, while others like Alfred Lin would work on Zappos and eventually land at Sequoia Capital. Hadi and Ali Partovi, well-respected entrepreneurs and brothers, founded Code.org. Others went on to join Stripe, Facebook, Amazon, and others. Emil Michael was in good company.
‡‡‡ Gurley thought wrong. The relationship would go spectacularly awry.
§§§ Krane negotiated a “board observer” seat, which allowed him to attend meetings, but without the ability to vote. It was irksome, given that Krane had sourced the deal himself, but better that than be cut out of the room entirely.
¶¶¶ If it was meant to dazzle Kalanick, it didn’t work; his TPG jet flight was a one-way trip to Beijing. On the way back home, he had to fly commercial.
**** Camp, unbelievably, used the money to continue funding StumbleUpon, which he still believed could become a dominant force in social networking. After years flailing, Camp finally pulled the plug in June 2018.
PART Ⅲ
Chapter 11
BIG BROTHER AND LITTLE BROTHER
The Four Seasons in Palo Alto is a towering semicircle, sheathed entirely in reflective glass, rising above US-101. The windows shimmer silver in the midday sun, as if the building were a giant processor chip lodged in the heart of Silicon Valley.
It was also a ten-minute drive from Google’s global headquarters in Mountain View. Somehow Krane had been able to accommodate Kalanick’s final demand and lock in a meeting with Larry Page and David Drummond. Kalanick and his dealmaker, Emil Michael, were invited to a 9:00 a.m. breakfast at the Googleplex.
But Kalanick was a night owl, accustomed to working until 11:00 p.m. followed by a nightcap with other entrepreneurs nearby. There was no way Kalanick could make a nine o’clock meeting in Mountain View. So, Krane booked Kalanick a suite at the Four Seasons.
Krane had a surprise in store for the CEO that morning. Kalanick walked out of the hotel doors to his idling Uber. He tossed his backpack in the backseat and prepared to head south.
Before his Uber driver could pull away, another car showed up—one that looked nothing like the Porsches and Teslas idling near the valet stand. Krane had talked the engineers in Google’s “X” division into loaning him one of Google’s famed self-driving cars. The white Lexus SUV pulled up, sporting Google’s logo beneath an array of lasers and cameras. Kalanick’s unmanned chariot had arrived.
Krane’s stunt worked. Kalanick was stunned, giddy like a teenager. He cancelled his Uber, hopped into the back of the Lexus, and accepted his ride down south towards the future. (He was so excited, in fact, that he left his backpack in the other car.)
The meeting proved exactly as wonderful as Kalanick had imagined. The group—Larry, Drummond, Kalanick, Michael, and Bill Maris, the managing partner at Google Ventures—spoke like old friends, musing together on what fruits the partnership would bring to the world.
Meeting Page, in particular, thrilled Kalanick. Page was the type of founder Kalanick had worshipped from a young age. He was a self-made man who had engineered an elegant solution to an insanely difficult problem, organizing the entire world’s information using search algorithms. Kalanick loved efficiency—Scour and Red Swoosh, his first two startups, were predicated entirely on the notion of being efficient—and Google was the most efficient search engine ever built. Kalanick felt that with Page as his mentor Uber would be unstoppable.
“It was like big brother and little brother,” Kalanick later said about that first meeting.
Travis’s impression of the meeting didn’t exactly sync with reality. Anyone who has met Larry Page knows that he is not a personable guy, and the furthest thing from anyone’s “big brother.” Page is an engineer’s engineer; socially awkward, disinclined to take meetings with anyone outside of his inner circle, and obsessive about the incredibly complex problems he wishes to solve.
For Page, the investment was strategic. The Google co-founder harbored a deep interest in transportation. He kickstarted Google’s self-driving car research long before other tech and automobile companies thought it was possible. He poured millions of his personal wealth into researching flying cars. Larry Page didn’t care about Travis Kalanick; he cared about the future of transportation.
Moreover, Kalanick never internalized Page’s philosophy on in-house competition. Larry Page gave his divisions a large degree of autonomy. Google Ventures, in particular, told outsiders that it was a separate entity from Google proper, meaning it didn’t necessarily report back to the mothership. Ostensibly, it was also true that just because you were getting a GV investment didn’t mean you had Google’s support.
Despite Page’s lack of visible affection during the breakfast, Kalanick believed he was making a crucial ally. The group talked about potential ways they could collaborate. Perhaps the companies could improve Google Maps through Uber’s millions of daily trips. (Uber, in turn, was powered navigationally by Google Maps.)
Page stayed for a short time to talk about these partnerships, and then excused himself to wander his sprawling campus. Kalanick couldn’t wait to meet him again for their next “jam sesh.”
As Kalanick was hammering out an exciting future for Uber with top brass at the Googleplex, Anthony Levandowski sat frustrated just a few buildings away.
Levandowski had dedicated his life to technology and robotics. Born in Brussels, Levandowski immigrated to the United States as a teenager and landed in Marin County, just across the Golden Gate Bridge from San Francisco. From a young age he was obsessed with maps and vehicles. And he loved building and tinkering. He spent his undergrad years in the East Bay, at the University of California, Berkeley, where as an industrial engineer he built one of his first robots—a Lego-constructed machine that could pick up and sort Monopoly money. Soon he convinced his classmates to enter the DARPA Robotics Challenge with him, a program put on by the Department of Defense in which competitors would buil
d autonomous cars and race them across the Mojave Desert. They entered with high hopes, but the autonomous vehicle they built, a motorcycle nicknamed “Ghostrider,” ended up crashing within seconds of beginning the race.†††† The loss deflated him; Levandowski liked to win almost as much as he liked building his robots.
He scored a post-collegiate job at Google working on the company’s Street View project. Levandowski was the exact type of engineer Google loved to hire; curious, brilliant, and harboring a wide array of interests outside of his main duties at Google.
Levandowski became an unmistakable presence on campus, in part because of his enormous height; he was six feet, seven inches tall. But his personality loomed just as large. He was gregarious, engaging, sharp, and messianic about tech—especially his own projects.
At the time Levandowski worked there, Google encouraged employees to embrace the company’s “20 percent time” initiative. That meant 80 percent of your work at Google was meant to focus on your job, but you could spend 20 percent of your time working on other interests.
For Levandowski, that meant building robots. He formed a startup outside of Google named 510 Systems—a nod to the Berkeley telephone area code—and with a group of other employees began building tech that could one day prove useful to Google. That included sensors and other software specifically for self-driving cars. Unbeknownst to Google, the search giant was soon buying much of its tech for the street-mapping project from one of its own employees, Levandowski, who sold the gear via a middleman.
Google eventually found out about Levandowski’s ruse. Instead of firing him, Google decided to buy Levandowski’s startup for $20 million.
Side hustles like 510 Systems defined Levandowski. He liked money, but what he liked more was finding hacks and work-arounds. Levandowski may have labored at a giant corporation, but he was still a scrappy startup guy at heart. Building a business and selling it back to Google was validating; he had found a hole in the 20 percent time system, exploited it, and won. The $20 million windfall was good, too.
