In what is rapidly devolving into an all-out brawl on the board of the world's highest-valued private company, a group of Uber shareholders have asked the venture capital firm Benchmark to step down from the board of directors.
This move comes only a day after Benchmark took the aggressive step of filing suit against Uber's former CEO Travis Kalanick, arguing that the founder had violated his fiduciary duty to the company and had committed fraud by seeking to "increase his power over Uber for his own selfish ends." Their suit is seeking to remove Kalanick from the board and reduce his role at the company.
First uncovered by Axios, we've also confirmed that an email, signed by Shervin Pishervar of Sherpa Capital, Ron Burkle of Yucaipa Companies and Adam Leber of Maverick, criticizes the manner in which Benchmark demanded Kalanick's resignation and their subsequent lawsuit against him.
"...We do not feel it was either prudent or necessary from the standpoint of shareholder value, to hold the company hostage to a public relations disaster by demanding Mr. Kalanick's resignation, along with other concessions," the letter says in part. "Accordingly, we would request that Benchmark help the Company realize its full potential by allowing the necessary work to be done in the Board Room rather than the Courtroom."
The group further requests that Benchmark divests enough of their Uber shares (currently valued at $8.4 billion) to lose their board appointment rights. TechCrunch has reached out to Benchmark and Sherpa Capital for more details.
Uber declined to comment on the report.
Uber's board of directors will reportedly be meeting later today. Below is the full text of the email, which was sent this morning:
As a group of shareholders of Uber Technologies, Inc. (the "Company") we were surprised and distressed to learn through the media of the lawsuit brought by your firm against the Company, and its founder and former Chief Executive Officer Travis Kalanick.
Naturally, we share your concerns about the problems that the Company has confronted in recent months, but we are greatly concerned about the tactics employed by Benchmark to address them, which strike us as ethically dubious and, critically, value-destructive rather than value enhancing.
Specifically, we do not feel it was either prudent or necessary from the standpoint of shareholder value, to hold the company hostage to a public relations disaster by demanding Mr. Kalanick's resignation, along with other concessions, on a few hours' notice and within weeks of a personal tragedy, under threat of public scandal. Even less so your escalation of this fratricidal course – notwithstanding Mr. Kalanick's resignation – through your recent lawsuit, which we fear will cost the company public goodwill, interfere with fundraising and impede the critical search for a new, world-class Chief Executive Officer. Benchmark has used false allegations from lawsuits like Waymo as a matter of fact and this and many actions has crossed the fiduciary line.
Benchmark's investment of $27M is worth $8.4 billion today and you are suing the founder, the company and the employees who worked so hard to create such unprecedented value. We ask you to please consider the lives of these employees and allow them to continue to grow this company in peace and make it thrive. These actions do the opposite. Accordingly, we would request that Benchmark help the Company realize its full potential by allowing the necessary work to be done in the Board Room rather than the Courtroom. To this end, at this point, in light of your suit against the Company, we believe it would be best, and hereby request, that Benchmark remove its representative from the Company's Board and move promptly to divest itself of enough shares in the Company so as to cease to have Board appointment rights. We have investors ready to acquire these shares as soon as we receive communication from Benchmark that they are willing to withdraw their lawsuit and sell a minimum of 75% of their holdings.
We are also asking for a symbolic Board of Directors vote on this matter at today's Board meeting to show how the Board of Directors stands on this lawsuit brought against the company, its founder and the 15,000 employees of Uber who have all worked so hard in concert to create the fastest growing company in history. Many other shareholders share our views and will be adding their names in the days ahead. Any shareholders who want to join this letter and petition may email one of our signatories of this letter so that we can submit a final list of shareholders who support this request.
Benchmark's move is very controversial in Silicon Valley. "Things have really gone off the rails," said Kate Mitchell, co-founder and partner at Scale Venture Partners, on TechCrunch's Equity podcast. Uber has had "huge value destruction" and Benchmark's team "obviously believes that there needs to be a huge wakeup call."
One Uber investor, who asked not to be named, told us that Benchmark made a "shocking" mistake when it granted Kalanick control of additional board seats last year. He said it was not good for shareholders, but believed Benchmark was letting Kalanick do whatever he wanted because they thought of him as the next Zuckerberg.
And there could be a long-term impact on Benchmark's deal flow. Investors cultivate a "founder friendly" image and some founders are already speaking out against Benchmark's decision.
Lucas Matney and Katie Roof wrote this story for TechCrunch.