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Uber: Is In A Crisis

Benchmark Capital, a venture capital firm that was an early investor in Uber and holds a seat on the board, has sued Travis Kalanick, Uber’s founder and recently-ousted CEO.

The suit, scooped by Axios, alleges breach of contract and fiduciary duty by Kalanick. Basically, Benchmark is accusing Kalanick of pulling strings to try and stack the board in his favor, and eventually orchestrate a triumphant return as Uber’s CEO.

That’s not some reading-between-the-lines interpretation; it’s exactly what Benchmark is saying in its suit:

Kalanick, the former CEO of Uber, to entrench himself on Uber’s Board of Directors and increase his power over Uber for his own selfish ends. Kalanick’s overarching objective is to pack Uber’s Board with loyal allies in an effort to insulate his prior conduct from scrutiny and clear the path for his eventual return as CEO—all to the detriment of Uber’s stockholders, employees, driver-partners, and customers.

Benchmark reportedly led the movement that saw Kalanick ousted as CEO in June. Thanks to a vote held in June 2016 that expanded the size of the board from 8 to 11 members, Kalanick retains control over three board positions — one of which he has granted himself. Benchmark alleges that Kalanick didn’t disclose details of “gross mismanagement” before the vote, and therefore wants the court to reverse the 2016 vote and remove the board seats.

That would kill Kalanick’s seat on the board and most of his remaining influence. It would also lock him out of the company that he founded, and still owns around 10% of. Benchmark, for reference, holds about 13%.

Kalanick making a return has been something that’s been on the table ever since he was ousted. If you remember, he was actually supposed to be taking a “leave of absence” initially, and that was only changed after Benchmark’s intervention. Following his resignation, over 1,000 employees signed a letterasking for him to be reinstated.

There’s a lot at stake for Uber right now. The list of challenges facing the new CEO, when they’re found, is daunting to say the least. Uber has no senior management, only a few more years of burning cash until it goes bankrupt, and a pending lawsuit against Google that could destroy Uber’s self-driving car efforts.

The last thing that Uber needs, unfortunately, is a months-long legal civil war between a major investor and the company’s founder — who is still loved by some of Uber’s employees. Right now, it’s a battle over control of the company, but it could prove to be an existential crisis all too easily.

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