Silicon Valley Venture Capitalists Prepare for an I.P.O. Wave

With Dropbox and Spotify successfully going public, tech investors believe that a bonanza of initial public offerings is finally about to arrive.

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Hundreds of Start-Ups Tell Investors: Diversify, or Keep Your Money

Leading Silicon Valley entrepreneurs are forming a Founders for Change coalition to deliver a message to the white- and male-dominated world of venture capital.

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Women in Cryptocurrencies Push Back Against ‘Blockchain Bros’

Cryptocurrencies and blockchain were meant to be great equalizers. Instead, women are finding that the gold rush is already stacked against them.

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State of the Art: About That Joint: Marijuana Start-Ups Pass

By breaking marijuana free from smoking and its paraphernalia, new delivery methods — especially portable vapes — are transforming the image and utility of cannabis, and helping it grab a mainstream audience. In the booming new market, the drug of lazy stoners is being rebranded by start-ups as the “wellness” drug of tomorrow. It’s a cure-all for an anxious, tech-addled society — a salve for every ailment, a balm for every mood, ibuprofen meets a glass of red wine cut with Prozac and a hint of Deepak Chopra, all delivered to your door.

“This can be the challenge of cannabis, but also the opportunity — there’s thousands of possible combinations,” said Troy Dayton, the chief executive of ArcView. He pointed to the many different problems that cannabis companies are aiming to treat, from anxiety, insomnia and pain to problems with libido and creativity. “It’s just a merchandiser’s dream.”

The growth of Eaze, a cannabis delivery start-up operating in the Bay Area and San Diego, underlines the trends shaping the burgeoning industry. When Eaze started in 2014, marijuana “flower” — that is, the green bud you put in your pipe and smoke — made up 85 percent of sales.

Now flower is down to less than a third of sales. In 2017, flower was usurped by vape cartridges — kind of like e-cigarettes, they use an electronic element to heat a cannabis-infused oil. Because it does not burn organic material, vaping cannabis is considered safer than smoking, just as vaping nicotine is safer than smoking cigarettes.

“For a lot of new users, the concept of smoking just feels unhealthy to them,” said Jim Patterson, Eaze’s chief executive.

But vaping has other advantages over smoking. It produces a fraction of the odor, it doesn’t need any real gear, and it’s portable, easily hidden and very easy to use — press a button and inhale. And because cartridges can include flavors and mixes of different cannabis compounds to produce stronger or weaker effects, vapes can be branded and marketed at dozens of customer niches.

Eaze — which had been offering only medicinal sales until this year, and now sells cannabis for both recreational and medical uses — said that thanks in part to vapes, its sales grew 300 percent in 2017. (It declined to disclose a dollar figure.) By the end of last year, it was doing more than 120,000 deliveries per month. Women made up 35 percent of its customer base last year, compared with 25 percent in 2015. And its fastest-growing age group was baby boomers.

“The story here is that the average cannabis consumer is becoming the average American,” Mr. Patterson said.

In anticipation of full legalization, Eaze plastered the Bay Area in marketing, with billboards introducing cannabis as a therapy for several specific ailments: “Hello Marijuana, Goodbye Anxiety” and “Hello Marijuana, Goodbye Insomnia.” Mr. Patterson said the marketing had been paying off; orders have increased threefold since the start of the year. The company, which has raised nearly $52 million from investors, declined to disclose its valuation.

Another start-up, Cura Cannabis Solutions, an Oregon company that makes vape cartridges, reported similarly robust growth. In December 2016, Cura’s sales were $2 million; a year later, revenue had grown to $7 million a month.

Cannabis-related start-ups have previously reported trouble finding investors to touch their industry, but Nitin Khanna, Cura’s co-founder and chief executive, suggested that investors’ appetites had turned. “We are currently raising money at a $400 million valuation,” he said.

Vivien Azer, an analyst who studies the alcohol and cannabis markets at the financial services firm Cowen, said the rising appeal of cannabis was part of a long-term cultural trend. During the last decade, the social perception of marijuana has rapidly improved, to the point that its rise now poses a plausible threat even to the alcohol business.

“I view alcohol and cannabis as substitutes in the market,” Ms. Azer said. She pointed out that since 2008, there had been a steep decline in the number of 18- to 25-year-olds who reported consuming alcohol in the past year but a steep increase in the number who said they had consumed cannabis.

The trend is driven by a shift in risk perception. Young people used to think of smoking pot as riskier than alcohol, but in the last decade that idea has flipped.

“Increasingly young people view alcohol as more risky, and they view cannabis as much less risky,” Ms. Azer said. In a note to investors last year, she pointed out that cannabis use was gaining acceptance among all ages, ethnicities and income groups. Legalization also tends to slash the price of cannabis, further increasing its attractiveness.

The upshot in her report: Today’s young people are on the vanguard. Cannabis could be on the way to becoming the drug of choice for tomorrow’s America — a future in which lots of us get high, but no one smokes.

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State of the Art: Saudi Money Fuels the Tech Industry. It’s Time to Ask Why.

The money from regimes that have been criticized for their human rights records — from Saudi Arabia’s government in particular, which has plans to funnel potentially hundreds of billions of dollars into tech companies through its state-controlled Public Investment Fund — stands in stark contrast to those aims. By accepting these investments, tech companies get to revel in the branding glory of global good while taking billions from a government that stands against many of those goals — a government that has an abysmal record with human rights groups, that has systematically marginalized women, that has not had much legal due process and that has advocated an extreme form of Islam that has zero tolerance for just about any religious or intellectual diversity whatsoever.

“Look, every company has a choice about their actions and inactions,” said Freada Kapor Klein, co-chairwoman of the Kapor Center for Social Impact, which advocates for a more diverse and inclusive tech industry.

She said companies could choose not to do business with governments whose actions they found troubling, but many of today’s tech companies have lost a moral compass. “There is an elitism that makes it far too easy for them to rationalize their behavior with their belief that they are the smartest guys — and, yes, it’s always guys — in the room,” she said.

Unsurprisingly, this is not a topic many people want to talk about. SoftBank, the Japanese conglomerate that runs the $100 billion Vision Fund, which is shelling out eye-popping investments in tech companies, declined to comment for this column. Nearly half of the Vision Fund, about $45 billion, comes from the Saudi Public Investment Fund.

WeWork and Slack, two prominent start-ups that have received recent investments from the Vision Fund, also declined to comment. So did Uber, which garnered a $3.5 billion investment from the Public Investment Fund in 2016, and which is in talks to receive a big investment from the SoftBank fund. The Public Investment Fund also did not return a request for comment.

Twitter, which got a $300 million investment from Prince Alwaleed’s Kingdom Holding Company in 2011 — around the same time that it was talking up its role in the Arab Spring — declined to comment on his arrest. Lyft, which received $105 million from Prince Alwaleed in 2015, also declined to comment.

Privately, several founders, investors and others at tech companies who have taken money from the Saudi government or prominent members of the royal family did offer insight into their thinking. Prince Alwaleed, some pointed out, was not aligned with the Saudi government — his arrest by the government underscores this — and he has advocated for some progressive reforms, including giving women the right to drive, a restriction that the kingdom says will be lifted next year.

The founders and investors also brought up the Saudi government’s supposed push for modernization. The Saudis have outlined a long-term plan, Vision 2030, that calls for a reduction in the state’s dependence on oil and a gradual loosening on economic and social restrictions, including a call for greater numbers of women to enter the work force. The gauzy vision allows tech companies to claim to be part of the solution in Saudi Arabia rather than part the problem: Sure, they are taking money from one of the world’s least transparent and most undemocratic regimes, but it’s the part of the government that wants to do better.

Another mitigating factor, for some, is the sometimes indirect nature of the Saudi investments. When the SoftBank Vision Fund invests tens of millions or billions into a tech company, it’s true that half of that money is coming from Saudi Arabia. But it’s SoftBank that has control over the course of the investment and communicates with founders. The passive nature of the Saudi investment in SoftBank’s fund thus allows founders to sleep better at night.

On the other hand, it also has a tendency to sweep the Saudi money under the rug. When SoftBank invests in a company, the Saudi connection is not always made clear to employees and customers. You get to enjoy the convenience of your WeWork without having to confront its place in the Saudi government’s portfolio.

Then, finally, there’s the justification of desperation. Some companies don’t have any choice but to take money that’s offered to them. (In 2009, The New York Times Company took a loan from the Mexican billionaire Carlos Slim, who has been criticized for gaining his wealth through close connections with government officials.)

But the tech companies that the Saudis are itching to invest in often do have a choice; they are some of the most highly valued companies of our era, and many of them have no immediate need for more money. For instance: Slack, which raised $250 million from SoftBank last month, said it had no plans for spending the money and instead had raised it to preserve long-term “operational flexibility.”

But why take it from the Saudis? I suspect it’s the most obvious reason: because the money is there, and no one is making too big a fuss about it.

It used to be that most of the money in tech came from more vaunted sources — universities, philanthropies, pension plans and other nonprofits, which made up the bulk of funders to venture capital firms like Sequoia Capital and Kleiner Perkins Caufield & Byers.

Now we’re in a new era, when giant pools of money splash through sleek-sounding Vision Funds and come out seeming squeaky clean — and ready to fund the next great thing to make the world so much better, we promise.

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Uber Founder Travis Kalanick Resigns as C.E.O.

Uber’s board said in a statement that Mr. Kalanick had “always put Uber first” and that his stepping down as chief executive would give the company “room to fully embrace this new chapter in Uber’s history.” An Uber spokesman declined to comment further.

The move caps months of questions over the leadership of Uber, which has become a prime example of Silicon Valley start-up culture gone awry. The company has been exposed this year as having a workplace culture that included sexual harassment and discrimination, and it has pushed the envelope in dealing with law enforcement and even partners. That tone was set by Mr. Kalanick, who has aggressively turned the company into the world’s dominant ride-hailing service and upended the transportation industry around the globe.


Uber Investigation Leads to Shake-Up

An investigation into Uber’s troubled company culture has led to changes in leadership. The chief executive has taken a leave of absence and several others have been fired over the past two weeks.

By NEETI UPADHYE on Publish Date June 14, 2017. Photo by Mark Kauzlarich/The New York Times. Watch in Times Video »

Mr. Kalanick’s troubles began earlier this year after a former Uber engineer detailed what she said was sexual harassment at the company, opening the floodgates for more complaints and spurring internal investigations. In addition, Uber has been dealing with an intellectual property lawsuit from Waymo, the self-driving car business that operates under Google’s parent company, and a federal inquiry into a software tool that Uber used to sidestep some law enforcement.

Uber has been trying to move past its difficult history, which has grown inextricably tied to Mr. Kalanick. In recent months, Uber has fired more than 20 employees after an investigation into the company’s culture, embarked on major changes to professionalize its workplace, and is searching for new executives including a chief operating officer.

Mr. Kalanick last week said he would take an indefinite leave of absence from Uber, partly to work on himself and to grieve for his mother, who died last month in a boating accident. He said Uber’s day-to-day management would fall to a committee of more than 10 executives.

But the shareholder letter indicated that his taking time off was not enough for some investors who have pumped millions of dollars into the ride-hailing company, which has seen its valuation swell to nearly $70 billion. For them, Mr. Kalanick had to go.

Our Previous Uber Coverage

The five shareholders who demanded Mr. Kalanick’s resignation include some of the technology industry’s most prestigious venture capital firms, which invested in Uber at an early stage of the company’s life, as well as a mutual fund firm. Apart from Benchmark, they are First Round Capital, Lowercase Capital, Menlo Ventures and Fidelity Investments, which together own more than a quarter of Uber’s stock. Because some of the investors hold a type of stock that endows them with an outsize number of votes, they have about 40 percent of Uber’s voting power.

Benchmark, Lowercase, First Round, Menlo Ventures and Fidelity did not respond to requests for comment.

But on Twitter, Mr. Gurley of Benchmark, one of the earliest supporters of Mr. Kalanick at Uber, said of the executive, “There will be many pages in the history books devoted to @travisk — very few entrepreneurs have had such a lasting impact on the world.”

Mr. Kalanick’s resignation opens questions of who may take over Uber, especially since the company has been so molded in his image. And Mr. Kalanick will probably remain a presence there since he still retains control of a majority of Uber’s voting shares.

Taking a start-up chief executive to task so publicly is relatively unusual in Silicon Valley, where investors often praise entrepreneurs and their aggressiveness, especially if their companies are growing fast. It is only when those start-ups are in a precarious position or are declining that shareholders move to protect their investment.

In the case of Uber — one of the most highly valued private companies in the world — investors could lose billions of dollars if the company were to be marked down in valuation.

Uber, which has raised more than $14 billion from investors since its founding in 2009, has a wide base of shareholders apart from the ones who signed the letter. Uber’s investors also include TPG Capital, the Public Investment Fund of Saudi Arabia, mutual fund giants like BlackRock and wealthy clients of firms like Morgan Stanley and Goldman Sachs.

In the letter, in addition to Mr. Kalanick’s immediate resignation, the five shareholders asked for improved oversight of the company’s board by filling two of three empty board seats with “truly independent directors.” They also demanded that Mr. Kalanick support a board-led search committee for a new chief executive and that Uber immediately hire an experienced chief financial officer.

Mr. Kalanick is stepping down as Uber works to improve its relationships with some of its constituencies. Earlier Tuesday, the company emailed its drivers, who work as contractors, to let them know they would soon be allowed to take tips, which drivers had not been able to accept previously. The tipping change was among several new initiatives announced for drivers.

“Over the next 180 days we are committed to making driving with Uber better than ever,” the company said. “We know there’s a long road ahead, but we won’t stop until we get there.”

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