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Lambda School is Silicon Valley's big bet on reinventing education and making student debt obsolete. But students say it's a 'cult' and they would have been better off learning on their own.

Businessinsider - Sat, 10/12/2019 - 00:32

  • Some of Silicon Valley's best and brightest believe that Lambda School is a new model for vocational education that could make student debt obsolete. 
  • The big innovation: Rather than paying up-front for tuition to its 9-month coding bootcamp program, Lambda School asks most students to sign income sharing agreements — where they pay a portion of their salary for the first two years after getting a job that pays $50,000 or more.
  • However, we spoke to former and current Lambda School student, who say that it falls short of that promise, with under-qualified instructors and an incomplete curriculum that requires them to rely on self-teaching and outside resources to complete the program. 
  • Those students say that the program is like a "cult," where they worry about criticizing Lambda School for fear of getting kicked out, and where they're encouraged by staff — including CEO Austen Allred — to respond to critical social media posts with positive testimonials. 
  • The Lambda School students say that when they voice concerns about the program or complain of harassment from fellow students, they get brushed off, ignored, or made to feel they were the problem.
  • Lambda School is a graduate of the famed Y Combinator startup accelerator program, and has attracted $48 million in venture capital from investors including GV (formerly Google Ventures), Stripe, and even Ashton Kutcher.
  • "While we can't respond to specific inquiries out of respect for privacy, we appreciate the concerns of any and all of our students. We are continuously aiming to be transparent on where we need improvement and the steps we are taking to address them," CEO Austen Allred said in a statement.
  • Click here for more BI Prime stories.

Erica Thompson has always had an interest in technology. Her father, a municipal transit operator, taught her the basics of programming, which she practiced while he built computers in his free time.  

She initially studied music education, but after her father had a heart attack, she decided that it might be time to pursue a career in programming. She had just wrapped up a software development course at a local college in Los Angeles when she saw a Facebook ad for Lambda School — an online coding bootcamp that requires no upfront tuition.

She decided to take a chance to hone her skills and make herself more competitive in the job market, without paying out of pocket. 

It's that very sales pitch that's driven Lambda School, based in San Francisco, to a position of prominence in Silicon Valley. A graduate of the famed Y Combinator startup incubator program (previous graduates include Airbnb and Dropbox), it's gone on to raise over $48 million from investors like GV (formerly Google Ventures), Stripe, and even Ashton Kutcher. The school boasts that there are nearly 3,000 students currently enrolled. 

What makes it unique from other coding schools is its income sharing agreement (ISA) model. Students sign a contract, agreeing to pay 17% of their income for two years when they get a job paying at least $50,000 a year, with a maximum payout of $30,000. It also offers a less-popular choice to pay a flat $20,000 in tuition, instead. 

To many, Lambda School represents a better way of thinking about higher education and vocational training, as Wired put it in an August headline: "Lambda School's For-Profit Plan to Solve Student Debt." And because students attend Lambda School remotely for eight hours a day, it's theoretically open to anybody, anywhere. The model has proven so appealing, other startups are following suit with their own ISA-based business models

Lambda School boasts of its successes, saying that graduates of the 9-month program go on to work for companies like Amazon, Google, or Microsoft. According to the Council on Integrity in Results Reporting, 60.9% of Lambda School students were employed 90 days after graduation, going up to 85.9% within 180 days. Graduates earn a median annual base salary of $60,000, according to that same study — although a Lambda School spokesperson puts that figure at $70,000, and notes that many graduates are in rural areas where average pay is lower.

What Thompson found, however, was that Lambda School was very different than what she hoped it would be. She says that she was brushed off by staff when she reported racist harassment from two of her classmates.

Not long after, Thompson says she was told that she was in danger of being removed from the program if she didn't hit certain goals. She says that she ultimately was kicked out of Lambda School, towards the end of the program, just days after raising her concerns directly with CEO and cofounder Austen Allred. 

"It seems that if anyone speaks up and is too critical of the program in any of the channels, they react as if the student is the problem, though they mandate feedback daily," Thompson told Business Insider. 

This is indicative of the general atmosphere at Lambda School, according to 5 former and current students, most of whom asked for anonymity for the sake of their careers. We also spoke to applicants and other people familiar with the Lambda School program.  

They say that while Lambda School pitches itself as a first step towards better job opportunities, the reality can be more underwhelming: The curriculum is lacking, the instructors are often under-qualified, and students are afraid to speak out in a culture described as being akin to a "cult," they say. 

"Lambda School is not worth the life it takes from you, and it's not worth the dollar amount you agree to pay them back," a former student said.

Lambda School did not make Allred available for an interview. In a statement, Allred said:

"While we can't respond to specific inquiries out of respect for privacy, we appreciate the concerns of any and all of our students. We are continuously aiming to be transparent on where we need improvement and the steps we are taking to address them."

"We adopted the ISA model to open up access to students from all walks of life and are constantly iterating on our curriculum and processes based on their unique experiences and feedback. At the same time, we're working to streamline those same feedback loops to make them as effective as possible. There's always room to improve, and we welcome any additional feedback on how we can continue to raise the bar."

'Trust the process'

Allred is known to many in Silicon Valley as a charismatic leader with a compelling personal background. He moved to San Francisco from Utah to break into the tech industry, and says he first lived in a car while his career got off the ground.

He's said that he decided to start Lambda School under the ISA model after being "taken aback" when speaking with someone who couldn't afford the $10,000 to attend a coding bootcamp. The goal, Allred has said, is to increase the economic opportunity for anybody, anywhere, who wants to build their own lucrative career in tech.

However, Lambda School students say that in reality, the program feels like a "cult" that attracts people down on their luck or otherwise in tough financial situations, and then locks them into an intensive program that ultimately leaves them on the hook to pay back thousands of dollars in their future wages.

"Lambda School is literally a cult," a former student said. "Cults are hard to leave. Cults play on your emotional vulnerability. Cults keep you mentally and physically exhausted so you can be more compliant…They're specifically targeting people who are vulnerable in hard-life situations."

To that point, 5 current and former Lambda School students tell Business Insider that they feel that they can't criticize or critique the program. 

A recent blog post from Allred highlights Lambda School's process for gathering feedback, where students are given constant opportunity to submit their thoughts, both directly to instructors and anonymously. 

However, the students say they don't feel comfortable airing any grievances: They're not only concerned about getting kicked out of the program, but also that they may end up blacklisted by companies like Nexient that are known to hire Lambda School graduates. 

Often, when students do bring up concerns about the school, they're just told to "trust the process," two sources say.

"It almost feels like gaslighting," a student said. "A lot of students have brought up similar concerns, and they're continually disregarded. There's a mantra they keep repeating: 'Trust the process of Lambda.'"

Troll defense

Allred, for his part, is known for personally responding to critics of Lambda School on social media. "People want to think that Lambda is a scam, because they want to believe the results we're producing are impossible," Allred recently told Wired.

It's common for students to spring to the school's defense, too. 

For example, when somebody posted to Twitter saying "Lambda School is trash," or when a Reddit user last year wrote a post saying "Is Lambda School really terrible?" users claiming to be Lambda School students chimed in with their thoughts. While those posts can sometimes contain critiques of the program, they're usually positive on Lambda School overall. 

"Your experience will vary based on who is your instructor and your PM, as with everything, some are better than others, but honestly, overall, I have had a really good experience, and I'm very happy with it," one commenter said.

However, these posts are at least sometimes made because Lambda School encourages students to defending the company's reputation in public, students say – with management, staff, and even classmates all known to encourage students to respond to any haters. 

A screenshot of Lambda School's main chatroom on Slack, shared with Business Insider, shows Allred himself thanking students for responding to a critical Twitter post. "Thanks guys for tweeting there, appreciate that," Allred wrote, as he shared a link to yet another Twitter post. 

'The curriculum is garbage'

The Lambda School students that Business Insider spoke with said that the actual curriculum has its problems, too. Expectations are unclear, they say, with constantly-shifting deadlines and classwork assignments that are themselves packed with software bugs. 

Some students say that to actually master the programming topics at hand, they had to use outside resources like Treehouse, Khan Academy or YouTube, because the Lambda School program itself wasn't sufficient. One former student goes so far as to say that it doesn't do enough to teach the fundamentals of computer science.

"Everyone knows the curriculum is garbage," another former student said. "They know it's not working. If you're keeping up, you either already had a foundation or you're self-teaching. The actual school is not effective at teaching. People are going outside to get what they need."

In general, many graduates who found jobs feel they would have been successful without Lambda School, though the school gets the credit for their success, two former students say.

Ultimately, some students say, they feel like they would have gotten the same or better education in coding with self-guided learning programs from places like Udemy or Khan Academy. 

"Lambda can do exactly the same as $10 course from Udemy," a former student said. "If you are able to get any resource on the Internet and spend the next few weeks actually reading through it and coding small projects, you're going to get a better experience than Lambda."

Students also give poor marks to the quality of teaching staff at Lambda School. Three current and former students complain that instructors are often themselves graduates of other coding bootcamps, with little real-world experience. One former student describes the instructors as "highly incompetent." 

Among the teaching staff is Ryan Allred, brother to CEO Austen Allred, who works at Lambda School as a data science instructor. However, his LinkedIn profile indicates that his experience in the tech industry consists of graduating from a web development bootcamp and working as an intern in the AI-related field of deep learning.

A Lambda School spokesperson defends his experience, and says he's "one of our higher rated instructors at the school." When Business Insider checked his LinkedIn profile after reaching out to Lambda School for comment, Ryan Allred's previous experience had changed from "Deep Learning Intern" to "Deep Learning Engineer."

Current and former students also say that Lambda School wouldn't be able to run without the labor of its team leads: students who are employed by the school to lead team meetings, fill out forms rating student performance, and conduct one-on-one meetings to review code. 

'Disorganized'

Former and current Lambda School students describe the program as "disorganized," with topics, projects, and even the length of the program itself seemingly changing at random. 

Starting in May, Lambda School extended the length of the program from 30 weeks to 9 months. A spokesperson says that existing students were given the option to either finish the program as scheduled, switch to the 9-month timeline, or else leave the program without triggering their ISA. No students stayed on the 30-week plan, the spokesperson said. 

However, three sources say that students weren't warned of the change at all and suddenly had their expected date of graduation extended by about a month with no warning. That presented a potential financial risk, the sources say, given that many simply don't have the time to work paying jobs while enrolled in the intensive program. 

This kind of disorganization appears to have led to at least one costly mistake for Lambda School: In August, Business Insider reported that Lambda School was facing a $75,000 fine for failing to obtain a key registration with educational authorities in the state of California, where it's headquartered.

At the time, Allred blamed Lambda School's former legal counsel for the decision not to apply for the registration in the first place. Failing to obtain that registration could endanger its ability to continue to operate, regulators told Business Insider. Currently, Lambda School's registration application is under review, authorities say. 

Read more: The hot Silicon Valley coding bootcamp Lambda School is paying a $75,000 fine for not registering properly with the state of California

Two people also say that the application process for Lambda School is confusing and inconsistent. Susan Money, from Michigan, said that she was unimpressed with the quality of a prerequisite screening class required to enter the program, and she never heard back from Lambda School after she completed it.

Another, Jacqueline Homan of Pennsylvania, who applied for the program hoping it would lift her out of poverty, said that she withdrew from that same class for medical reasons, and was told that she could re-enter at any time — but was bumped from Lambda School's Slack without notice in the interim period and couldn't raise Lambda School for help, even though she contacted the school to add her back.

Later, when Homan posted about her Lambda School experience on Quora, Allred responded, saying Homan's statements were false and that she was not accepted. Homan says she never received any rejection email.

"I basically got blown off," Homan told Business Insider. "If a program like that, that practically guaranteed job placement, if something like that isn't for someone like me, who the hell is it for?"

Diversity matters

Lambda School prides itself on a diverse student body. Because classes are held remotely, and because there's no upfront cost, it can accommodate students who might otherwise not have access to an education in programming.  However, current and former students say that they've been disappointed that Lambda School's teaching staff isn't diverse, in turn: most of the school's instructors are male or are not from underrepresented groups.

"Diversity is an important area of focus for the team," a Lambda School spokesperson said. "There's been little turnover on the instruction team, and the initial team was hired primarily on referrals from the founders' home state of Utah, not a very diverse state. As we've grown we've adopted a rigorous hiring process that has resulted in 5 of the last 7 instructor hires coming from underrepresented groups."

Still, students say, Lambda School can sometimes make for a learning environment that's uncomfortable for students from underrepresented groups, with staff doing little to intervene. Students recall instances of racist memes spreading through the Slack chatrooms, or when a white male student wore a Mexican sombrero to a presentation in front of the class.

On one occasion, a former student says, instructors started referring to each other as "Nazis." Lambda School says it was unaware of this incident and could not find a record of it on its internal Slack. 

"We take all forms of racism, sexism, and other discrimination very seriously," the spokesperson said. "Many students have been removed for violating our student code of conduct, which is primarily focused on ensuring a positive, safe learning environment for all students. We actively respond to inappropriate, unprofessional, and discriminatory content."

When students do report harassment, however, they're brushed off, ignored, or made to feel that they were the problem, students say. That was the case with Thompson, the student who says she was dismissed from the program after complaining of racist harassment. 

"They advertise the school as being for non-traditional students who may not be able to afford other routes into the industry, but those same students are also less likely to be able to get justice if something goes wrong," Thompson said. 

'You have to buy into it'

So, ultimately, is Lambda School worth it? That appears to be a matter of perspective. 

The $60,000 median base salary of Lambda School graduates, as reported by the Council on Integrity in Results Reporting, is slightly below the $65,000 median across all coding bootcamps according to Course Report, which studied programs such as Hackbright Academy, Hack Reactor, and Fullstack Academy. However, going with Lambda School's own figures of $70,000 makes for a more favorable comparison.

A Lambda School blog post says that it plans to share more data on graduate salaries and employment each quarter, starting early next year.

Furthermore, the income sharing agreement model doesn't necessarily mean that Lambda School is cheaper than its competitors in absolute terms. Both the $20,000 flat-rate tuition plan and the $30,000 cap on ISA repayments over the two-year period are well over the average bootcamp tuition of $13,584, also according to Course Report

To be sure, not all Lambda School students pay as much as $30,000. According to Lambda School's own math, if a student makes the minimum $50,000 annual salary that triggers the ISA, that student would be on the hook to pay $708.33 a month, totaling to nearly $17,000 at the end of the two-year repayment period.

A spokesperson points out that Lambda School's program is significantly longer than other programs of its like, and says that it includes more resources to help students get a job after graduation. The spokesperson said that the various coding education programs are very different, and it can "be like comparing apples and oranges." The spokesperson said that "we have always been open and upfront about the cost of our program but believe it is important to also be transparent about other school factors."

There still remains the question of cost, however, given that Lambda School's ISA means that students will be giving up a portion of their earnings after graduation for the two-year repayment period. 

"That is an affordability concern for students who are getting a job and will still have to make ends meet, pay for shelter, pay for food, and take care of medication and other life expenses," Joanna Darcus, staff attorney at the National Consumer Law Center, told Business Insider.

Still, despite these concerns, a former student says it's no surprise why so many of their fellow students and graduates jump to Lambda School's defense on social media and elsewhere. For them, Lambda School is a big, bold bet on their future success. That means that when things do go wrong, they may not want to admit it — even to themselves, the former student said. 

"If you're in Lambda School as a student, you have to buy into it," a former student said. "You told your friends and family and girlfriend and kids that you're going to become a software engineer. You don't want to look like a loser if you didn't make it. I think people put all their accountability on themselves for making it work when the school is failing them."

Got a tip? Contact this reporter via email at rmchan@businessinsider.com, Telegram at @rosaliechan, or Twitter DM at @rosaliechan17. (PR pitches by email only, please.) Other types of secure messaging available upon request. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: Deutsche Bank analysts say the arrival of Google Cloud CEO Thomas Kurian 'changed everything' in the fight with Amazon Web Services

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NOW WATCH: 7 lesser-known benefits of Amazon Prime

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US defence chief: We're not abandoning the Kurds in Syria

Al Jazeera - Sat, 10/12/2019 - 00:30
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Amazon fires: What's the latest in Brazil?

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The fires in the Amazon have been dampened - but it's not the only area under threat.
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Paris killings: Terror at heart of police HQ jolts France

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The murder of four people is being seen as the worst assault in France since the Paris attacks of 2015.
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Trump impeachment: Marie Yovanovitch says she was ousted over 'false claims'

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Read the pitch deck that Uber founder Garrett Camp created for the ride-hailing giant back in 2008 – before the company became the $120 billion giant it is today (UBER)

Businessinsider - Sat, 10/12/2019 - 00:01

It's a big year for Uber.

The first name in ride-hailing had a ton of hype around it for the first half of 2019 thanks to its IPO. And though the $8 billion valuation fell well short of speculations of $100 billion, Uber is still one of the biggest names on the market today.

With such eye-popping numbers, it's difficult to remember a time when the 10-year-old company wasn't the juggernaut it is today. Uber currently has more than 2 million drivers ferrying passengers in more than 63 countries.

But back in August 2008, founder Garrett Camp was laying out his dream of a "next-generation car service" in a slideshow on his computer. Little did he know that dream would grow exponentially into a company that now handles grocery delivery, that has a rapidly growing on-demand food delivery segment in Uber Eats, and is developing a fleet of self-driving taxis.

As part of our coverage of the genesis of today's successful companies, BI Prime took a look at how Camp envisioned Uber (then UberCab) 10 years ago in his original pitch deck:

  • The core concept was largely the same: a fast and efficient on-demand car service that he described as the "NetJets of car services"
  • Uber originally wanted to screen its customers by only picking up members and banning hailing from the street
  • All of Uber's projected use cases, from airport pickup/dropoff to travel to and from restaurants, still hold up today

Some of what Camp laid out in the pitch deck no longer holds up, such as a few of Uber's projected eco-friendly benefits and the makeup of Uber's fleet of cars.

The rest of the deck outlines some key points such as:

  • Plans for surge pricing
  • The company's project valuation
  • Potential outcomes for the company, including a best-case scenario
  • Future optimizations
  • Marketing ideas
  • And more

BI Prime is publishing dozens of stories like this each and every day, chock full of exclusive content and industry analysis. Want to get started by reading the full pitch deck?

>> Download it now FREE

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Payments giants abandon Facebook's Libra cryptocurrency

BBC News - World - Fri, 10/11/2019 - 23:51
Mastercard, Visa, eBay and Stripe join PayPal in no longer supporting Facebook's effort to launch a currency.
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US postpones next tariff hike after China trade talks

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US President Donald Trump hails a "phase one deal" and suspends a planned tariff hike.
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The WNBA's inclusion in the world's most popular basketball video game will dramatically change the perception of women in sports

Businessinsider - Fri, 10/11/2019 - 23:12

  • "NBA 2K20" added the WNBA to the franchise for the very first time.
  • In an interview with Business Insider, "NBA 2K" gameplay director Mike Wang said the creative team had been planning to add the WNBA to the game for several years, but needed time to complete the process.
  • The WNBA players have been scanned and motion-captured just like the men, and the game has been tweaked to meet the skill, style, and finesse of the women's game.
  • Increased representation for the WNBA and other female athletes in video games will only help to increase the popularity of women's sports in the long-term.
  • Visit Business Insider's homepage for more stories.

Last night, Elena Delle Donne and the Washington Mystics beat the Connecticut Mystics in the fifth and deciding game of the WNBA Finals, closing out the season in impressive fashion. After the game was done, I turned on my Xbox to play "NBA 2K20" so I could replay the same matchup in the WNBA Finals myself.

As simple as it sounds, this wasn't possible two months ago. This is the very first year that the WNBA has been included in "NBA 2K," and it has already done a great job helping me and countless others become more familiar with the league's players.

Playing games like "Madden" and "MVP Baseball" as a kid helped make me into a sports fan, and I know I'm not alone. The presence of the WNBA and other women's sports teams will help open these games up to new audiences and help bring new fans to professional women's sports.

SEE ALSO: Elena Delle Donne powered through a broken nose and 3 herniated discs to bring the Washington Mystics their first championship

"It's about time," two-time WNBA MVP Candace Parker said.

"It's about time," Los Angeles Sparks star Candace Parker told Jemele Hill during an interview on Hill's podcast "Unbothered." Parker was the WNBA's Rookie of the Year and Most Valuable Player when she joined the league in 2008, and she told Hill that growing up she had always hoped to have her own sneaker, and to be in a video game.

"A lot of people are asking 'are you so happy?' No, this should've happened a while ago, but I'm happy it's happening now, and I'm excited for the future of it, because now young boys and young girls are going to grow up seeing that. And that's what you have to do — you have to be able to see it to accept it and believe in it."



Sexist trolls demonstrate why it's important to have the WNBA in "NBA 2K20."

When "NBA 2K" announced that WNBA players would be joining the game, it sparked a wave of misogyny from men who felt that 2K was wasting their time including the women's league. Many of them mocked the WNBA for being less popular than the men, asked why the WNBA didn't have its own game, and made demands for "realism" if men and women take the court together in the game (they don't).

In reality, those misogynists hammered home why its important for women to be visible within professional sports and gaming, so that a new generation of basketball fans can be exposed to the WNBA and see them as professionals and stars in the same light as the NBA's top players.

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Benchmark was the poster boy for 'founder-friendly' VCs, but after WeWork and Uber its reputation is looking tarnished

Businessinsider - Fri, 10/11/2019 - 22:44

Martin Roscheisen has been fired twice by the boards of startups he led.

Even so, Roscheisen says he would gladly work again with the venture capital firm that pushed him aside in one of the two episodes. 

Roscheisen, who is now chief executive of venture-backed diamond-maker Diamond Foundry, described that incident as a mutual decision he reached with a venture capital firm partner on the board who asked him to resign when it became clear that the startup was struggling to grow users.

But to take money again from the "the backstabber of all founders"?

Unthinkable, Roscheisen said.

The "backstabber" he's talking about is Benchmark Capital, a renown Silicon Valley venture capital firm which was in the news in September for its role helping to remove WeWork's charismatic and controversial cofounder Adam Neumann from the helm.

Benchmark is one of the most respected investment firms in the tech world, with a history of backing big hits like Twitter and Snap and a carefully crafted reputation of supporting, and understanding, entrepreneurs. This reputation is now under scrutiny as the events at WeWork and other startup interventions by Benchmark raise questions about the firm's true character.

The spotlight comes as the notion of the "founder-friendly" venture firm — a trend that Benchmark is largely responsible for creating — is being reconsidered across Silicon Valley and the broader investment community. The idea that startup founders are infallible looks more tenuous amid tales of excess and bad judgement at some high-profile firms. 

"There's just so much competition for the best deals and the best founders, that venture capitalists were tripping over themselves to say who could be the most founder friendly," said Mark Suster, a two-time entrepreneur and general partner at Upfront Ventures in Los Angeles.

"Then there are people who are old enough and wise enough, to have a long enough lens, to say, 'You know what, governance matters.' ... It's not the popular thing to say right now," Suster said, in defense of Benchmark's behavior.

A spokesperson for Benchmark declined to comment.

A pattern or a co-incidence?

For critics of Benchmark, the last few years provide plenty of ammunition.

In 2017, the San Francisco firm along with other investors pressured Uber's cofounder and chief executive Travis Kalanick to quit. It also sued Kalanick, alleging that he misled them in order to add board seats under his control. Benchmark was expected to see its stake hit approximately $8.25 billion in value after Uber went public.

Benchmark partner Bill Gurley also helped the board at Nextdoor relieve founder Nirav Tolia of his duties as chief executive last year, sources familiar with the talks told The Wall Street Journal. Tolia did not respond to a request for comment.

"I don't know how you explain to founders, 'Hey, the way I do early-stage investing is — I bet on founders,' and then you have this track record of explicitly not betting on founders," said Delian Asparouhov, a principal at Peter Thiel's venture capital firm Founders Fund.

"That to me is what feels morally corrupt (about firing founders). You have this dichotomy between what you're pitching to the next founder and what your actions actually reflect," Asparouhov said.

Benchmark, based in San Francisco, attracts founders with its impressive track record. The firm has modest fund sizes and still managed to take 25 companies public in the last decade, including Uber, Dropbox, GrubHub, and Yelp, PitchBook said. It now has 33 startups in its portfolio, compared to Kleiner Perkin's 90 and Sequoia Capital's 74.

Read more: How WeWork spiraled from a $47 billion valuation to talk of bankruptcy in just 6 weeks

Some investors say the chief executive ousters at WeWork and Uber, which was also backed by Benchmark, are more coincidence than correlation. The firings happened in the span of two years and took place at consumer-facing companies, which gave them more prominence in the media, said Semil Shah, a seed-stage investor at Haystack and a venture partner at Lightspeed in Menlo Park.

"There is a risk that if the collective board does not feel like the CEO is the best steward of the enterprise, that option is on the table," he said, referring to the option of ousting a CEO. "It's not a Benchmark thing. This happens at other funds."

Benchmark owes part of its success to the way it actively manages its portfolio. But as the firm tries to woo founders, its reputation among them and its response to the unfolding founder-friendly debate could determine its future ability to land the hottest deals.

Founder Fund's Asparouhov said any venture capital firm that has a history of firing founders could lose out on the most sought-after deals. A small number of founders who have prior experience working at a white-hot startup are more likely to create "extraordinary returns," he said, and are also more likely to know about the firm's track record.

Though these insider-founders are in the minority, "when it does come up, it tends to be painful for the investment firm," he said.

'Bill wants to win'

Heather Fernandez's account of working with Benchmark shows the firm's appeal. Her company Solv, which is working to bring convenience and transparent pricing to healthcare, raised money from the firm in 2017 and had partner Bill Gurley join the board.

Fernandez described the Benchmark partner as a "thought partner." Before the startup raised a cent of capital, they met and spoke on the phone often to fine-tune the idea and plan for challenges ahead.

"The role of an early-stage investor is to dig in with you," she said.

Others say Benchmark can turn on a dime if it feels its payday is at risk.

An entrepreneur who spoke on the condition of anonymity said the firm helped unseat him at his own startup when it was underperforming so the firm could replace him with a chief executive "in their network who they already know and trust."

Roscheisen, the entrepreneur who was ousted twice, felt scorned.

His firm Nanosolar, founded in 2001, had raised half a billion dollars to develop a cheaper and highly efficient solar cell. The problem was getting the technology to market. It was still untested at scale by the time Nansolar signed more than $4 billion in orders in 2009.

As a board member, Gurley had a latent presence, Roscheisen said.

"Gurley was stunningly clueless about the industry that Nanosolar was operating in even after eight years on the board," he said, adding that the investor was "weak in the knees at the first blow of a bit of wind."

After years of delays and unsolved product issues, Roscheisen said the board forced him to resign. Geoff Tate, a former chipmaker executive who replaced Roscheisen as chief executive, confirmed.

"Bill wants to win," Tate said. "Bill has a smart mind, and he's going to question things if he thinks it's going the wrong direction."

Gurley did not return repeated requests for comment.

Fernandez, the healthcare founder, said she expects her investors to have her back. But she knows being founder friendly has limits.

"If a board is hearing from the executive team, from employees, from customers, that there is a problem with the CEO, or if you see a destruction of value happening, I have a hard time believing that they'd say 'We're going to stand by this person no matter what,'" she said. 

In defense of Benchmark

The setup at WeWork meant that removing the CEO was not simple, and utlimately required founder Adam Neumann to agree to step down.

Neumann had locked up control of parent corporation The We Company ahead of the planned initial public offering. Its filings to go public, called an S-1, revealed that Neumann had 20 votes per share with his superpowered stock, about double the industry standard. He also owned an interest in four buildings that WeWork leased, received personal loans from the company, and bought the trademark to the "We" name so he could license it at cost.

Read moreWeWork details CEO Adam Neumann's web of loans, real-estate deals, and family involvement with the company

Outside observers have criticized investors, including SoftBank, for giving the founder so much power.

"People will say why would the VCs ever do that? How could they be that stupid? Sometimes, it is what it is," Mike Maples, Jr., a partner at venture firm Floodgate, said. "Your job is to make money for your investors."

Maples said if he passed on an investment opportunity because the founder had more voting shares than other directors, and the company went on to give massive returns, his firm lost. So did the university endowment or hospital that's invested in the firm as a limited partner and could have built another building on campus.

There are other stakeholders to consider, said Shah, an investor.

"I think when any top firm — it doesn't matter if it's Benchmark or your next top firm — I think they're making a decision on behalf of a number of key constituents," he said, "which include everyone from employees to the key executives at the company who may mutiny to their limited partners and protecting their principle investment."

Being founder-friendly is overrated

Venky Ganesan, managing director of Menlo Ventures, said being seen as founder unfriendly can hurt a venture firm's reputation.

The problem is, he said, what it means to support entrepreneurs has changed since he joined the venture business almost 20 years ago. Ganesan related founders to teenagers and investors to parents.

"These are people who have great potential, but we need to make sure they turn into responsible adults," he said. "You set boundaries, curfews, and consequences. ... Now the role has changed. They have become friends. We want to go and have a beer with them."

The events of the last few months could shift expectations again.

"People think founder friendly is you saying yes to everything," Ganesan said. "It's about helping you make the best decisions you can. Sometimes, it might mean saying no. We help you by saying no."

For Benchmark, which needs to win favor with a new generation of startups, the ability of founders to take such a nuanced perspective could make all the difference. 

SEE ALSO: The Takedown of Travis Kalanick — the untold story of Uber's infighting, backstabbing, and multimillion-dollar exit packages

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Phil Libin is refocusing his startup incubator from AI to health tech because there's no need to 'shove' artificial intelligence into everything

Businessinsider - Fri, 10/11/2019 - 22:40

  • All Turtles, an incubator launched and run by Evernote cofounder Phil Libin, has shifted its focus.
  • Libin launched it with the idea that it would foster applications and products based on artificial intelligence.
  • Now, All Turtles' focus is on developing products that help improve the health of individuals or workplaces.
  • Libin still thinks AI will be important for most of the products the company develops — just not all of them.
  • Click here for more BI Prime stories.

It's well known that startups quite often have to make a pivot — tweaking their business models or even completely revamping their whole market theses.

It turns out that startup incubators sometimes have to shift their focus also.

In the case of All Turtles, its pivot has been somewhat subtle, but still significant. Phil Libin, the company's CEO and founder, has shifted the focus of the incubator from fostering artificial intelligence applications and products to developing apps that improve people's health.

"We were always focused on solving what we thought were worthwhile problems, and the more we started looking at things, the more we realized that there's this common thread running through a lot of the problems in the world," he said. "The way that we live is maladapted," he continued. "It's not how we evolved to live."

All Turtles isn't abandoning artificial intelligence, by any means. One of the first applications to come out of its studio — Spot — is an AI-based chatbot that designed to make it easier for those who have experienced workplace harassment or discrimination to report what happened to them.

Read this: How an academic specialist in human memory created a chat app that's helping companies fight harassment and discrimination

Similarly, it's backed and is working with a startup called Tellus that's developing a device that's designed to monitor the vital signs and activities of elderly people using precision radar. Tellus' service relies on AI to make sense of the data coming from its radar-based sensor and to highlight notable changes.

All Turtles ditched a planned AI editor for its Sift app

But Libin is also open to having All Turtles work on projects that don't include any kind of AI at all. Last fall, for example, the company launched Sift, an app designed to provide users a deeper understanding of issues in the news without making them feel stressed or overwhelmed. The app covers topics including immigration, gun rights, and healthcare and offers a nonpartisan perspective with historical background and data to help explain the policy debate over such issues.

Originally, All Turtle planned to use AI to serve as a kind of editor for Sift. It would determine which topics were the most contentious, do some initial research on them, and even assign reporters to follow up and put together modules about them. But Libin and his team quickly realized that the AI was unnecessary.

"Humans are perfectly capable of knowing what people are yelling at each other about," he said. "It just felt better as a hand-crafted thing."

Libin insists the thesis he had when he launched All Turtles hasn't really changed. That assumption was that there are real problems in the world that haven't been solvable in the past that can now be solved because something is fundamentally different. Previously, his assumption was that the thing that was fundamentally different was going to be artificial intelligence or technology more broadly.

He still thinks that's going to be true most of the time. But he's open to the idea that some problems may now be solvable for reasons other than technology.

"Our goal is not to shove AI into things. Our goal is to make make products that make people healthier," he said. "I think a lot of them will benefit significantly from AI, but if they don't, they don't."

Changes other than just technological ones offer opportunities

Sift, for instance, is trying to address the problem of people feeling anxious and outraged and stressed out by the news. What's changed — what's created an opportunity for Sift —is the concern being raised by people such as former Google engineer Tristan Harris about how Internet services are stoking that outrage and how harmful that constant agitation can be to a democratic society that depends on informed citizens who can engage in reasoned, rational discussion, Libin said.

Similarly, while Spot depends on AI, it's also benefitted from the spotlight that's been placed on sexual harassment in the workplace by the MeToo movement and the massive employee walkout at Google last year.

"If you were doing something to combat workplace harassment and discrimination a few years ago, I think most companies would have said, 'We don't have that problem.' Now no one says that," Libin said.

"So, it's a combination of the technology getting better, but also the problem becoming much more obvious and acknowledged."

Even if All Turtles focus has shifted a bit, it's strategy hasn't. Libin is building out a global incubator; the company already has offices in Paris and Tokyo. It plans to open an office in Mexico City and other places around the world, although it's pushed back further expansion from this year until next.

Libin still believes in All Turtles' model

Libin also still believes in and is building All Turtles around another part of his thesis — that the way that technology and innovation is being fostered is fundamentally broken. Instead of focusing exclusively on using startups as the sole vehicles to develop technologies, All Turtles has taken a more eclectic approach.

In some cases it does back startups or develops technologies that will be spun off as separate companies. In other cases, it partners with existing companies to work on new products together. In still other cases, it develops technologies in-house that it plans to keep and offer as its own products.

"This idea that you can only innovate in startups is just a dumb idea," Libin said.

His only frustration with that thesis and All Turtles' model is that he keeps having to explain them to potential funders.

"Anytime you're explaining the model, you're not talking about the right thing," Libin said. "I am anxious to be at the point," he continued, "where no one cares about that anymore."

Got a tip about venture capital or startups? Contact this reporter via email at twolverton@businessinsider.com, message him on Twitter @troywolv, or send him a secure message through Signal at 415.515.5594. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: This tech VC is based in Singapore, not Silicon Valley. And the startups she's seeing are solving problems Silicon Valley isn't even aware of.

Join the conversation about this story »

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