Email to former board member

---------- Forwarded message ---------

From: Ryan Caldbeck {{12 - - - - - - - - -}}

Date: Sun, Sep 29, 2019 at 8:38 PM

Subject: Feedback

To: {{13 - - - - - - - - - - - - - - - - - - -}}


I believe in the importance of feedback for both people in a relationship. We will never work together again but I still think feedback is a gift so I’m offering this to you. In this case given your historical relationship with us I worry that you won’t receive it well. Nevertheless I’m offering this up to try and be constructive for you, your colleagues at {{15 - - - - - -}} and *most importantly* the entrepreneurs you serve.

The data suggests that venting doesn’t actually help mental health- it hurts. I am not writing this to vent. I am writing this because I am hopeful it will help future entrepreneurs you invest in. In my conversations with other founders you’ve interacted with, some clear patterns have emerged in how you treat entrepreneurs. From what I have heard, while some of the details of my situation are unique, the sentiment is anything but unique.

Your involvement was incredibly difficult for all of CircleUp and our board. My hope is that over time you can process some of this information below and make the necessary changes if you decide to stay in venture.

Here is my feedback:

  • Do No Harm. As a board member and investor myself, I’ve tried at the least to never be a distraction or harmful to another company (“Do No Harm”). I recognize {{15 - - - - - -}} is your first experience in venture, or as a professional investor, but I hope you try to talk to other venture investors and get feedback on how you show up in meetings. Traditional venture is an apprenticeship model - it is worth trying to get some mentors who can give you candid feedback. Run anonymous regular polls of your entrepreneurs to get direct feedback- and perhaps even survey those companies you met with but didn’t invest into. I’ve had enough interactions with other founders to know what they would say -  their feedback would be consistent with the sentiment in this email - but I’m not sure you’ve heard or absorbed that feedback. Many members of our team and our board (including very experienced investors and operators), found your interactions since the first meeting to be incredibly counterproductive. Several board members and teammates pulled me aside, especially in the early days before our relationship soured, to ask me to help make your participation less distracting. Think about what it takes for an employee to say to the CEO “how can we make {{14}}’s participation less counterproductive?” I’m reminded of so many incidents that were big enough for other board members and other employees at CircleUp to comment on. Simply put - there were more distracting and off topic comments from you than there were from all of the other board members combined. I believe in the power of examples so here are a few:  
  • When you Facetimed into a board meeting in a moving Lyft then midway through took us off video but left on audio while you had a full conversation with someone else. I felt humiliated for our team to see a board member act that way.
  • When at a board meeting at USV you stopped the meeting and said “guys we just aren’t focused on the right issues, this company has less than 6 months left.” One of the other board members said “{{14}} we have over 2 years left. What are you looking at?”  (You later realized you weren’t doing the math correctly.) People make mistakes {{14}} but what we consistently found is that you weren’t able to effectively digest the board deck in real time - which led to distracting and counterproductive comments. If you decide to try and take board seats, I hope you take the time to prepare in the future and find ways to more effectively digest complex information. I’m not naive enough to think everyone has read everything before the meeting. But I found that you can’t successfully wing it - you need to put in the work or it shows.
  • Seemingly vindictive actions- “CircleUp has never worked with a good company” (your quote; 2016). I’m sure you remember that comment as you said it so many times I finally wrote it on a whiteboard during a meeting at USV, circled it repeatedly and asked “can we please stop saying this now?” You were never clear what your intention was with that comment - but we felt so deflated and hurt each time you said it. To quote a teammate at CircleUp “That took the wind out of our sales”. I can take constructive criticism {{14}} - but this was just cruel for us and our team, whose mission is to help entrepreneurs thrive. Every single board member- every single one- was confused on what your intentions were.
  • For the record, in hindsight you were massively wrong. We had worked with Halo Top, Beyond Meat and several other of the most successful companies in consumer by that point. You were making demands about something you didn’t understand, you were wrong and it isn’t clear you understood the goals of your own destructive comments. That’s beside the point. How you delivered the message- without empathy and without a clear purpose was what was so painful for our entire team.
  • Constant insecurities- Everyone is insecure {{14}}. But your insecurities and persistent paranoia wreaked havoc on our boardroom. How many times did you mention to me or Rory how you didn’t feel respected by the other VCs on the board? Not in a way that communicated vulnerability, but in ways that demonstrated paranoia in counterproductive ways. Here were memorable quotes: “XXX wants to poach someone from {{15 - - - - - -}}, I just know it.” or “YYY doesn't even know the name of our fund- he definitely doesn’t respect me.”  Or “ZZZ just doesn’t show me any respect.” (all about different board members). I deeply respect vulnerability- but that didn’t seem to be your intention with those who heard these and similar comments. It seemed to others to be a deep-seated obsession with making sure other people demonstrated respect to you. We believed it was about personal status for you, not what was best for CircleUp. Those are all real examples (redacted)- and these insecurities kept showing up again and again in predictable ways including the humblebrags and making sure your voice was heard even when you didn't have anything substantive to add. I remember being asked in private: “Is he just paranoid?”. I felt exhausted and confused on how to respond when you would act like this. A portfolio company shouldn’t have to worry about this type of erratic or paranoid behavior from an investor, let alone a board member.
  • Counterproductive requests and suggestions- It would be hard to list all the special requests you asked of our entire team but these stuck out.
  • Marketing your next fund to potential LPs for you.  In 2016 you asked repeatedly for our investor sales team to reach out to investors and asked for multiple update calls, including getting upset that we hadn’t made more progress marketing *your* fund (when the track record was ~2x MOIC). To my recollection there was no offer to pay us, you just wanted to use our investor sales team to market your fund for your personal benefit. I’ve never heard of any VC ever asking one of their companies to do this. I’m not sure how the LPs in that existing fund would have responded had they known that the CEO of {{15 - - - - - -}}’s largest investment (at the time) was spending time marketing your next fund. In an email from Oct 22, 2016, I detailed out that one of our salespeople had (at that point) already reached out to 50 different investors for you. I also mentioned that another sales person kept finding inconsistencies in the deck and I was trying to get you to fix them. It was a horrible use of time for CircleUp and your LPs that had invested into CircleUp. Regardless, I regret saying yes to giving a few months of time. I regret trying to convince our sales team- most of whom had families to support but wouldn’t be compensated on your fund, that they should spend time on this for ‘goodwill’ with a board member. I should have been stronger to say no to you. I hope you now realize how unprofessional that request was and adjust your behavior in the future with other founders.
  • Writing and rewriting emails to your LPs for you. In the first year of our relationship you asked me repeatedly to write emails in your name summarizing our performance to your LPs. I would write one, then would get feedback to change the email- sometimes multiple times. “Can you make it shorter” or “Can you lengthen it”. I remember you asked me to have a call to update some of your LPs - and that you didn’t join the call. {{14}} those aren’t normal or professional asks of a founder - they put me in a really uncomfortable position. Its distracting and counterproductive for the relationship. I know at least one other board member eventually told you, “Your LPs are your responsibility {{14}}.” (2017)
  • Speaking without thinking. Hampton Creek just put a full page ad out in the [WSJ] attacking Unilever and you should do that attacking KKR.” (your quote) Suggestions like this- with so little thought into our product, drivers of our success and business model were beyond frustrating. Imagine if we had executed on this idea? It would not only have been a waste of time and money, it would have hurt our relationships with LPs. It was clear you hadn’t thought about or understood the differences between mayonnaise and the securities business, or the fact that our entrepreneurs really wouldn’t care at all if we went after KKR (the LPs certainly wouldn’t like it). Suggestions like that led multiple team members to ask if you had ever sat on a board before, putting me in positions to have to make excuses for you.
  • Forcing a sale 2 weeks before our deal - the worst time in my professional life was our pivot (detailed here). We were pivoting a Series C company, conducting layoffs, while raising another round and while raising a 1st time $125M venture fund. I was the lead on all of those things and they are each insanely hard. What wasn’t detailed publicly, but which you knew and the board knew, was that my wife and I were also dealing with heartbreaking fertility issues and my own meaningful health problems that were unrelated to stress, for which we were pulling in the best doctors in the country. I don’t blame you for wanting to sell {{14}}, I blame you for how you did it. I remember landing in Singapore to visit investors. Exhausted after months of no sleep and a long flight, and you demanded that we talk that day- a Saturday- in the few hours I had to sleep before a marathon of meetings with investors. I explained the situation and begged you to just talk over email…. Nope, it had to be on the phone and had to be 1:1 with me. Your message was that you wanted to sell half your stake in the round that would close in 2 weeks or you wouldn’t approve the deal. You knew we were working on that round for 6 months, during the pivot and while also raising the venture fund. An impossible combination. But you waited until 2 weeks before the projected close to demand to sell your stake. You can sell {{14}}- but it was how you did it that was so damaging. In talking with other founders I’m now aware that you have pushed the founder to get you out multiple times. Bailing when a company hit a rough spot and selling early gets a VC a bad reputation. Pushing the founder to solve the problem for the VC by saying “find me a buyer or I’ll hold up the deal” is truly destructive. It’s hostage taking. We had to scramble to solve your problem for you and put meaningful risk to the Company.
  • Reaching out to Temasek (2017)- “If you won’t find me a buyer I’ll reach out to Temasek on my own.” (your quote during our last raise when we were in final stages w/ Temasek) Every member of the board repeatedly asked you to just wait until the round was done so that it didn’t hurt the relationship with Temasek. {{14}} it isn’t the portfolio company’s responsibility to find you a buyer when you want to exit early - as a few board members said to you. Repeatedly. Please ask other VCs if you don’t agree- you won't find a top 50 VC that does this. I now know that you’ve done this to other companies as well in the past. So you threatened to reach out to Temasek directly while they were closing diligence  - which made our life more difficult with them. All we wanted was for you to do your own work {{14}}, and not disrupt the investors we had lined up.
  • Selling to {{17 -}} (2019) - In this most recent sale for the remaining 50% of your stake, you agreed to reach out to investors on your own only after multiple meetings and requests asking us to do it for you again. We asked {{15 - - - - - -}} 5-10 times over the past 6 months to please just keep us informed so we knew which investors were being approached- and thus could prepare. The board wanted you out as much as you wanted to be out. The other VCs on the board and we will never understand why you wouldn’t be willing to just give us a heads up on who you would talk to. Several members of the board asked you to just coordinate so that it didn’t create noise in the market given we were raising our next fund. The perfect example was when you finally told us about the {{17 -}} buying the shares for the first time- on the Friday (9/20) before the deal was set to close. You wouldn't answer 3 emails and 3 texts just asking for details like “can you share what the timing is” and “can you share who else you talked to so we can prepare”.  The silence didn’t help your LPs {{14}}, it just hurt us.  Even last week you wouldn’t answer the email but instead say “I’m only willing to talk about this in person and 1:1.” After that you demanded a response within an hour. How many times over the last 4 years would you sit on an email for a day, a week or not respond, but then also demand a response “by end of day” or “within the hour”. It demonstrates arrogance and a lack of respect for the other person.
  • As an aside when we talked with {{17 -}} and {{20 - - -}} they said that you told them you were coordinating closely with CircleUp. That was a lie and unethical {{14}}, we had no idea you were talking with them. `

While you will have made money on your investment, I’m sure we both regret working together. Looking back, I think if we had met in person before {{21 - - - -}}'s original investment, or if someone at {{15 - - - - - -}} had led the original diligence (rather than outsourcing the diligence to a third party), we all would have realized this wasn’t a fit. I share some of the responsibility for that and I regret that we went through the “diligence” process in just a few weeks. I regret that we only talked 2-3 times on the phone and *literally* never met in person before the deal closed. Our first meeting was after the deal had closed- at the first board meeting. I still can’t believe that is true for the lead in our Series {{22}}. I regret that not being a big red flag to me “hey if this guy will write his biggest check ever without meeting me, what does that mean?” I don’t know if your LPs are aware this happened, or if they are aware {{15 - - - - - -}} outsourced the diligence, but regardless I regret not asking why you were outsourcing the diligence to someone that didn’t work at {{15 - - - - - -}}. I own those mistakes. I am smart enough and experienced enough to see those red flags but I took the money. I have learned from that and I hope you have too. I hope that going forward you, or the lead at {{15 - - - - - -}}, takes the time to meet the CEO in person and to own the diligence yourselves. In our case might have saved us both a lot of pain.

People get into venture for different reasons. Some look at it as a really sexy job to make a lot of money and have power. Others (in my opinion the best), see it as an opportunity to help entrepreneurs to thrive and help change the world. I don’t know why you’re really trying venture {{14}}, but I do know that more than a few entrepreneurs have been incredibly hurt by your learning curve. I tried hard in this email to focus on examples and my feelings, not on personal attacks. I’m not sure I succeeded. I only hopeful that over time you’ll be able to adjust your behavior. I’m glad you were able to make money on your investment in CircleUp and I wish you no ill will. But regardless of financial outcome I hope you can talk with your team openly about changes you need to make to be a more constructive, and less hurtful, partner.

{{14}}, I don’t know what you’ll do with this feedback. There is a good chance you’ll toss it and never share it with others. But on the off chance that you want to work these things through, I think your colleagues and the entrepreneurs that you work with stand to benefit from some self-reflection on your part. You know I’m not making these examples up and there are many many more, most with witnesses. This is serious stuff, and it affects people’s lives. Not just the people you see, but their families. I think and hope that you are capable of better than I got from you.

Take care,