First Round Capital. first institutional investor in Uber, has yet to comment on controversy

Tom Paine

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Josh Kopelman/ Uber Blog

Josh Kopelman and First Round Capital are in an interesting position relative to Uber, although there might not be much they can do to influence it.

I wrote in June about how First Round Capital came to lead the seed round in Uber, as described by Business Insider. The First Round team knew of the concept of Uber through its association with Garret Camp, co-founder of FRC-backed StumbleUpon who reportedly came up with the idea for it (Camp at last word is Uber's non-executive chairman). FRC became Uber's first institutional investor. Now, by Fortune's assumptions, those seed round stakes of $500,000 may be worth up to $1 billion or more. And there is talk of raising another round at a somewhat higher valuation.

Kopelman is also, personally, an investor in Sarah Lacy's website PandoDaily, as is a partner with another VC firm that's invested in Uber (at least two other VC firms have invested directly in both). Lacy has been in many ways at the center of the conflict with Uber.

The long-simmering, but relatively quiet, controversy about Uber's corporate behavior exploded after BuzzFeed's piece published November 18 alleged that a senior Uber executive, Emil Michael, suggested at a dinner with media present (thought to be off the record) that it might hire opposition researchers to look into reporters' personal lives. That stirred up several other questions about Uber's corporate behavior. Despite CEO Travis Kalanick's tweeted apologies for Michael's comments, a lot of crap is still flying from all sides, as they say.

Some have tried to portray this struggle in political terms, though along confusing lines; some compare Uber users to Republicans, while others compare Uber to a progressive movement against a long-entrenched taxi monopoly trying to halt progress. No doubt a key hire is former Obama campaign manager and top White House aid David Plouffe (I wrote about his hire in August, and pointed out his Delaware roots) as SVP, Policy & Strategy. I don't know how much his fingerprints are on Uber's PR yet, but his aggressive tactics and dependence upon social media influence at the grass roots level as used on the Obama campaigns might be evident here.

Kopelman hasn't commented (and didn't respond to a Philadelphia Business Journal request for comment). Garret Camp hasn't commented. I tried to find out the current makeup of Uber's board but found multiple versions on the web and none on Uber's website; a request for an update to Uber was not answered.

Lacy said on Fox Business Wednesday that she emailed several common investors in Pando and Uber that "said, you know, I need to know frankly for our relationship what the ground rules of journalism are between your firm and Pando. And frankly, for the safety of my family, where do you stand on this alleged proposed plan to spend $1 million discrediting me? And no one’s written back" as of Wednesday.

Kopelman personally made an appearance behind the wheel for UberX in its abortive attempt to start up in Philadelphia in late October, before the PPA crackdown. And he followed up with a string of tweets pointing out some other ridiculous laws on the books in Pennsylvania.

To be sure, FRC is a small minority shareholder in Uber at this point. If its shares were worth $1 billion as of the last valuation, it was out of a total of $18.2 billion post money (after the funds were booked). Fortune's Dan Primack commented in today's TermSheet email that he didn't know how Uber is structured, "but do know that many of Silicon Valley's hotter startups structured their early investment rounds in a manner that precludes actual VC control." (Update: Primack: Don't overstate investor power at Uber. I don't think FRC has a board seat any more, as often happens. I believe Rob Hayes was taken off to make room for a larger investor.

There is a legitimate debate over the degree of regulation required in the Taxi industry, though its over regulated now. I'm not going to draw a conclusion on how Uber has acted, though it does seem in several respects to be boorish and overbearing. Many First Round Capital portfolio companies have pushed it to the brink in the process of creating a new market or service, and have tested the legal system while doing so (think Aereo), but have almost always been above board ethically. But Uber presents a different set of issues, that may or may not be smoothed over, at a critical point in its growth trajectory.

Update 11/25: Uber directors (per Form D filed with SEC 11/13/2014) include Travis Kalanick (CEO), David Bonderman (TPG Capital), Garret Camp, David Drummond (Google), Ryan Graves (Uber Head of Global Operations) and J. William Gurley (Benchmark Capital).

Update 11/26: Bloomberg reports that Uber is seeking to raise another $1 billion at a $40 billion valuation.

Update 11/29: Uber shut down in Nevada, Thailand, awaiting key court decision in France.

Update 12/6: Uber Raises $1.2 Billion At A $41 Billion Valuation, Vows To Become 'Smarter And More Humble' (Business Insider)

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