10 big things: Away's woes, and other warnings - PitchBook

The Startup World’s Hunger for Growth

The startup world often operates on a "grow or die" mentality, creating immense pressure at all levels. Success is seen as a stepping stone to even greater expectations, leading to a cycle where one's best is never enough. This urgency can inspire greatness, but it can also lead to questionable or even reprehensible behavior.

In early December, a report of workplace bullying led to the resignation of a unicorn CEO. Two other major companies faced significant financial consequences due to questionable tactics used to achieve industry dominance. These incidents highlight a trend of bad behavior coming to light in the private markets. Here are 10 key takeaways from the past week:

1. Truth and Consequences

On December 5, The Verge published a report exposing a toxic workplace at Away, a luggage startup with over $180 million in VC funding. The report focused on CEO Steph Korey's management style, which included pressuring employees to work long, unpaid hours and publicly berating them on Slack. Following the report, Korey announced she would step down as CEO, transitioning to executive chairman, with Stuart Haselden (formerly of Lululemon) set to replace her.

The issues at Away were largely attributed to rapid growth, which left employees stretched too thin. The pressure to maintain high growth rates is a common theme in startups, driven by the need to satisfy investors and secure further funding.

Juul Labs, an e-cigarette maker, exemplifies this growth-at-all-costs model. After reaching a $38 billion valuation, Juul faced investigations and lawsuits over allegations of targeting minors in its advertising. Major investor Tiger Global recently cut Juul's valuation to $19 billion. The root cause of Juul's troubles, like Away's, is the relentless pursuit of growth.

Apollo Education Group, parent of the University of Phoenix, settled with the FTC for $191 million over misleading ads about employer connections. The settlement included $50 million in cash and $141 million in debt cancellation for former students. The University of Phoenix has a history of similar controversies, all stemming from the drive for continued growth.

The common thread in these cases is the prioritization of growth over ethical considerations. Sometimes, there are more important things than an ever-increasing growth curve.

2. Take-backs

WeWork continued to reverse many of Adam Neumann's decisions. This week, it sold Conductor back to its executives and shuttered Spacious, a co-working startup acquired just four months prior. SoftBank, WeWork’s new owner, also sold its stake in Wag back to the startup’s management, two years after investing $300 million.

3. Moving Forward

Despite WeWork’s troubles, Chinese co-working rival Ucommune filed for a US IPO, aiming to succeed where WeWork failed. Bill.com, a financial software provider, had a successful IPO, with its stock rising 61% on its first trading day.

4. A Princely Debut

Saudi Aramco, under Crown Prince Mohammed bin Salman, completed a successful IPO, with its market cap rising from $1.7 trillion to $2 trillion after two days of trading. Aramco is now the world’s most valuable public company, though its ownership structure makes it unique compared to companies like Apple or Alibaba.

5. Crushing Cancer

Merck and Sanofi announced multibillion-dollar acquisitions in oncology: Merck acquired ArQule for $2.7 billion, and Sanofi bought Synthorx for $2.5 billion. Cancer-detection startup Grail raised $125 million toward a $250 million target. Life-sciences investors Omega Funds and The Column Group are also raising significant new funds.

6. Drone Deals

EHang, a Chinese autonomous air taxi startup, went public in the US, raising $40 million and achieving a $687 million market cap. PrecisionHawk, another drone company, raised $32 million to further develop its analytics tools.

7. PE’s Big Funds

Private equity fundraising in the US set new records. Leonard Green Partners closed a $12 billion flagship fund and raised $2.75 billion for a middle-market strategy. Clearlake Capital filed to raise $5 billion for a new fund.

8. PE’s Big Deals

Nestle sold its US ice cream business to Froneri, a joint venture with PAI Partners, for $4 billion. Other major buyouts in the works include a potential McAfee takeover of NortonLifeLock and Apollo Global Management’s $4.3 billion offer for Tenneco’s powertrain unit.

9. Foreign Finance

Brazilian brokerage XP, backed by General Atlantic, raised nearly $2 billion in a Nasdaq IPO, reaching a $20 billion market cap. Canadian payment processor Nuvei raised $270 million from Novacap and Caisse de dépôt et placement du Québec, reaching a $2 billion valuation.

10. Plane and Simple

Delta Air Lines agreed to take a minority stake in Wheels Up, a private charter operator valued at $1.1 billion. Onex, a Canadian private equity firm, completed its $3.8 billion takeover of WestJet Airlines, a deal previously challenged by Air Canada.

Correction: This story has been updated to clarify that Stewart Butterfield and Jen Rubio are engaged, not married, and to more accurately describe the FTC settlement with the University of Phoenix, which did not admit wrongdoing.