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Choosing Between NQSO and ISO Stock Options for Your Business

By: Jon Avidor

Companies planning to offer options of its stock as a form of compensation generally have two choices: an incentive stock option (ISO) plan, or a nonqualified stock option (NQSO) plan. The most notable differences between ISOs and NQSOs are in their tax treatment and the advantages they provide to employers and its recipients.

ISOs can only be offered to employees. ISOs are offered an incentive for personnel to remain with a company over a long period of time and to work to increase the company’s value. With an equity option in the company, the better the company does, the more the employee’s equity will be worth. Generally, ISOs are more beneficial for employees than NQSOs for tax reasons: employees can defer recognition of income until either the grant or exercise of the shares, and the income gained via disposition of the shares is taxed more favorably as long-term capital gain.

ISOs provide a slight benefit to employers in that they are exempt from 409A valuation, with some considerations. However, ISOs offer less benefits for employers than NQSOs. Employers are generally not entitled to tax reductions for ISOs, and ISOs come with complex administrative rules; companies must also comply with a long list of requirements to be eligible to offer an ISO plan. Nevertheless, ISOs may be an attractive option for start-ups whose stock may increase significantly later down the road as their business develops.

NQSOs are typically more favorable for the employer. NQSOs can be granted to both non-employees, including non-employee directors, consultants and advisors, and employees. Employers can claim a tax deduction for NQSOs and are more straightforward to administer. There are fewer tax minefields, as it is more straightforward to determine the taxes owed on NQSOs than ISOs. One caveat is that income from an ISO is not treated as wages for employment tax purposes, while income from an NQSO plan is, requiring both employer and employee to pay employment taxes on NQSO plan payments. However, the NQSO tax deduction typically offsets this cost for the employer.

Employers should consider their unique business needs and weigh the benefits of both types of plans before utilizing options as a form of compensation.

Crowdfunding and Jurisdiction: Tokenizing the World by ICO

By: Jon Avidor

The crypto industry has caused yet another crack in the regulatory foundation of the global landscape- this time, it’s regarding digital assets and initial coin offerings (“ICOs”). ICOs are a relatively new method of fundraising utilized by start-ups and seen as a quick way to gain capital. The surge of start-ups relying on ICOs over the past two years has sent lawmakers scrambling to address the ICO regulatory framework and its other inherent risks. However, regulators are divided on how to best regulate ICOs while also protecting investors.

The EU’s European Parliament Committee on Economic and Monetary Affairs (“Committee”) is the latest regulator to tack itself to the growing list of jurisdictions attempting to define the legal treatment of ICOs. The Committee is currently drafting new crowdfunding regulations for ICOs. Many consider this a good first step towards legitimizing ICOs and hope that this regulation will serve as proof for mitigating any potential fraud or cyber security risks for ICO investors.

ICO regulatory framework provides not only more clarity for potential investors, but it also impacts where a start-up company may choose to incorporate its business. A jurisdiction with specific ICO regulation, such as Malta and Singapore, is more likely to attract crypto-based start-up companies looking to conduct ICOs as these companies can confidently rely on ICO-specific rules and regulations in those jurisdictions.

As jurisdictions continue to regulate the crypto space, there is still a lack of overall uniformity regarding ICO regulations. According to a recent PwC report, the U.S. views ICOs as traded securities, while the EU classifies its tokens into three subsets—asset, payment, and utility tokens—which gives the buyer direct access to a product or service, as opposed to an investment.

It is yet to be determined if a worldwide consensus on ICO regulations is necessary, but ICOs could potentially morph into something similar to, if not the same as, traditional financial system currently in place, such as raising funds through venture capital or corporate debt. For now, the only universal consensus among regulators is that ICOs potentially pose a threat to both financial and economic risks, and thus, some form of regulation is required.

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We would like to thank our intern, Jaclyn Wishnia for her contribution to this article.

Legal Alert: Don’t Forget To Pay Your Annual Business Taxes

By: Steve Masur

Many states require domestic corporations, limited liability companies, and partnerships to pay an annual tax, known as franchise tax for corporations and annual tax or annual filing fee for LLCs and partnerships, for the privilege to do business and exist as an entity under that state’s laws. Be aware that these annual taxes are distinct from income tax. Franchise taxes are calculated different ways, but are usually based on the corporation’s capitalization. For LLCs and partnerships, they are usually a flat fee. Taxes continue to accrue on a business entity until it files a document to officially terminate its existence, often with the secretary of state. Failure to file and pay by the specified deadline may result in a penalty fee and monthly interest, and if in arrears for several years, termination of existence by the state.

Delaware Business Taxes

Franchise tax on entities incorporated or formed under the laws of the State of Delaware are due for corporations on March 1 and for LLCs and partnerships on June 1. Corporations’ franchise tax may be calculated here and will be the lesser of the two amounts under the authorized shares and assumed par value capital methods, plus a $50 annual report filing fee. LLCs and partnerships pay a flat fee of $300. You can pay your franchise tax and file your annual report online. Failure to file by the deadline will result in a $125 penalty on corporations and a $200 penalty on LLCs and partnerships, with interest of 1.5% per month on late payments.

New York Business Taxes

Domestic corporations and foreign corporations authorized to do business in the State of New York, among other types of general business corporations, must pay an annual franchise tax either on/before April 15 if operating on a calendar taxable year or within three-and-a-half months after the end of the corporation’s tax year. The tax due is equal to the highest of the three following bases under this schedule of taxation rates, plus the metropolitan transportation business tax:

Business Income: Federal taxable income minus investment income and other exempt income apportioned to New York State
Business Capital: Total business capital allocated to New York State after deducing liabilities attributable to assets
Fixed Dollar Minimum (FDM): Graduated schedule of flat fees based on New York State receipts

You can pay your franchise tax online.

LLCs and partnerships, both domestic and foreign authorized to do business in New York, must pay an annual filing fee based on the income derived from New York State sources determined by a graduated schedule of flat fees. The fee is due within three-and-a-half months after the end of the entity’s tax year, and is submitted along with a Form IT-204-LL.

Corporations, LLCs, and partnerships may request a six-month extension to file or will otherwise incur late fees, though failure to pay for two consecutive years may result in automatic dissolution.

California Business Taxes

Corporations incorporated or doing business in the State of California, whether or not qualified or registered under California law to do business there, must pay an annual franchise tax equal to the greater of (a) the corporation’s net income derived from California sources multiplied by the appropriate tax rate (8.85% for C corporations and 1.5% for S corporations) or (b) the $800 minimum franchise tax. Corporations are required to pay franchise taxes even if they are inactive, operating at a loss, or have only existed for less than one year by the filing date and are filing a short-period tax return. Franchise taxes must be paid and submitted with a Corporation Franchise or Income Tax Return (Form 100/100S) on or before either on/before April 15 if operating on a calendar taxable year or within four months and fifteen days after the end of the corporation’s tax year.

LLCs doing business in California and/or registered with the California Secretary of State are subject to an annual tax of $800, due within four months and fifteen days after the end of the corporation’s tax year, with an LLC Tax Voucher (Form FTB 3522). LLCs are also subject to an additional fee based on the LLC’s total income derived from California sources, determined by a graduated schedule of flat fees.

California automatically allows for a six-month extension, after which non-payment will result in penalties and interest.

See this resource from Parasec for a full list of annual report due dates across the 50 states.

Why Independent Contractor vs. Employee Status Matters

By: Jon Avidor and Tyler Horowitz

Among the various questions that employers face is whether to classify certain personnel as independent contractors rather than as employees. Many new entrepreneurs will rely on the advice of colleagues and friends who will encourage categorizing new hires as independent contractors to avoid paying employment taxes and providing benefits, which isn’t always bad advice but isn’t that simple. Despite how an employer labels its personnel or even drafts its services agreement, the determination finally rests with the Internal Revenue Service and Department of Labor in light of how the relationship actually carried on.

Company’s Right to Control and Other Guideposts for Determining Status

Distinguishing an employee from an independent contractor is often difficult in the absence of bright-line rules, though the standard focuses on the employer’s “right to control,” which balances three considerations:

Behavioral Control: Beyond requesting certain services and deliverables, does the employer have the right, or exercise an ability, to direct and control what, how, and when the individual’s work is performed, whether through instructions, training, or other means?
Financial Control: Does the employer direct or control the financial and business aspects of the individual’s performance, such as paying service fees according to the company’s standard payroll schedule, exercising discretion over expense reimbursements, or providing the tools and supplies to perform the tasks at hand?
Relationship of the Parties: If there’s a written contract between the parties, is it structured like an employment agreement or services agreement? Does it afford the individual employee-type benefits (such as insurance, a pension, etc.? Is the relationship open-ended in terms of length and type of service provided? Is the “independent contractor” given certain responsibilities and discretion typical of an employee?

Ultimately, does the company have the right to control not only what is to be done by the “independent contractor,” but also how it is to be done? If so, the worker is most likely an employee. On the other hand, if the company doesn’t control the means and methods of the work product, the worker is most likely an independent contractor. Employers should analyze the entire relationship and pay attention to the degree of control it has over the worker.

Administering the Relationship

Especially in the employment context, companies should set forth the terms of its personnel’s engagement in a written contract―for employees, an employment agreement, and for independent contractors, a services agreement. As discussed, state and federal authorities will look past a written agreement to how the relationship actually exists or existed, though an written agreement is an employers best tool to clarify expectations. For example, a standard services agreement should always state that the individual is performing his or her services as an independent contractor and is not entitled to employment rights or benefits, nor is he or she authorized to act on behalf of the company. The agreement will disclaim the company’s tax withholding and reporting obligations as well. The services agreement may also say that any work product is considered a “work made for hire” and belongs to the company. Each of these provisions make clear to the independent contractor that he or she is not an employee and shouldn’t assume otherwise.

Additionally, employers are required to deduct payroll taxes from its employees and issue them W-2s, while companies who engage independent contractors do not withhold payroll taxes and, if they have paid the independent contractor $600 or more during that tax year, issue them 1099s. Independent contractors are required to calculate their own payroll taxes and may have to make quarterly estimated tax payments to the IRS, in addition to remitting applicable state and local taxes. Companies should consult an accountant to ensure they withhold and remit the proper payroll taxes and issue the appropriate tax forms to their employees and independent contractors.

Risks of Misclassification

Employers are often tempted to label as many of their personnel as independent contractors as possible―they wouldn’t have to contribute to Social Security and Medicare or remit unemployment tax, provide workers’ compensation insurance, or provide employee benefits, including health insurance and paid sick leave and vacation time. However, a company that misclassifies employees as independent contractors could face serious consequences if they’re ever audited. This often arises when a former “independent contractor” applies for unemployment and lists among his or her previous employers a company that hadn’t reported the individual as an employee, triggering a state investigation. If caught, the company may owe back taxes and be subjected to fines at the state and federal levels for uncollected income tax, Social Security, Medicare, and unemployment tax. Worse yet, a misclassification could open a flood-gate of litigation from past or current “independent contractors.” Don’t fall into the trap of improperly classifying your workers as a cost-savings tool.

*We would like to thank our intern Tyler Horowitz for his contribution to this article.

E.U. General Data Protection Regulation Looms for American Multinational Businesses

By: Jon Avidor and Cassidy Lopez

If you do business in Europe, a new landmark European Union data protection law may have a huge impact on how you may collect and store personal information from their E.U. clients and customers.

The General Data Protection Regulation (GDPR), which is set to go into effect on May 28, 2018, is perhaps the most significant change in personal data privacy rules to date. The new regulation gives European Union citizens more control over the private information they share online and applies to all companies worldwide that do business with E.U. citizens. It is a prime example of the difference in how American law and European law approach consumer privacy—opt-in vs. out-out—while forcing global companies, especially those in the tech, retail, healthcare, and financial industries, to find a compliant yet practical and workable balance.

The new law itself has extensive technical and costly requirements, including providing E.U. customers with copies of their personal data at their request and also deleting any such personal data at the customer’s behest. Companies must also report any data breaches within a 72-hour period. Non-compliant companies can face threatening fines of as much as 4% of its annual revenue or 20 million Euros, whichever is higher.

Implications for Data Collection and Retention

Personal Data: The GDPR regulates directly or indirectly identifiable information about a person, or “Data Subject,” which is more expansive than the traditional American concept of “personally identifiable information,” and can include the consumer’s name, photo, email address, financial and banking information, social media posts, medical information, and even IP address.

Information Concerning Minors: Data controllers must obtain parental consent before processing personal data of children under the age of 16, though E.U. member states may lower the minimum age to no less than 13. This sets a higher bar than American privacy law, which under the Children’s Online Privacy and Protection Act requires verifiable parental consent before collecting and storing personally identifiable information relating to children under the age of 13.

Consent to Collect Data: The hidden browse-wrap privacy policy is a no-go under the GDPR. Data collectors must have “unambiguous” consent to collect ordinary identifiable “personal data,” such as a person’s name, location data, or demographics, but “explicit” consent to collect sensitive personal data, including information relating to a person’s racial or ethnic origin, political opinions, religious beliefs, health, and more. An intelligible and easily accessible form stating the purpose of data collection is sufficient for unambiguous consent, but explicit consent requires affirmative acceptance or opt-in.

Data Retention and Consumer Requests: The GDRP’s greatest compliance cost will likely result from the strict data retention policies. Data collectors must routinely account for the data they hold and why and where, how, and for how long its stored. Within one month upon request by a data subject, these companies must provide E.U.-citizen customers with reports detailing all high-risk personally-identifiable information held by the company and disclose how they use that data and under what permissions. Companies will develop mechanisms for users to submit data requests to gain access to personal information.

This is not surprising in light of the 2014 ruling by the Court of Justice of the European Union that, under the EU’s 1995 Data Protection Directive, individuals have the “right to be forgotten,” more specifically, the right to request Internet search engine operators remove information from search results that is “inaccurate, inadequate, irrelevant, or excessive.” Listen to John Oliver’s take on Last Week Tonight.

Mandatory Security Breach Notifications: To ensure accountability, in the event of a “high risk” security breach, the data controller must notify its country’s supervisory authority and all affected individuals within 72 hours of discovering the breach.

Appointing Data Protection Officers: Organizations that engage in “large scale” systematic collection and processing of personal data must hire an expect in data protection law and practices as a Data Protection Officer.

Penalties for Non-Compliance: The enforcement mechanism under the GDPR is a fine, tiered up to the greater of 4% of total worldwide turnover (i.e., revenue) in the past financial year or 20 million Euros, based on, among other things, the scope and duration, negligence, and subsequent transparency of the data breach or non-compliance, as well as past infringements

Effect of “rexit: Since the United Kingdom will still be a member of the European Union when the GDPR goes into effect later this year, the GDPR will become part of U.K. law and remain so after leaving the E.U. The U.K. Department of Digital, Culture, Media and Sport introduced into Parliament the Data Protection Bill, which according to Shearman & Sterling, would largely implement and perhaps even enhance the GDPR framework and policies. As of January 18, 2018, the bill had proceeded from the House of Lords and is currently under consideration in the House of Commons. Check the status here.

U.S. Cooperation and the Privacy Shield

The E.U.-U.S. Privacy Shield framework is an agreement between the U.S. Department of Commerce and the European Commission designed to provide a regulatory framework for commercial personal data exchange between the European Union and United States in a way that satisfies both jurisdictions’ privacy and consumer data protection laws, namely the GDPR. It replaces the U.S.-E.U. Safe Harbor program. Once an eligible U.S. organization voluntarily and publicly commits to the Privacy Shield Principles, compliance with its commitment to data processing transparency, security, and accessibility is enforceable under U.S. law, primarily by the Federal Trade Commission or, if relating to an airline or ticket agent, the Department of Transportation. Participating American businesses must also provide a free mechanism for consumers to resolve privacy issues directly with the company and agree to final, “last resort” arbitration with an approved data protection authority. The E.U.-U.S. Privacy Shield will not apply to data transfer between U.S. and U.K. companies post-Brexit, according to a U.K. parliamentary committee report as reported by TechCrunch.

Looking Ahead, Companies Weigh Their Options

Compliance with GDPR is a top priority for many large U.S. based multinational companies, but achieving compliance won’t be cheap. PricewaterhouseCoopers reported that, to insure against the threat of fines and penalties resulting from non-compliance, 92% of U.S. multinational companies cite compliance with GDPR as a top priority and 68% of those companies are committing between $1 million to $10 million to GDPR compliance efforts. For others, the investment isn’t worth the return, and the threat of high fines and injunctions is instead leading some businesses to reconsider doing business in Europe. In another recent survey conducted by PwC, 32% of respondents plan to reduce their European presence, while 26% plan to exit the European market all together. While Google parent company Alphabet certainly won’t exit the European market, which contributes approximately $9.3 billion to Google’s annual revenue (approximately 33%), Deutsche Bank predicts Google’s bottom line could take a 2% hit as an estimated 30% of E.U. users will likely opt-out of data sharing under the GDPR, decreasing Google’s targeted ad efficiency by 20%. One report also claims that only 34% of sites in the EU are ready for GDPR. As European regulators continue to clarify how they will interpret the GDPR, more American companies are likely to re-evaluate the return-on-investment of their European initiatives.

* We would like to thank Cassidy Lopez for her contribution to this article.

Year-End Maintenance for a Healthy Business

The end of another year presents an opportunity for you to take stock of how your business has developed, and to think carefully about whether you have kept pace with your legal needs. Please consider the following so you maintain a healthy business as you enter the new year.

Corporate

Pay franchise taxes on company shares to your state of incorporation, often due at the end of the year, not on Tax Day.
File a Biennial Statement or annual report with your state of incorporation.
Comply with annual governance requirements, such as holding a shareholders meeting and updating your governance documents to reflect any major actions taken over the past year.

Intellectual Property

Confirm that each of your employees and independent contractors have assigned the rights in their work product to your company.
Ensure that your online terms of use and privacy policy still accurately reflect your business practices and are up-to-date with changes in the law―like the regulation for maintaining DMCA protection.
Consider how your brand has grown and developed, and whether you might have valuable trademarks that should be protected by registration with the U.S. Patent and Trademark Office.

Business Operations

Make sure you have the right agreements in place for all new hires.
Check that all essential business licenses are active and in good standing.
Determine whether there is a current and valid contract in place for each of your most important business relationships, and revisit the terms of any contract for any changes.

Entrepreneurship Bootcamp Series October 10 – Raising Money For Your Startup

By: Rob Griffitts

Thank you for attending our Entrepreneurship Bootcamp Series on October 10. The series is a first-of-its-kind monthly session working with experts where top industry experts talk about various parts of creating a startup with the goal to help founders over any hurdles that they may have.

On October 10th, the following people spoke:

Asha Saxena, who is a professor at Columbia University, entrepreneur in residence at the Eugene Lang Entrepreneurship Center, CEO of Future Technologies Inc. and one of the winners of NJBIZ’s Best 50 Women in Business award. She will be talking about how to raise money for your startup.

Michael Mulvaney is a Regional Sales Consultant within the technology team at TriNet, that helps power business success with extraordinary HR. He also is an advisor to tech startups and founders of various growing companies. He provides an unique perspective, since many of his clients are startups, to the theme of the event.

In addition a panel of entrepreneurs who have raised funds in the past came to share their experiences with us! Panel members included Dilip Rao (Former investment banker & CEO of Sharebite), Lyle Pinder (Founder and CEO of Auviso Inc.), and more. All members of the panel have raised over $1M and have recently closed their rounds.

The Entrepreneurship Bootcamp Series is for you if:
– You are looking to understand the art of converting ideas to reality
– You are motivated to learn more about entrepreneurship opportunities and experiences
– You are ready to step up your game in the world of entrepreneurship with a great community of self-starters
– You are interested in networking efficiently with our newly launched EventMate app

Whether your goal is to:
– Build a strong foundation for your startup
– Understand ways to became an excellent leader and manage your ongoing opportunities
– Expand your networking platform in different sectors and industries
Then this workshop is the perfect fit for you!

Agenda:
6:00-6:10pm: Registration & Welcome
6:10-6:25pm: Asha Saxena’s Presentation
6:25-7:00pm: How to Raise Money for Your Startup Panel
7:00-7:15pm: Q&A
7:15-7:45pm: TriNet Presentation
7:45-8:00pm: Q&A
8:00-8:30pm: Networking

Stay tuned for the next event which will be announced on our site soon!

Equity Dilution: Is the Juice Is Worth the Squeeze?

By: Steve Masur and Cassidy Lopez

If you’ve ever made orange juice from concentrate, you probably already have a good feel for how equity dilution works. When you put the orange juice concentrate in a pitcher, you have a small amount of, well, really strong concentrated juice. As you add water, the water dilutes the original concentrate, which then represents only a small portion of your beverage. The same holds true for equity.

What is Equity Dilution?

Equity dilution refers to the reduction in the percentage ownership interest—shares of stock or membership units—of current stockholders of a corporation or members of a limited liability company when the company issues new shares or units, whether that be through a private placement of securities or an initial or follow-on public offering (IPO/FPO). The number of shares or units held by existing shareholders or members remains the same, though when the company increases the total number of shares or units issued and outstanding, each preexisting stakeholder will subsequently own a smaller ownership percentage of the enlarged pie. This sounds scary to stockholders and LLC members, but keep in mind that a company’s value increases whenever money is infused. In other words, existing stockholders or LLC members will own a smaller portion of the company, but the reality—or the hope anyway—is that what they do own is worth more.

Calculating Equity Dilution

To calculate equity dilution, you as a stockholder or LLC member need to know three things: (1) how many shares/units you own, (2) how many shares/units were outstanding prior to the investment, and (3) how many new shares/units were issued in the financing.

Determine Your Original Ownership Percentage: Divide the number of shares/units you currently own by the total number of the company’s issued and outstanding shares/units prior to the investment. For example, if you own 20,000 shares of a corporation and the corporation has issued 100,000 total shares of stock, you own 20% of the company.
Find the Number of Shares/Units Outstanding After the Financing: Add the newly issued shares/units to the total number of shares/units issued and outstanding by the company prior to the investment. In this example, if the corporation issues an additional 25,000 shares to a new investor, add 25,000 to the 100,000 then-outstanding shares to find the company now has 125,000 total shares of stock outstanding.
Calculate Your New Ownership Percentage: Divide the number of shares/units you currently own by the total number of shares/units issued and outstanding by the company after the investment. Continuing with this example, if you own 20,000 shares of the corporation, and now the corporation has 125,000 shares outstanding, divide 20,000 by 125,000 to find you now own only 16% of the company.
Determine Your Equity Dilution: Subtract your new equity percentage from your old equity percentage to find the amount by which you have been diluted by the investment. In this example, subtract 16% from 20% to find you own 4% less of the company than you did before.

Staying on this example, let’s now assign a valuation to the company. Prior to the investment, the corporation had a pre-money valuation of $1,500,000. The corporation issued 25,000 shares to a new investor in exchange for $500,000, making the company now worth $2,000,000. Prior to the financing, you owned 20% of the company, which at its prior valuation, meant your ownership interest was worth $300,000, or $15 per share. After the financing, your ownership interest was diluted to 16%, but the company’s new post-money valuation makes your ownership interest worth $320,000, or $16 per share. You own a smaller percentage of the company, but that percentage is now worth more.

Check out this tool from OwnYourVenture as a great resource to visualize equity dilution.

Preventing Dilution

Practically speaking, the only way to actually prevent dilution is to be the sole owner of your corporation or LLC. Though for founders who intend to take any outside investment, the key is to only grant equity in exchange for something (or someone) that will generate more value than what is given up. In other words, that 4% equity dilution should throw off a greater than a 4% increase in value to the company. Mechanisms to prevent dilution do exist, more often in later stage equity financings, though how they are structured and their implications to the various stakeholders vary and will be discussed in a later LawTalk blog post.

Was Silicon Valley “Bro Culture” to Blame for Uber CEO’s Resignation?

By: Steve Masur and Cassidy Lopez

Ride-sharing giant Uber‘s Travis Kalanick has been forced to step down from his role as CEO of the company a week after taking an “indefinite leave of absence” amid growing backlash over his leadership and corporate culture at Uber. Uber has been rocked by what seems to be a never-ending series of scandals, PR crises, and staff departures (since the beginning of this year, the company has lost fourteen of its top executives), leaving investors to question whether Kalanick was fit to continue leading the company.

The company’s rough ride began on January 19^th, when the Federal Trade Commission issued Uber a $20 million fine for misleading drivers about pay. A week later, a viral campaign to #DeleteUber was started after Uber turned off surge pricing at JFK airport in New York City to draw more customers during a taxi driver strike in response to President Trump’s travel ban. Kalanick also received backlash for joining Trump’s Strategic and Policy Forum, though a few days after unrelenting criticism on social media, Kalanick resigned from the economic advisory board. However, by February, the New York Times reported that almost 200,000 users had deleted the Uber app from their smartphones.

In mid-February, a former Uber software engineer published a powerful blog post alleging a culture of sexual harassment and gender bias at the company. An internal investigation into harassment and discrimination was launched, led by former U.S. Attorney General Eric Holder and Uber board member Ariana Huffington. The investigation has led to 20 firings so far. The firings were aimed at addressing deeply rooted cultural and managerial issues within the company, stemming from an inherent misogynistic culture within the Silicon Valley startup community. Holder issued a report in June recommending that the company reevaluate Kalanick’s leadership at the company as well as “enhance board oversight.” Many have criticized the “toxic bro culture” which exists in Silicon Valley. Investors have an affinity for favoring young, good-looking men, hustlers and go-getters, with an aggressive nature who will do what it takes to make sure the company takes off. “Bro” culture may have its perks in the beginning in leading start-ups to rapid growth and quick profits, but it also encourages ignoring the rules (or, at the very least, pushing boundaries beyond what’s traditionally acceptable) and doing whatever it takes to win no matter the circumstances. That attitude, which is what made Uber a $70 billion company, also, unfortunately, led to Kalanick’s downfall. Leslie Miley, a former software engineer at Slack, may have put it most precisely: “Maybe there’s no morality in money.”

Amid all of this scandal, Uber was also facing an intellectual property lawsuit by Alphabet Inc.’s self-driving car subsidiary Waymo and an investigation by the U.S. Department of Justice into software tools that were allegedly being used to deceive some law enforcement. UPDATE (2/9/2018): Waymo and Uber have reached a settlement their trade secret lawsuit over self-driving vehicle technology, in which Waymo will obtain 0.34% of Uber’s equity, valued at $245 million at a $72 billion valuation. In a statement, new Uber CEO Dara Khosrowshahi denied any allegations of unfair competition and trade secret misappropriation, but expressed “regret” over Uber’s actions and looked ahead to a cooperative partnership with Alphabet.

Kalanick’s “indefinite leave of absence” was not enough for some investors who were growing weary of the leadership at the head of a company they had pumped millions of dollars into. Five major shareholders, which include some of the tech industries top venture capital firms, notably Benchmark, LOWERCASE capital, Menlo Ventures, First Round Capital, and Fidelity Investments, and who together hold about 40 percent of Uber’s voting power, demanded Kalanick’s resignation. The shareholders are calling for a board-led search for a new Chief Executive Officer and are demanding that the company immediately hire an experienced Chief Financial Officer. In a day and age where venture capital funding has profoundly changed the U.S. economy, investors have a large influence over companies, as evidenced by the shareholder letter calling for the resignation of Kalanick. A 2015 Stanford University study found that 43% of all public companies founded since 1979 were backed by venture capital firms, and this number has only been on the rise two years later.

The venture capitalists funded Travis Kalanick to do exactly what he did, which is to ignore the rules, eat for lunch anyone who got in Uber’s way, and build an enormous amount of value. It was truly amazing how Uber was able to bust the national and world-wide monopolistic trusts of taxi and limousine authorities. However, Uber’s mistake was not transitioning sooner to a more upright American corporate culture the way other Silicon Valley startups have done. So the question now remains: who will be the new head of Uber? Kalanick will remain a part of Uber since he still owns a majority of Uber’s voting shares, but shareholders and board members are surely on the hunt for someone experienced, professional, and ready to get the company back on track and back in the good graces of millions of users around the world.

Entrepreneurship Bootcamp Series : How to Hire the Right Tech Team

Thank you for joining us at the Entrepreneurship Bootcamp Series at WeWork Soho South! Steve Masur joined Asha Saxena, professor at Columbia University and CEO of Future Technologies Inc and Dasmer Singh, product manager at Venmo. Asha and Dasmer discussed the ins and outs of building a strong tech team for your start up and explained how to expand your networking platform in different sectors and industries.

Asha Saxena is a professor at Columbia University and CEO of Future Technologies Inc.. She is also an entrepreneur in residence at Eugene Lang Entrepreneurship Center and was rewarded NJBIZ’s Best 50 Women in Business award. The premise of her discussion was about how to hire the right tech team for your company.

Dasmer Singh is currently enrolled at Stanford’s Business School and is the project manager for Venmo, which has skyrocketed over the past couple of years. He constructed and completed a bulk of the coding that went into the Venmo app. And throughout his talk, Dasmer went over the workflows of project management and how to make sure your tech team is productive and efficient enough to bring your ideas to the real world.

The Entrepreneurship Bootcamp and these guest speakers were here to help you and your team overcome problems you may face when beginning your startup company. This specific series focused on ensuring you how to hire and pick the best fit tech team that will help you bring your idea to life. We are excited that you were able to hear these speakers talk about their companies and how they were able to build their ideas and turn them into successful startups.

Tickets are available at Eventbrite.