Hyperloop One: Silicon Valley's Latest Soap Opera
Drama seems to follow Elon Musk wherever he goes.
First we had the controversy over whether he deserved to be called a co-founder of PayPal. Then he was sued by Tesla co-founder Martin Eberhard over the exact same issue. And two weeks ago, Musk proposed that Tesla acquire troubled SolarCity, which he chairs and is run by his two first cousins.
Now, Musk’s Hyperloop concept is in jeopardy over a fantastic feud between Hyperloop One’s co-founders. A lawsuit filed by ousted CTO Brogan BamBrogan (more on the name later) against executive chairman Shervin Pishevar and the company alleges breach of fiduciary duty, breach of contract, wrongful termination, retaliation, defamation and assault.
While Musk is not directly involved in Silicon Valley’s latest soap opera, his other company, SpaceX, developed the initial high-speed pod and tube concept and licensed it to Hyperloop One (formerly Hyperloop Technologies) as open source technology. Also Pishevar and BamBrogan are both close associates of Musk. He appears to be their connection.
Pishevar is a serial entrepreneur, angel investor and venture capitalist who’s backed dozens of tech startups, including Uber and Hyperloop One. He’s also a big donor and fund-raiser for various Democratic Party candidates, including Barack Obama and Hillary Clinton.
While his name was actually Kevin Brogan at the time, BamBrogan (after marrying Bambi Liu, Bambi plus Brogan became BamBrogan) was a key engineer at SpaceX for nearly a decade before joining forces with Pishevar to form Hyperloop One in 2014. As with many startups, the partnership hasn’t gone as smoothly as planned.
On Tuesday, BamBrogan and three other executives filed a 29-page complaint against the company, Pishevar, investor Joe Lonsdale, CEO Rob Lloyd and Afshin Pishevar (former general counsel and Shervin’s brother) alleging a veritable smorgasbord of dysfunctional behavior that includes cronyism, nepotism and a death threat.
According to the suit, the “money men” in control of the company marginalized the plaintiffs and the engineering team and used their hard work to “augment their personal brands, enhance their romantic lives, and line their pockets (and those of their family members).”
The complaint claims that Pishevar “installed” his own brother, who previously ran a small law firm in Maryland, as general counsel, and granted him compensation and equity far exceeding what the engineers were awarded. It also alleges that Pishevar paid a PR vendor he was dating $40,000 a month and that Lonsdale “insisted the company hire his little brother’s two-person outfit” as its “exclusive investment bank.”
The suit also claims that the defendants granted themselves the lion’s share of stock and super-voting rights and signed long-term partnerships with no due diligence. It further alleges that Pishevar pressured potential investors to also participate in his own fund, Sherpa Capital, and that he gave preferential treatment to friends above strategic investors.
All this seems to have come to a head in May. Following an $80 million Series B round of funding, the plaintiffs and seven other top executives sent a grievance letter to the “money men” seeking changes in the company’s capital and operating structure. In other words, they didn’t like the way the “money men” were running the show.
“Primarily, we feel that a significant problem exists in the disparity between the outsized control and equity owned by Shervin Pishevar and the limited collective control and ownership by the team,” it said. “Also, we don't believe that venture capitalists should have voting control of a company which is engaged in the development of technology and deployment of infrastructure that they do not fully understand.”
Here’s where it gets interesting. BamBrogan apparently called several investors to alert them to these internal issues. If Pishevar and company were at all inclined to make concessions, those phone calls probably put the kibosh on that line of thinking. That appears to be the catalyst that brought the insurgency to an end.
But not everyone reacted in a level-headed way.
Afshin was caught on camera placing a hangman’s noose on BamBrogan’s chair, an offense for which he was later fired. Then all the defendants were either actually or constructively terminated, the latter term meaning they were demoted and subsequently resigned. And here we are.
Meanwhile, the company is treating this as a “bogus lawsuit” by a bunch of “disgruntled ex-employees” as part of a failed coup, according to multiple reports. In addition, the company claims that the rope was a lasso, not a noose. You say tomato, I say tomahtoe.
What do I think of all this? Just another soapy day in the wacky world of Musk Valley. Speaking of whom, I wonder if Musk is going to have to swoop in and rescue this disaster of a company the way he seems or at least claims to have done with the others. Wouldn’t surprise me in the least.