How relationship between Uber and Google soured and skidded into litigation

San Francisco — When Uber Technologies was raising venture capital in 2013 it was one of the hottest deals.

No one was more eager to write a cheque than Bill Maris and David Krane of Google Ventures, since renamed GV, but not everyone there agreed.
The firm already had an investment in a competitor, Sidecar, and Uber was demanding what looked like a sky-high valuation.
Maris and Krane prevailed, and the deal is now regarded as GV’s greatest success. On paper, the firm’s initial 2013 investment of $258m gained about 14 times its value in the next three years to more than $3.5bn.


But now Alphabet, Google’s corporate parent, is suing Uber for theft of trade secrets, alleging that one of the top engineers in its self-driving car programme left with thousands of confidential files, including designs that helped him start self-driving truck company Otto and then quickly sell it to Uber. Uber denies those claims.
The lawsuit, filed by Alphabet’s self-driving car unit Waymo, has jolted the fast-growing, highly competitive industry around autonomous vehicles and ride services, seen as the future of private road transport.
Yet the confrontation was a long time in the making: the complex relationship between the companies was tense from the start, say insiders, and soured further as they increasingly competed with each other.

Now, if the Waymo suit damages Uber, GV’s investment in the ride-hailing company stands to go down as a Silicon Valley rarity: a large funding deal undermined by the firm’s own investors.
"Whatever Waymo gains, Google Ventures loses," said Stephen Diamond, associate la professor at Santa Clara University.

The lawsuit is just one in a series of recent public setbacks for Uber, including claims of sexual harassment that prompted an internal investigation, a video of CEO Travis Kalanick arguing with an 
Uber driver that led him to apologise publicly, and Uber’s admission on Friday that it used a secret tracking tool to avoid authorities.
In response to the lawsuit, Uber said: "We have reviewed Waymo’s claims and determined them to be a baseless attempt to slow down a competitor and we look forward to vigorously defending against them in court.
"In the meantime, we will continue our hard work to bring self-driving benefits to the world."
A GV spokeswoman would not comment.

Deal at any cost
Uber was more than just another investment for then-fledgling Google Ventures, which needed a high-profile deal to put it on the map.
Maris and Krane were early Uber fans, but it took about two years for them to connect with Kalanick. When Uber investor Benchmark finally brokered a meeting in May 2013, the Google Ventures partners were determined to do a deal at practically any cost, according to two sources close to the transaction.
With other would-be investors waiting in adjacent conference rooms at Uber’s San Francisco offices, Maris and Krane made their pitch to invest. Kalanick pushed for a higher valuation, without a board seat; Google Ventures pushed back, asking for a board observer seat and a liquidation preference for protection if Uber was sold at a loss, one of the sources said.
They finally came to terms, with a $3.5bn valuation, and there were signs of a possible broader alliance. David Drummond, Google’s senior vice-president of corporate development, had a social relationship with Kalanick, and he joined the board.

A ride in a self-driving car and a meeting with Google CEO Larry Page, recounted in Brad Stone’s recent book The Upstarts, seemed to bode well for the relationship.
But conflicts emerged immediately. Kalanick, a tough negotiator, wanted a discount on software tools behind Google Maps, the company’s ubiquitous mapping software, according to a person close to the transaction. The best Google Ventures could offer was close contact between Uber and Google’s mapping team, the person said.
Kalanick also wanted Uber to be featured prominently in Google Maps, eventually giving customers a way to hail an Uber ride directly from Maps, and Google agreed, a source close to Uber said. But Uber felt Google dragged its heels on the integration and found the initial roll-out disappointing, the source said.

Friction got worse as Uber turned its attention to autonomous driving in which Google had already established an early lead. Uber announced its intentions in typically abrupt style in early 2015, poaching 40 faculty and researchers from Carnegie Mellon University to set up a self-driving lab in Pennsylvania.
It bought mapping software firm deCarta and began investing heavily in its own mapping systems. Meanwhile, Google launched an on-demand delivery service, a market Uber is also chasing, and began offering a car-pooling service through driving app Waze, which it acquired in 2013. The car-pooling feature in particular rankled Uber, said a source close to the company.
"Things escalated from frenemy to now enemy quite quickly," said Anand Sanwal, CEO and co-founder of venture capital research firm CB Insights.
The tension bubbled to the surface last August, when Drummond stepped down from Uber’s board.
Uber declined comment on any of its dealings with Google and did not make Kalanick available for an interview.

Undermined by its own investors?
Uber’s aggressive culture was the subject of many conversations at Google Ventures, a source close to the transaction said. Hoping to influence the start-up, the venture firm at first encouraged a flow of talent from Google to Uber.

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