This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
Ben Horowitz, the co-founder of the Silicon Valley venture capital firm Andreessen Horowitz, has a new book about what makes for a purposeful culture.
In What You Do Is Who You Are (Oct. 29; HarperCollins), Horowitz offers lessons from history as well as from his own experience to answer the question that’s top of mind for executives now more than ever: “How do you create and sustain a culture you’re proud of?”
Horowitz spoke with Fortune’s Andrew Nusca in a wide-ranging interview. Below is an excerpt from the Q&A (Read it in full here.)
FORTUNE: One of the things businesspeople like to stew on is whether culture can be changed—especially if it’s a bad one. Now that you’ve written your book: Can it?
HOROWITZ: If a guy who’s born a slave can take a bunch of slaves and turn them into one of the greatest fighting forces in the world [referring to the Haitian Revolution’s slave revolt], you absolutely can change the fucking culture at your company. That’s a mistake that people often make—that you can’t.
One of the more striking examples of that is Sun Tzu running a concubine army and changing the culture around [military] drills in an instant by cutting people’s heads off. It’s very possible. It’s a matter of technique and commitment to change.
People can come in and water down a culture, but if you’re taking away the old culture, you need to give it a stronger purpose than it had. [When it removed controversial CEO Travis Kalanick] Uber didn’t quite replace the culture with a stronger culture. That’s one of the mistakes it made. Travis’s culture was really compelling, creative, powerful, and motivating—the “super pumped” virtue. He did a lot right and had one very big flaw in the code. But they lost a lot of what he did right in the transition, and you can see that attrition today. (Editor’s note: Horowitz’s firm famously passed on investing in Uber, choosing rival Lyft instead.)
Let’s talk about office space purveyor WeWork, which is dominating news headlines right now for having a corporate culture so all-encompassing and detached from reality—it’s literally The We Company—that it hid the problematic business underneath it. In light of the book’s lessons, what do we draw from this?
It’s easy to shit all over everything Adam [Neumann, WeWork’s co-founder and former CEO] did now—the swing and the miss with the IPO, [the takeover by] SoftBank, all of that. But what he accomplished wasn’t trivial; it was very real. WeWork started with a giant vision: “We will change the way that work happens, and make it much more human.” He built a culture around that, and lived it himself. And it was such a compelling narrative that he was able to raise nearly as much money as anybody has privately and build a very talented workforce—those employees are really very good. And from a business standpoint, he created a consumer brand on a real estate company. Who’s done that? Maybe Donald Trump, I guess.
A slightly different category, I think.
Yeah (laughs). The core thing in WeWork’s culture was optimism: “Dream bigger.” It ended up being the Achilles heel because there were clearly things that were not expected in the business, and I’m sure people said something along the way, and I’m sure bad news was difficult to deliver in that environment. That’s where cultural design is very complex. And you have to be careful of that. I talk about that in the book. The Samurai are an honor culture. But you need to be polite and have rules of engagement—you can’t just have strong, massive cultural concepts and not define the limitations on that. From afar, that seems like the mistake [Neumann] made.
QUOTE OF THE DAY: “The size of the commitment that SoftBank has made to [WeWork] in the past and now is $18.5 billion. To put things in context, that is bigger than the GDP of my country where I came from (Bolivia). That’s a country where there’s 11 million people.” — SoftBank executive Marcelo Claure in an address to WeWork’s worried staff. Read the leaked transcript from the all-hands meeting.
NOT SO FAIR: Fair.com, a flexible car ownership startup valued at $1.2 billion will be laying off 40% of its staff. It is also removing its CFO, Tyler Painter, who is the brother of the CEO. He’s being replaced in the interim by Kirk Shryoc.
VENTURE DEALS
- DAZN, a London-based sports streaming service, will raise at least $500 million, according to Bloomberg. Read more.
- Pollen (f.k.a Verve), an invite-only marketplace using influencer marketing for experiences and events, raised $60 million in funding. Northzone led the round, and was joined by investors including Sienna Capital, Draper Esprit, Backed and Kindred.
- Current, a New York-based bank for modern life, raised $20 million in Series B funding. Investors include Wellington Management Company, Galaxy Digital, and CUNA Mutual Group.
- Ally, a Bellevue, Wash.-based business performance management software provider, raised $15 million in Series B funding. Tiger Global Management LLC led the round.
- Modern Animal, a Los Angeles-based veterinary company, raised $13.5 million in seed funding. Founders Fund led the round, and was joined by investors including Upfront Ventures, Susa Ventures, BAM Ventures, BoxGroup, DCM, LJ Ventures, and Wonder Ventures.
- Incode, a San Francisco-based facial recognition company, raised $10 million in seed funding. The investors were not named.
- Ginger, a behavioral health coaching app, raised $7.5 million in funding from Health Velocity Capital.
- Tonkean, an Israel-based robotic automation and management platform for business operations, raised $7.2 million in seed funding. Foundation Capital led the round, and was joined by investors including Magma Venture Partners and Slow Ventures.
HEALTH & LIFE SCIENCES DEALS
- Allievex Corporation, a Marblehead, Mass.-based biotechnology company, raised funding of an undisclosed amount. Novo Holdings and Pappas Capital led the round.
PRIVATE EQUITY DEALS
- Granite Creek Capital Partners LLC and Red Arts Capital acquired Sunset Pacific Transportation, a Chino, Calif.-based logistics provider. Financial terms weren't disclosed.
- HCAP Partners made an investment in Lone Star Analysis, a Dallas-based provider of predictive and prescriptive data analytics and analysis. Financial terms weren't disclosed.
- Vance Street Capital recapitalized Eirtech Aviation Services, an Ireland-based provider of specialist aviation services. Financial terms weren't disclosed.
- Infogain, which is backed by ChrysCapital, acquired Revel Consulting, a Seattle-based digital experience consultancy. Financial terms weren't disclosed.
OTHER DEALS
- Authentic Brands Group acquired Barneys, a New York-based chain of luxury department stores, for $271.4 million.
IPOs
- Ucommune, China’s biggest workspace provider, has filed confidentially for an IPO in the U.S., Reuters reports citing sources. Read more.
- Phathom Pharmaceuticals, an Emeryville, Calif.-based firm focused on gastrointestinal diseases, raised $182 million in an IPO of 9.6 million shares priced at $19. It posted a loss of $1.3 million in 2018. Frazier Life Sciences (41.1% pre-offering) and Takeda Pharmaceutical Company (9.1%) back the firm. It plans to list on the Nasdaq as “PHAT.” Read more.
- Progyny, a New York-based firm focused on fertility benefits, raised $130 million in an IPO of 10 million shares (33% insider sold) at $13 apiece. It posted a revenue of $105.4 million and losses of $5.5 million in 2018. TPG (27.2% pre-offering), KPCB (25.6%), and GlaxoSmithKline (13.9%) back the firm. It plans to list on the Nasdaq as “PGNY.” Read more.
- Youdao, a Hangzhou, China-based maker of learning products and services, raised $95 million in an IPO of 5.6 million ADSs priced at $17. It announced an additional private placement of $125 million worth of shares by Orbis Investment Management. It posted revenue of $142.6 million and a loss of $84.8 million in 2018. NetEase backs the firm. It plans to list on the NYSE as “DAO.” Read more.
- Cabaletta Bio, a Philadelphia-based biotech focused on autoimmune diseases, raised $75 million in an IPO of 6.8 million shares priced at $11. It posted a loss of $12.2 million in 2018. 5 AM Ventures (19% pre-offering), Adage Capital Partners (19%), and Baker Bros (19%) back the firm. It plans to list on the Nasdaq as “CABA.” Read more.
EXITS
- PTC agreed to acquire Onshape, a Cambridge, Mass.-based full-cloud 3D CAD system, for $470 million. Onshape had raised approximately $169 million in funding from investors including Andreessen Horowitz, New Enterprise Associates, Commonwealth Capital Ventures and North Bridge Venture Partners.
PEOPLE
- Sorenson Capital promoted Burke Davis to principal.
