Bastian Lehmann: How the Uber Deal Went Down and How a $2.65BN Deal Turned into $5BN | E1137

Intro (00:00:00)

• Bastian Lehmann negotiated a deal with Uber that resulted in a $5 billion valuation for his company, with only $100 million left in cash and a negative gross profit margin in the single digits.
• The company later became profitable.
• Most companies fail because the founders give up, but Lehmann refused to give up.
• Bastian Lehmann was born in 1977 in Germany.
• He was a curious child who loved to play and explore.
• He spent most of his time outdoors, playing in the forest and running around with friends.
• He and his friends would put on exhibitions.

Importance of Skill vs Luck (00:01:39)

• Bastian Lehmann's philosophy emphasizes determination, hard work, and grit over luck.
• Moving to the United States proved to be a pivotal moment in his career.
• His passion for computers led him to discover a method for accessing the internet for free using a US calling card.
• Through a chance encounter, he learned how to obtain a US calling card and impersonate a service agent, enabling him and his team to connect to the internet without incurring high costs.
• By acquiring a calling card number and PIN code, they were able to make free calls to AT&T in Germany, connecting their modem to the phone line and inputting the necessary information to access their internet service provider.
• Lehmann acknowledges that their actions could be interpreted as embezzlement of AT&T or MCI services.

Impact of Parents’ Divorce (00:06:49)

• Bastian Lehmann was six years old when his parents divorced.
• His brother was almost three years old at the time.
• Lehmann describes his life before the divorce as "pretty perfect."
• After the divorce, things became more complicated.
• Lehmann's mother worked three jobs to support the family.
• She never spoke badly about his father, despite the difficulties.
• Lehmann credits his mother's strength and resilience as a major influence on his own life.

Source of Grit & Ambition (00:07:57)

• Lehmann believes his grit, steeliness, and ambition come from his upbringing.
• He recalls a specific moment when he realized how tight money was for his family.
• His mother had to take on an additional cleaning job in the early morning.
• Lehmann was determined to make enough money to provide for his mother.
• He wanted to ensure she had everything she needed.

Leading Postmates in Wartime Mode (00:09:25)

• Bastian Lehmann, the former CEO of Postmates, describes the company's journey as a "wartime mode" with an intense focus and determination to succeed.
• Despite competitors raising larger funding rounds, Postmates remained focused on their mission and believed in their potential for profitability.
• Lehmann emphasizes that Postmates, DoorDash, and UberEats had sound fundamentals, with clear paths to profitability and strong execution capabilities.
• Contrary to the perception of tough business models, Lehmann asserts that Postmates and other major players had profitable markets at scale.
• The key moment for raising significant capital was when the market shifted, and additional funding became crucial for advertising and market share acquisition.
• Founders Fund, led by Peter and Brian, invested in Uber's Series A round, which was seen as a smart move by Uber's founders.

Importance of VC Brand & Leading Rounds (00:14:42)

• A well-known lead investor can provide a positive signal to the market, but it cannot save a company with poor execution.
• Every funding round is challenging, but as a business matures, it becomes increasingly difficult to raise capital.

Negotiating the Uber Acquisition (00:15:38)

• The initial discussions about merging Postmates and Uber took place during the COVID-19 pandemic.
• At the time, Uber Eats was struggling due to the decline in their rides business, while Postmates was the market leader in most of the US (except California).
• Uber saw an opportunity for consolidation and approached Postmates about a potential merger.
• Contrary to rumors, Postmates was not running out of cash and was planning to go public before the acquisition.
• Postmates believed that joining forces with Uber would be the best move for the company's long-term success, as the market needed to consolidate.

Lessons on Getting Acquired (00:18:55)

• Bastian Lehmann reflects on the acquisition of Postmates by Uber.
• He emphasizes the importance of putting the company's best interests first, even if it means setting aside personal ambitions.
• Lehmann highlights the successful negotiation of the deal, which resulted in a significant increase in the total value from $2.65 billion to almost $5 billion due to favorable market conditions.
• Determining the price of Postmates involved a combination of factors, including the last valuation, forward-looking revenue multiples, and market sentiment.
• Uber initially proposed a price of around $2.2 billion, which was negotiated up slightly.
• Lehmann prioritized securing favorable terms, such as no breakup fee and no collar on the deal, over pushing for a higher headline price.

Board Reaction and Founder's Advice (00:18:55)

• Brian Singerman, a board member, expressed excitement about the deal, acknowledging Lehmann's role in securing it.
• Lehmann believes that founders should be persistent and never give up, as most companies fail due to founders giving up.

Dara Khosrowshahi as a Non-Founder CEO (00:22:25)

• Dar is considered one of the best non-founder CEOs.
• He gives his employees a lot of autonomy.
• He is a calculated risk-taker.
• He has successfully maneuvered legislation, cultural issues, and external expectations.
• He has made Uber his own company.

Postmates Brand & Acquisition (00:25:02)

• Pan does not care about Dar writing off the Postmates acquisition as he is not in charge of Uber.
• He sees no signs of the Postmates acquisition being written off.
• The Postmates brand is still very strong, especially in LA.
• Consolidating to one brand may be smart, but Uber knows when to do that best.
• The idea was to unite the tech under the different brands and eventually have the same product with different names.
• Different brands can be used to appeal to slightly different audiences.

Starting a Second Company (00:26:30)

• Bastian Lehmann found it difficult to do nothing after leaving Uber.
• He enjoys building products, running teams, and working on ideas.
• Investing did not bring him the same joy as actively building something.
• It is easy to raise money.
• Founders can select the people they want to work with.
• It is easier to assemble a team.
• Founders know how to run the processes and avoid mistakes.

Selecting VCs & Raising Money (00:28:49)

• Bastian Lehmann, CEO of TipTop, secured funding for his startup after being introduced to Mark Andreessen through a mutual friend.
• The funding round was completed swiftly with minimal negotiation, agreeing on a reasonable price for a cold start Series A debt.
• At the time of funding, TipTop had three co-founders, an idea, and had been exploring the problem space.
• Lehmann expressed concerns about excessive funding leading to complacency but raised enough to test multiple startup ideas.
• TipTop has a high conviction bar, strongly believing in the product but uncertain about market size and impact.
• Lehmann mentioned Patrick and John Collison as examples of successful founders with a clear cut-off strategy based on specific metrics.

Starting a Company with Financial Security (00:34:02)

• Bastian Lehmann shares his experience of starting a second company after successfully selling his first one.
• Lehmann emphasizes the significance of staying humble, adaptable, and problem-solving oriented, rather than relying on past achievements.
• The process of receiving the proceeds from a company sale takes about a year, involving various legal and financial steps.
• Lehmann describes the anticlimactic moment of receiving the money due to the year-long preparation and the need to maintain focus on running the company during the transition.
• The speaker regrets not being able to celebrate with their 2,000 employees in person due to the pandemic restrictions.
• The end of the 10-year journey was bittersweet, as the close-knit community had to part ways while adhering to pandemic safety measures.
• Lehmann worked long hours, including weekends, and spent most of their time in the office.

VC & Value Add (00:39:30)

• Venture capitalists (VCs) often lack original thinking and follow the crowd, which can be detrimental to founders seeking funding.
• Founders should focus on making "courageous bets" rather than safe decisions when seeking venture capital.
• The best VCs are humble and provide support without interfering with the company's success.
• Founders should avoid investors who require excessive "education" about the business, as it may indicate a lack of conviction in the investment opportunity.
• It's better to focus on investors who initially believe in the business rather than spending excessive time with the same VC firm.
• Be cautious when a VC tries to understand your business in detail while also analyzing a competitor's business, as it may indicate a lack of focus.
• Spending too much time and effort in meetings with VCs who need excessive conviction, regardless of the investment size, can be a red flag.

Running Board Meetings (00:45:48)

• Bastian Lehmann initially struggled with running board meetings due to his focus on daily operations.
• He learned the importance of aligning the board and communicating effectively with them.
• Lehmann found it beneficial to have a board dinner the night before meetings, allowing for discussions and reducing anxiety during the actual meeting.
• Sending out a board deck a few days in advance helped keep the meeting focused and efficient.

Hot Takes on Inference Computers (00:48:11)

• Bastian Lehmann believes there are overlooked areas in the current state of AI and large language models (LLMs).
• LLMs are still expensive and more costly than Google Search, limiting killer apps beyond chatbots.
• There's a shortage of compute power, mostly used for training models in the cloud on powerful GPUs.
• Lehmann proposes a new type of computer for personal AI, designed specifically for inference.
• This computer would not have a screen or require direct interaction but would power a large language model.
• It would be a platform with personalized weights and preferences, connected to the world as desired.
• Inference should happen as close to the data source as possible for maximum effectiveness.
• Personalized weights and numbers in the cloud would be costly and unable to provide real-time responses.
• Running inference at home would only incur electricity costs, making it cost-effective.
• Lehmann draws a parallel between the current situation and the time-share mainframe era.
• He suggests that a shift towards personalized home computers for AI could revolutionize the field, similar to Apple's introduction of personal computers.

Future of Phones & Vision Pro (00:52:31)

• Apple may not be best placed to run AI models locally on devices due to their monopoly on hardware and phone usage.
• The phone may become obsolete as AI advances and people move towards using implants or smaller devices to communicate.
• The Vision Pro, in its current form, is a product in search of a market and may have limited applications in science, medicine, and media.
• A successful AR device would be unrecognizable from regular reading glasses, have unlimited battery life, and provide a subtle overlay of information.
• Contact lenses that connect to the internet may eventually become a reality.
• Incumbents are likely to benefit more from AI in the short term due to their data advantages and cash flow.
• However, new companies may emerge and become major players in the field of AI by starting with overlooked or non-obvious applications.

Future of AI & Startups vs. Incumbents (00:56:24)

• Incumbent companies can be vulnerable to disruption from startups due to internal issues like product failures and conflicts.
• OpenAI's rapid rise in the AI field, despite the dominance of established tech giants, exemplifies the potential for startups to challenge incumbents and achieve significant growth.
• OpenAI's success has inspired entrepreneurs to pursue bold ideas and explore new possibilities in AI.
• The speaker is particularly interested in companies working on specific AI models and space nuclear startups.
• The speaker emphasizes the urgency of developing AI rapidly to address global challenges and prevent extinction, but does not believe in the concept of an evil AI causing our demise. Instead, they suggest that extinction may occur due to our failure to enhance our intelligence and utilize intelligent tools.

Quick-Fire Round (01:03:58)

• Bastian Lehmann discusses various topics in a quick-fire round of questions.
• On what he has changed his mind about in the last 12 months:
  • He believes the technology industry is no longer in a slump and is excited about its future.
• Biggest concern in the world today:
  • Flying on United Airlines.
• Single biggest way VCs and founders are misaligned:
  • Expectations, specifically when, how, and what.
• Most lavish purchase since having two kids:
  • He doesn't specify.
• Biggest piece of BS advice he hears often:
  • The first X dollars in revenue is always the hardest.
• Kindest thing anyone has ever done for him:
  • His co-founder, Sean, has been an incredible supporter and friend throughout his journey as CEO.
• Other than Dara, which CEO does he respect the most and why:
  • He believes the world would be a better place with more founder CEOs and highlights Patrick at Stripe, Zack at Plaid, and Max at Figma as remarkable leaders.
• Where he sees himself in 2034:
  • Realistically, he expects to be at a sports event with his kids, likely watching them play basketball.