Is the dismissal of the Chinese CEO in Silicon Valley due to racial discrimination or because of the medicine he took two years ago?

From Justin Zhu’s Twitter avatar

Bloomberg writer Sarah McBride tells the story of a Silicon Valley startup founder’s struggle with the board of directors. Chinese entrepreneur Zhu Haoran valued his company at US$2 billion, but an unorthodox style and tense relationships with investors cost him his job.

On April 26, Justin Zhu was walking on Broadway in San Francisco when he was suddenly called to attend a conference call and was fired.

He was the CEO of digital marketing startup Iterable Inc., and his co-founder, Andrew Boni, and the company's board of directors told him he was going to lose his job, mostly. Because he took LSD before a meeting in 2019.

The full name of LCD is lysergic acid diethylamide, a strong hallucinogenic drug.

This statement is not false. Zhu Haoran said that he originally wanted to take a small amount of medication to improve his concentration, but accidentally took too much. There were other reasons why he was fired.

For the past 10 months, Zhu has been talking to a reporter from Bloomberg Businessweek about his experience as a CEO, the challenges faced by Chinese in Silicon Valley, and his relationship with Dispute between two major investors in Iterable.

When investors asked him to shut up, he didn't listen, which was the final straw after a long feud.

Zhu’s firing has developed into a bizarre story that has hit many classic cultural triggers in Silicon Valley, with the founder not behaving like a traditional businessman, turning to drugs to seek extra energy, and speaking out about Risks of workplace stress. It's also a story steeped in the tense racial politics that are currently roiling the tech world and American society at large.

"In the early days, they were looking for strange things," Zhu Haoran, 31, said of venture capital. He turned Iterable from an idea into a company worth about $2 billion, a staggering success by most measures. But he said that when a company reaches this stage, the new mantra becomes, reduce risk.

Zhu Haoran started working as a software engineer at Twitter in 2011. Two years later, he and Boney, now 32, invested their life savings in a new company, Iterable, to target customers with highly customized marketing campaigns and notifications, such as reminding customers of their food delivery orders via email or text message. state.

It didn’t take long for the company to start getting customers, and investors rushed to sign contracts. By the end of 2016, Iterable was valued at $125 million.

Zhu himself exudes an eccentric temperament that is consistent with the free-thinking spirit of Silicon Valley. At a recent business lunch, he wore a teal velvet sweatshirt emblazoned with planets and stars. He said he bought the sweatshirt because it reminded him of "The Little Prince."

He enjoys discussing the amorality of capitalism, the principle of cosmic debt, and the need for more love in the world.

Even when Iterable was booming, Zhu said he sometimes felt alienated and sad, believing that he and the company were too focused on sales and making money at the expense of altruistic goals.

In 2019, while attending an investor's wedding in Lebanon, Zhu Haoran met an entrepreneur who suggested that he take a small amount of LSD to improve concentration and overall well-being. Zhu researched the idea and found studies linking microdosing to improved focus and lower stress.

Back in San Francisco, Zhu is preparing for an important meeting with a prominent investor group. He had never used the drug before and, believing that a small amount of LSD could improve his speech, decided to give it a try, taking a small amount before the meeting.

Things are not going well. When trying to get these potential investors to agree to a series of financial forecasts, Zhu Haoran looked at the screen, where the numbers and images flickered on and off, making it impossible to tell.

He said his body felt like it was melting. After an awkward silence, a colleague walked in. Zhu took a sip of tea and continued speaking from memory.

The meeting did not result in investment.

From Justin Zhu on Twitter

Zhu’s relationship with venture capitalists has become tense. He wore cargo shorts and a T-shirt to meet with Geodesic, a venture capital firm founded by John Roos, the former U.S. ambassador to Japan. An Iterable board member later told him Geodesic wouldn't invest, suggesting part of the reason was that he was dressed too casually.

But a person familiar with Geodesic's thinking said the company made the decision without considering Zhu's attire.

At another investor meeting, Zhu pointed out that the abbreviation for artificial intelligence sounds like the Chinese word for "love." Afterward, a colleague asked him if he was "going to be Adam Neumann."

Neumann, the former CEO of WeWork, is known for harping on similar topics.

Later, Zhu Haoran heard that an investor questioned whether he was taking drugs at the time. He said no, and said that his use of microdosing in the workplace was just a one-time incident.

Boney told him that he preferred the cautious Justin Zhu. Zhu replied that he finally showed the real Zhu Haoran, here he used his Chinese name.

At the end of 2019, after Iterable successfully raised $60 million, two of his investors, Murat Bissell, general partner of CRV, and Shardul Shah, partner of Index Ventures, Ah, took Zhu Haoran out for dinner to celebrate. In a corner of Hakkasan's restaurant, two VCs steered the conversation toward the topic of company leadership.

Zhu was shocked and asked if they would consider replacing him as CEO.

"This is still your company," Zhu said Bissell assured him at the time, but also asked him to consider the benefits of a more experienced leader.

Shanghai-born Zhu Haoran said he recalled an earlier conversation with an Asian investor who said Zhu might one day be asked to give way to a white senior executive. Tube.

So he told investors he wanted to stay, in part to set an example for other East Asian immigrants.

"I didn't feel any understanding," he recalls. "They said, OK."

Then, he said Bissell changed the subject.

When asked about the dinner and other details Zhu described, Index Ventures, through a spokesman, declined to be interviewed. CRV did not respond to multiple requests for an interview, and Bissell did not comment.

In the early days of the COVID-19 outbreak, Zhu applied for a $30 million loan to keep the business afloat in case of an economic downturn. In order to close the loan, the bank asked for letters of recommendation from his board of directors.

Zhu Haoran said the Shah had been delaying. Eventually, Shah asked to meet with co-founders Boney and Bissell in South Park, the venture capital hub of San Francisco. As the group gathered on benches outside, investors again raised the topic of a search for a new CEO.

"You were just doing pattern matching," Zhu recalled. "The last 20 CEOs you go public are probably all white."

This is not a crazy assertion. Most Silicon Valley CEOs are white men, and many are from India, but few are from China, Japan or South Korea. However, both Index Ventures and CRV have backed some well-known East Asian CEOs. CRV is an early investor in DoorDash, led by Nanjing-born Tony Xu. Index has invested in Zuora and other companies run by East Asian executives.

Zhu believes that his lack of rapport with the Shah was due to his East Asian background. Zhu said he prefers to seek knowledge rather than shut down dissent or engage in noisy debates, which his investors mistook as a cultural sign of weakness, a stereotype that academic researchers hold of East Asians. believed to be the reason they are underrepresented in leadership positions in the United States.

In a phone call later that week, Zhu said Shah asked him to be "more personable" and "work harder" on the board, to which he responded that those habits were not in his nature. Most board members also expect Zhu to keep the company's key metrics in mind as part of a performance improvement plan.

Zhu said he agreed to the plan and the loan was approved by the Shah. But Zhu Haoran was still very unhappy about this.

"I run the company with Eastern values," he said. "This does not mean that I do not have the ability to serve as CEO."

Zhu Haoran said that the dispute was a form of discrimination, even if it did not fit the inherent image of racial prejudice. Bissell grew up in Türkiye and Shah is South Asian. After he was fired, the board replaced him with Boney. Boney is the president of Iterable and, like Zhu, is of East Asian descent.

Zhu said he suspected that the board of directors was using Boni to take advantage of the situation and would eventually find someone to replace him.

By late summer 2020, Iterable's business was booming again. It's time to raise more capital. But Zhu Haoran had grown distrustful of Shah and wanted to minimize his involvement in the deal.

With Shah's cooperation, he arranged for Silver Lake to buy about half of Index and take Shah's board seat as part of a financing round that valued Iterable at $2 billion.

After eight people were murdered in Atlanta in March this year, the United States began to discuss prejudice and violence against Asians. Zhu still remembers being beaten by bullies on campus and told to go back to China, so he helped organize a campaign called "Support Asian Americans" that attracted the support of 7,500 Asian American business leaders and allies. .

Zhu then became more convinced that he needed to tell his story his own way. He told the board he had been talking to a Bloomberg reporter and spoke out about the microdosing incident for the first time. The board asked him not to discuss the matter with investors or speak out about his considerations.

Zhu Haoran said that he wanted to tell everything, even if he lost his position. "The only reason to share this is to help founders who are suffering and people who are going through what I am going through." . ”

At the end of April, Zhu’s investors once again asked him not to give interviews to the media. Soon after, he received a call saying he was fired.

He sat down in a park in San Francisco's Financial District and tried to make sense of what was happening.

"This is the price of justice now," he said. "I'd rather tell the story and get fired.

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