Bradley Tusk made $100 million helping Uber conquer New York, and he’s not apologizing – Government News

on Sep13

13 September 2017 | 8:48 pm

Political operative Bradley Tusk got into the venture capital game by accident, but he couldn’t have had a better start. In 2011 he agreed to accept shares in a ride-hailing startup in exchange for guiding entrepreneur Travis Kalanick through the maze of New York’s taxi regulations. Those shares of Uber, paid in lieu of Tusk Strategies’ $25,000-a-month fee, are believed to be worth $100 million now.

Tusk ran Michael Bloomberg’s last mayoral campaign and was a top deputy to former Illinois Gov. Rod Blagojevich, who is serving a 14-year sentence for racketeering. (Tusk was not implicated in Blagojevich’s schemes.) Known as a hard-hitting operator, Tusk has turned his skills toward helping startups with the potential to shake up industries in New York, where regulations protect the status quo. He’s still getting paid in equity, but he also wants to play for bigger stakes.

His two-year-old Tusk Ventures is in the midst of closing its first fund, having raised $31 million to invest in businesses in need of help negotiating regulated markets. The fund will also take advantage of opportunities that come along among the 28 companies Tusk Ventures has a stake in.

Despite his long rsum and a turn toward a tech-friendly style of dressing—the blue suit he wears in his website photo has been traded for a V-neck T-shirt and white slacks—Tusk had his work cut out for him winning over investors.

“I was seen as ‘Who is this political guy, and why am I giving him money?'” he recalled. “But people started to realize [that] almost every new company is a tech company, and most new businesses are regulated by government in some way. And entrenched interests don’t just say thank you when they’re disrupted. They punch back. So we’re needed.”

Tusk’s highlights as a counterpuncher include taking out Anthony Weiner in the 2009 mayoral race by “belittling his record and encouraging embarrassing articles in the New York dailies,” according to The New York Times. Tusk also orchestrated the scorched-earth campaign that ended the de Blasio administration’s attempt to impose a vehicle cap on Uber in 2015.

As a VC firm, however, Tusk Ventures punches above its weight for reasons that don’t entirely have to do with its campaigns. Starting with FanDuel, which became a client in late 2015, the firm’s investments chief, Jordan Nof, began requiring that startups give more than equity; they must also grant Tusk Ventures the right to invest 10% of the money going into their next funding round.

That provision lets the firm jump the line of established VCs and join oversubscribed rounds, as it did with insurance pioneer Lemonade when it raised $34 million this past December. Other firms that took part in the round included industry giants Sequoia Capital and General Catalyst. “A company like Lemonade, we never would have gotten the chance to invest as much as we did—or anything at all—but we were contractually guaranteed investment rights, and we took advantage of the full allocation,” Tusk said. “So we get into deals that no other young, small fund like ours could ever get into.”

BOTH SIDES OF THE SPECTRUM

The arrangement has benefits for the startups as well, says Craig Elbert, co-founder and CEO of customized vitamin subscription startup Care/of. Tusk Ventures has been advising the company since it launched last year, and it took part in the startup’s seed round in November and its $12 million Series A round in July.

“Entrenched interests don’t just say 
thank you when they’re disrupted. 
They punch back”
“We just want to be aligned with them in doing what’s best for our business,” Elbert said. “So when they’re putting in capital, it’s nice for us because it validates their support and further aligns us.”

In some quarters, however, Tusk is considered a bad influence. Susan Lerner, executive director of good-government group Common Cause New York, takes issue with his advice concerning whether startups should ask permission or beg forgiveness. At a tech event this year, his answer was that it depends on whether the punishment is a $100 fine or a prison sentence.

“His attitude is, there are ways in which it’s a good business model to break the law,” Lerner said. “And he holds himself out as someone able to advise companies to break the law at minimal cost.”

She added that opposition to new businesses isn’t always about entrenched interests protecting themselves. “There are protections in the law not to protect one industry or another but to protect consumers,” Lerner said.

Tusk’s response is that new technologies often operate in gray areas that government agencies don’t understand and to which current laws may not apply. He sees his job as challenging “the veracity of the status quo,” he said. “To say you can never do anything that hasn’t been contemplated before, then you can never progress as a society.”

Tusk also feels that Uber, which of all his portfolio companies pushed the hardest at boundaries, was ultimately proved right. It won most of its battles with municipalities and brought ride-hailing to much of the country. When it comes to Kalanick, who so damaged his company by disregarding rules that he was forced to step down, Tusk insists that he fell short on workplace culture, not in his dealings with regulators. “He’s a true visionary,” he said.

Tusk recently hired Uber’s former New York general manager, Josh Mohrer, as a strategic adviser to help startups manage rapid growth.

Tusk Ventures is hardly alone in operating in gray areas. “Technology and consumer expectations are moving way more quickly than government can,” said Vincent Ponzo, who heads the Eugene Lang Entrepreneurship Center at Columbia Business School. “Companies are going to be the ones pushing regulations.”

And as more startups deal with regulations, the value of Tusk’s expertise grows. “Most VCs don’t know how to navigate that environment,” said John Frankel, founding partner at Manhattan-based FF Venture Capital. He added that regulatory “arbitrage” is increasingly becoming part of the investment equation.

Tusk expects his venture fund to close by next month and top out at $35 million. He and Nof say the fund is just the beginning.

“What’s interesting is that people who said no to us for Fund 1, all of a sudden, when they saw the deals we were getting, said, ‘Hey, when are you guys raising Fund 2?'” Tusk said. “We have so much opportunity in front of us.”

A version of this article appears in the September 11, 2017, print issue of Crain’s New York Business as “He steered Uber through New York.”



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