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VCs look the other way as they give $205 million more to Verkada, whose technology has been repeatedly abused • londonbusinessblog.com

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Verkadaa six-year maker of security tools and technology for businesses — it sells them a suite of video security cameras, door-based access control, environmental sensors, alarms, and guest and mailroom management, all connected in a cloud-based platform — just donated $205 million in Series D funding raised at a self-proclaimed valuation of $3.2 billion.

In total, Verkada has raised $360 million in funding, it says.

On the one hand, it’s easy to understand what attracted investors like Linse Capital to Verkada’s latest round, which also included Michael Dell’s MSD Partners, Sequoia Capital, Next47, Meritech Capital and Felicis Ventures. Surveillance is a lucrative industry, and based on what Verkada says, it has quadrupled its workforce since its last funding round in 2020, with more than 1,000 new employees; it has opened six new offices; and it has quadrupled its customer base to over 13,000. Among the wide range of clients listed on the website are Virgin Hyperloop, the Hartford Police Department and San Rafael City Schools in California.

But boy, did investors have to look away from a lot of alleged horror to continue funding the company with the same management team. Indeed, a string of stories in recent years that have become surprisingly hard to find online could have easily propelled investors in the opposite direction.

In March 2021, for example, Bloomberg reported that more than 100 Verkada employees could see through the cameras of its thousands of clients, including schools and police forces, as well as global companies such as Internet services company Cloudlare.

According to the report, security within the security company was so lax that Verkada… violated by hackers who were given access to an account that allowed them to see all of Verkada’s customers’ live feeds and archived videos. At the time, that included 150,000 cameras, including in Tesla, police departments and hospitals.

A related Bloomberg finding based on interviews with then and former employees was that while Verkada offered a “privacy mode” to customers, certain accounts would allow Verkada employees to disable that feature and see the CCTV footage.

Tesla’s Chinese affiliate later told Reuters that the breach only affected one of its supplier’s manufacturing facilities in Henan province west of Shanghai.

Furthermore, a Swiss computer hacker named Tillie Kottmann was quickly charged by the US government with multiple accounts of wire fraud, conspiracy and identity theft related to the Verkada hack.

Still, some damage has been done, you might imagine. Worse for Verkada, Bloomberg weeks later reported that according to the then and former employees, the data protection oversight was “symbol of a larger ‘bro culture’ that was sophomore and sales-obsessed, and that tolerated harassment of women, frequent parties, and misleading marketing claims.” (Glass door reviews of the company, many of which have been posted this summer, paint a similar picture. Although there are plenty of extremely positive comments from employees: “A rare startup that has hit the perfect growth and culture curve, where there are really no cons that come to mind!” – others warn potential employees to stay away. “Totally toxic environment, made complete with sales leaders prioritizing all the wrong behavior,” reads one review.)

Meanwhile, both stories pale in comparison to an earlier incident first reported by IPVMa research group in the security and surveillance industry and later verified by Vice.

What happened? In 2019, a sales director of Verkada’s office in downtown San Mateo, California, used the company’s own security cameras, which it uses in the building, to take and post photos of female co-workers in the Slack channel called # RawVerkadawgz, where, according to Vice, she made sexually explicit jokes about those colleagues who worked at the company.

Reportedly, in one instance, a photo of a female employee with her mouth wide open was taken and commented on in the channel, including the sales director and at least several other employees in sales.

Such a toxic environment was not only allowed, but encouraged, numerous contributors suggested to Vice at the time the article was written.

Regardless, Verkada’s employees — and investors — had reason to question management’s judgment. Per Vice, after the Slack channel was reported to the company’s HR team, Verkada CEO Filip Kaliszan announced in an all-hands meeting that an undisclosed number of employees active in that Slack channel had chosen got in between leaving the company or it reduced their share of the stock. They weren’t fired until Vice reported on the case.

Kaliszan, who co-founded the company with two of his fellow computer science graduates from Stanford — James Ren and Benjamin Bercovitz — remains at the helm.

Pictured above: Verkada cameras.

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