A trip to Cabo, an allegation of sexual assault, and 'a culture of dishonesty': Inside the downfall of the founding CEO of $1.9 billion startup Apttus
- Kirk Krappe, the longtime CEO of $1.86 billion startup Apttus, left the company in July. Two months after Krappe's abrupt departure, Apttus was acquired by Thoma Bravo, a Chicago private-equity firm.
- Sexual harassment and inappropriate relationships were rampant at the highest levels of Apttus, according to documents and several former employees and insiders Business Insider spoke with.
- Krappe left the company after the settlement of a claim of sexual assault at a February company retreat. The claim against Krappe was described to Business Insider by several people familiar with the matter.
- In a recent letter to David Murphy, the Apttus executive chairman installed by Thoma Bravo, a former Apttus employee describes a place overrun by fear, bullying, and discrimination - and hints at more forthcoming legal claims.
When employees showed up to work at Apttus' San Mateo headquarters on July 2, they were shocked to learn that the startup's longtime CEO, Kirk Krappe, was no longer at the company.
Krappe, whose faint British accent and pocket-square outfits made him stand out in Silicon Valley's landscape of fleece vests, cofounded Apttus in 2006 after a career spent at Bain & Co, Oracle, and several enterprise startups.He was the face and voice of the company. Just a few weeks earlier, Krappe was onstage at the company's annual user conference delivering one of his trademark "free-form" speeches. These often began with an abstract history lesson (topics included human evolution and Turkish archaeology) and eventually segued into Quote-to-Cash, a sales software, Apttus' signature product.
It didn't take long before rumors about Krappe's disappearance were swirling through the company's offices. There had been a booze-filled sales retreat in Cabo. There were allegations of sexual assault. Had Krappe been forced out, people wondered?
The story about Cabo was just one of many worrisome allegations involving Krappe that were coming to a head around the time, and which ultimately would suggest that the tech entrepreneur's old-world charm and erudite air might be concealing a pattern of questionable behavior.
With promises of an eventual IPO, Krappe sold employees, customers, and investors on a Silicon Valley dream that in hindsight appeared to have been only loosely based in reality.
Instead of a hot IPO-bound startup, the company Krappe created was by a number of accounts a lawless place where sexual harassment and inappropriate relationships were rampant at the highest levels, according to several former employees and insiders Business Insider spoke with and according to legal documents.
Misdeeds such as padding expense reports and promising clients nonexistent products were encouraged, the people said, and any voices of dissent were swiftly silenced.At a time when reports of inappropriate behavior among executives at high-profile tech companies from Google to Uber have come to light, the story of Apttus is more than just another disturbing example of alleged sexual misconduct in the male-dominated technology business.
The startup's still unfolding drama, if the allegations are true, shows how pervasively a company can be infected by toxic behavior once it's taken root at the top of the organization, and how easily it is allowed to happen in Silicon Valley.
Big-name backers from Salesforce Ventures to ICONiQ Capital to IBM's venture arm invested in Apttus during Krappe's tenure, even as his behavior - including having a child outside of his marriage with a manager at the company - raised eyebrows throughout the organization.
Apttus' last venture round in September 2017 valued the company at $1.86 billion. Salesforce, whose founder, Marc Benioff, is an outspoken advocate for stamping out sexism in the workplace, declined to comment, as did IBM. ICONiQ Capital, which is closely associated with Mark Zuckerberg and Sheryl Sandberg, both prominent supporters of the #MeToo movement, did not return requests for comment. Zuckerberg and Sandberg declined to comment.
Two months after Krappe's departure, Apttus sold a majority stake to Thoma Bravo, a Chicago private-equity firm with offices in San Francisco.
It's unclear whether Thoma Bravo was aware of the allegations surrounding Krappe during the time of the acquisition. But while the problematic CEO was gone by the time Thoma Bravo announced the deal, some of the problems created during Krappe's reign are likely to live on.
Several claims involving allegations of harassment or a hostile work environment are in various stages of negotiations, Business Insider has learned, and there are three lawsuits from former employees who claim that Krappe had misled them about the health and size of Apttus' business.
And in a recent letter sent to David Murphy, the Apttus executive chairman installed by Thoma Bravo, in October, a former Apttus employee hinted at more forthcoming legal claims.The private-equity firm has not disclosed how much it paid to acquire its majority stake in Apttus, which has raised about $400 million in funding over the years. In a news release announcing the deal, Thoma Bravo touted the "operational excellence" it would bring to Apttus, which makes software to helps businesses manage revenues and customer relationships.
Representatives from Apttus declined to comment. Thoma Bravo did not respond to a request for comment.
A night of heavy drinking at the hotel bar
The claim that preceded Krappe's departure was made by a 26-year-old rising star on Apttus' business-development team who, along with her aunt, attended a February retreat in Mexico that Apttus hosted for high-performing sales personnel.
The Presidents Club event, as Apttus called the company getaway, took place at the One&Only Palmilla resort near Cabo San Lucas, a coastal property that to many is the epitome of paradise. Located 30 minutes from downtown Cabo, the beachfront is lined with palm trees and beach chairs. Its bright-blue infinity pool is an Instagram influencer's dream with its dramatic views of where the Gulf of California meets the Pacific Ocean.
It was there, after a night of heavy drinking at the hotel bar, that Krappe allegedly followed the business-development employee back to her hotel room and sexually assaulted her.
The claim against Krappe, which was described to Business Insider by multiple people familiar with the events, was settled outside of court in early June. A large sum of money changed hands, and both Krappe and the plaintiff left the company at the time of the settlement. Gloria Allred, who represented the plaintiffs on the case, declined to comment.
Krappe did not respond to multiple requests for comment.
Bikinis, massages, and 'sexulence'
For some employees, signs of dysfunction and unprofessional conduct were routine at Apttus.
In early 2015, people at the company noticed that one of their colleagues was pregnant. The late-20s blonde, who managed the global partnerships and business-development teams at Apttus, had started showing. Though she was tight-lipped about her relationship with Krappe, most people at the company thought it was his child, sources told Business Insider.Krappe, who was in his mid-50s at the time, was still legally married to the mother of his four oldest children. But the newly minted couple got engaged and started raising their newborn daughter as a family.
People felt scandalized, but it wasn't just because of the affair. Krappe's fiancée moved up quickly at Apttus, and eventually managed a team called the Salesforce Excellence Team, known by some internally as the "sexulence team" because it was made up exclusively of "very pretty girls."
It was that team's job to fly around the country to host social events with salespeople at Salesforce, a crucial Apttus partner at the time and an investor in the startup.
That team, multiple sources said, was liberal with its expenses. Sources told Business Insider that manicures and massages would be documented as team-bonding expenses. Luxurious dinners between two Apttus employees would be documented as four-person client dinners with nonexistent Salesforce employees. In at least one instance, bikinis and beach chairs got expensed on a trip to Florida.
"We were encouraged to spend money on anything, and it would be approved," one former team employee said.
Employees on other teams took note of the spending, and of the fiancée's special status at the company. One employee on the fiancée's team went to HR and blew the whistle about the spending. Not long after, that employee was asked to leave the company, according to people familiar with the matter. Krappe's fiancée did not return requests for comment.
"It's like a zoo, and you either bite or you'll get bitten," another former employee said. "I've never worked at a company like this ever. It's strange."
A meeting at the fish market
But the alleged misdeeds at Apttus went a lot deeper than just expense reports.
In mid-2017, Apttus was hit with two lawsuits from former employees who both alleged that executives at Apttus, including Krappe, lied about the company's sales pipeline, product readiness, and command structure to get them to join the company. A third suit, on behalf of a former general manager and vice president William Veiga, is pending.The first two suits were filed on behalf of Elizabeth Baker and Marco De La Cuesta, high flyers in the enterprise-sales world. Baker had previously worked for Oracle and both spent time at SAP. They took managerial roles on the sales team at Apttus in late 2015, and were terminated by the board in June 2016.
Both complaints allege that they were fired over their refusal "to engage in the requested illegal and unethical conduct, and otherwise engage in a culture of dishonesty and corruption."
In her complaint, Baker describes meeting Krappe for lunch at the Fish Market in San Mateo before she took the job, and being told by Krappe that Apttus was experiencing "unprecedented growth in large enterprise companies."
In the case of Intel, the Silicon Valley chip giant, both suits allege that Apttus sought to sell a product that didn't yet exist. Intel grew concerned that something was wrong "after extensive suspicious delays and excuses from Apttus," according to the complaints.
It all came to a head in a meeting with the team, when Intel asked directly if the products it had "purchased had actually been developed, and if other Apttus customers were currently using the products today, in an actual production environment," according to the complaints.One team member deferred to another, who told Intel they had nothing to worry about. Later, the first team member said that he refused to answer their question because "his wife worked at Intel and 'he did not want to lie,'" the complaint said.
Intel declined to comment.
'Devalued, bullied, and treated like dirt'
Krappe's credibility among some employees began to suffer as his long-promised IPO never materialized.
For two years, Krappe had told employees and the public that Apttus would IPO imminently. A $55 million funding round in late September 2017 meant Apttus was flush with cash, but employees were starting to lose hope that they would ever see a big payout on the equity that many were offered as part of their pay packages.
Krappe told TechCrunch that Apttus would IPO in 2016 if it didn't get bought, and, later that year, he told MarketWatch that the company intended to go public in 2017. In October 2017, Bloomberg reported that Apttus hired Goldman Sachs to manage the offering.
With so much compensation wrapped up in equity, the IPO was highly personal to employees. But when staff members inquired into the delay, one person said, management would claim that the company just wasn't ready, and would invoke the IPO quiet period as a reason they couldn't explain the situation more in depth.
"We'd go to all-hands meetings where he'd speak and try to be inspirational," one former employee said of Krappe. "He always talked about being a team and being on a rocket. When you hear something repetitively, you're, like, 'This is something I've heard over and over.'"
The poor employee morale has outlived Krappe within Apttus.
In a recent letter to David Murphy, the Apttus executive chairman installed by Thoma Bravo, a former Apttus employee describes a place overrun by fear, bullying, and discrimination, and hints at more forthcoming legal claims. The author of the letter, Kyle Bouchard, was employee 33 at the startup and had moved up to vice president of strategic accounts. He resigned from the company soon after its acquisition in September."As a human being, you only can take so much of this brutality and for me, I chose not to be a part of a company where employees are devalued, bullied, and treated like dirt," Bouchard wrote in the letter obtained by Business Insider.
The letter singled out Krappe's handpicked chief strategy officer, Raj Verma, who is now COO, for many of the ongoing problems. According to insiders, Verma and Krappe worked closely together until the spring, when things came to a head. Bouchard declined to comment.
Verma did not return a request for comment.
'Never give up'
Whether Krappe will attempt to return to the business world is unclear. Business Insider is not aware of any criminal charges filed against him as a result of the alleged assault.
On the February night of the Presidents Club award ceremony in Cabo, just hours after the alleged sexual assault, Krappe and the rest of Apttus team headed to a farmhouse restaurant called Flora Farms, known for frequent celebrity guests such as Jennifer Aniston.
During the dinner, Krappe took the stage to pass out trophies to his star employees, according to people who were present. In the background, a video projected on the wall played Krappe's biography, tracing his life from his roots in Africa to the founding of Apttus. The video ends with Krappe's youngest daughter, now a toddler, running up and jumping into his arms during a staff photo in San Mateo.
In Swahili, and then English, words flash across the screen: "Never give up."As the video played, the audience could see Krappe well up with tears.