VCs look the other way as they give $205M more to Verkada, whose tech has been abused repeatedly

·4-min read

Verkada, a six-year-old, maker of building security tools -- it sells video security cameras, door-based access control, environmental sensors and alarms, all connected on a cloud-based platform -- just raised $205 million in Series D funding at what it says is a $3.2 billion valuation.

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

On the one hand, it's easy to appreciate what attracted investors like Linse Capital to Verkada's newest 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, since its previous funding round in 2020, it has quadrupled its headcount, adding more than 1,000 new employees; it has opened six new offices; and it has quadrupled its customer count to more than 13,000. Among the wide range of customers listed at its website is 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 terribleness in order to keep funding the company with the same management team in place. Indeed, numerous reports in recent years (that have become surprisingly hard to find online) might easily have driven investors in the opposite direction.

In March 2021, for example, Bloomberg reported that more than 100 employees at Verkada could peer through the cameras of its thousands of customers, including schools and police departments, as well as global corporations like the internet services company Cloudflare.

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

A related finding by Bloomberg based on interviews with then-current and former employees was that although Verkada offered a “privacy mode” to customers, certain accounts would allow Verkada employees to turn off that feature and see the camera footage.

Tesla’s China branch later told Reuters that the breach only affected one of its supplier’s production facilities in the Henan province west of Shanghai. Further, a Swiss computer hacker named Tillie Kottmann was quickly indicted by the U.S. government on multiple accounts of wire fraud, conspiracy and identity theft tied in part to the Verkada hack.

Still, some damage was done. Worse for Verkada, Bloomberg weeks later reported that according to then-current and former employees, the inattention to data protection was "emblematic of a larger 'bro culture' that was sophomoric and sales obsessed, and which tolerated the harassment of women, frequent partying and misleading marketing claims." (Glassdoor reviews of the company, of which many were posted this summer, paint a similar picture. While there are plenty of exceedingly positive employee comments -- "A rare startup that has hit the perfect growth & culture curve where there really aren't cons that come to mind!" -- others warn potential hires to stay away. "Completely toxic environment, made complete with sales leadership who prioritize all of the wrong behaviors," reads one review.)

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

What happened: In 2019, a sales director at Verkada's offices in downtown San Mateo, California, used the company's own security cameras inside the building to take and post photos of female colleagues in a Slack channel called #RawVerkadawgz where, per Vice, they made sexually explicit jokes about those colleagues who worked at the company.

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

That kind of toxic environment was not only allowed but encouraged, numerous employees suggested to Vice at the time the article was written.

Either way, Verkada's staffers -- and investors -- had reason to question management's judgment. Per Vice, after the Slack channel was reported to the company's HR team, Verkada's CEO, Filip Kaliszan, announced in a company all-hands meeting that an undisclosed number of employees active in that Slack channel were given the choice between leaving the company or having their share of stock reduced.

They were not fired (a seemingly obvious move) until Vice reported on the matter.

Further action does not seem to have been taken. At least, 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.

Verkada has been adding to its senior ranks in the interim. In April, it brought aboard Bill Berry, who is no stranger to dysfunction, as its general counsel. Berry, who has been practicing law for more than 20 years, stepped down late last year as vice president of legal at Tesla.