Fair’s CEO Scott Painter Resigns as Car-Leasing Startup Seeks a Path to Profitability: Term Sheet

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Another day, another SoftBank portfolio company in hot water.

Scott Painter, the founder and CEO of embattled car-leasing
startup Fair has
. His company underwent sweeping layoffs, which accounted for
roughly 40% of its staff, and his CFO (who was his brother) also left the
company last week. SoftBank’s Adam Hieber, one of Fair’s largest investors,
will take over as interim CEO.

SoftBank led Fair’s $385 million funding round last year,
making the startup’s valuation rocket to $1.2 billion from about $450 million.
Prior to the capital infusion, Fair had raised $115 million in equity funding
and almost $1 billion in debt. 

Last year, Fair acquired Uber’s car-leasing program, known
as Xchange Leasing. Uber sold the business after heavy losses, according
to the WSJ
. As part of that deal, Fair signed an exclusive agreement to
lease cars to Uber drivers.

a statement to The Verge
on his resignation, Painter wrote: “Successful
companies MUST operate and grow in a sustainable manner and ultimately be
profitable. The decisions that get made while growing a game changing business
at speed are tough but they are necessary if you are going to build enduring

Profitability has reared its ugly head again. Even though
Peloton’s CFO recently
that she hopes the public’s bias against unprofitable companies
changes, I actually think that day is far away. We’re seeing the tide
turn against venture-backed unicorns with big losses and a tough time
explaining how they plan to reach profitability.

Choosing growth over profitability has become a cliché in
tech circles, with founders trying to explain that losing billions of dollars
is justified as long as you’re growing. Now, it seems as though companies are
starting to correct for years of choosing hyper-growth over building
sustainable businesses with sound financials. Patricia Nakache, General Partner
at Trinity Ventures, described this as “a
pendulum swing
” at Fortune’s Most Powerful Women event earlier this

“We have swung way out towards growth at most costs. But now
public markets have weighed in and resoundingly said, this has gone too
she said. 

She cautioned: “It’s a mistake in private markets to go from
extreme to extreme.” Yet “extreme to extreme” is the new normal for private,
well-capitalized companies like Fair, Wag, and WeWork. 

2018 was a year of excess. 2019 was a year of reality
checks. Let’s see what 2020 has in store.