VCs look the other way when they give $205 million more to Verkada, whose technology has been abused repeatedly

Verkadaa six-year-old manufacturer of building security tools and technology for companies – selling them a suite of video security cameras, door-based access control, environmental sensors, alarms and guest and mail room management, all connected in a cloud-based platform — just raised $205 million in Series D funding at what it says is a $3.2 billion valuation.

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

On the one hand, it’s easy to appreciate 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. The observation is a profitable industry, and based on what Verkada said, since its previous funding round in 2020, it has quadrupled its headcount, adding more than 1,000 new employees; six new offices have been opened; and has quadrupled its customer base to more than 13,000. Among the wide range of customers listed on its website are Virgin Hyperloop, the Hartford Police Department and San Rafael City Schools in California.

But boy, did investors have to look away from the many supposed horrors to keep funding the company with the same management team. Indeed, numerous reports in recent years (which have become surprisingly hard to find online) could easily steer investors in the opposite direction.

In March 2021, for example, Bloomberg reported that more than 100 Verkada employees can peer through the cameras of its thousands of customers, including schools and police departments, as well as global corporations such as Internet services company Cloudlare.

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

A related Bloomberg finding, based on interviews with current and former employees, is that although Verkada offers a “privacy mode” to customers, certain accounts will allow Verkada employees to turn off that feature and view the camera footage.

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

Additionally, a Swiss computer hacker named Tilly Kottmann was quickly indicted by the US government on multiple counts of wire fraud, conspiracy and identity theft related to the Verkada hack.

Still, some damage was done, one can assume. Worse for Verkada, Bloomberg weeks later reported that current and former employees at the time said the disregard for data protection was “emblematic of a larger ‘bro culture’ that is second-rate and sales-obsessed and that tolerates harassment of women, frequent coupons and misleading marketing claims.” (Glass door reviews of the company, many of which were published this summer, paint a similar picture. While there are plenty of overwhelmingly positive employee comments — “A rare startup that has hit the perfect growth curve and culture where there really aren’t any downsides that come to mind!” — others warn potential employees to stay away. “A completely toxic environment made up of sales leaders who prioritize all the wrong behaviors,” reads one review.)

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

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

In one case, a photo of a female employee with her mouth wide open was reportedly captured and commented on in the channel, which included the sales director and at least several other sales staff.

This kind of toxic environment was not only allowed, but encouraged, multiple Vice staffers suggested at the time of writing.

Either way, Verkada employees — and investors — had reason to question management’s judgment. According to Vice, after the Slack channel was reported to the company’s human resources team, Verkada CEO Philip Kaliszan announced at a company meeting that an undisclosed number of employees active in that Slack channel had been given a choice between leaving the company or their share of stock declines. They weren’t fired until Vice reported the case.

Kaliszan, who co-founded the company with two fellow Stanford computer science graduates James Wren and Benjamin Berkowitz, remains at the helm.

Pictured above: Verkada cameras.

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