Fluid Trucks, a startup founded to revolutionize the commercial vehicle rental industry, has fired CEO James Eberhardt and chief legal counsel Jennifer Snyder, both co-founders and siblings, according to people familiar with the matter. The changes, which employees described as a hostile takeover, were led by two minority shareholders on the company's board of directors. Both Eberhardt and Snyder retained their positions on the board.
The previously unreported management restructuring comes after venture-capital-backed Fluid Truck lost tens of millions of dollars as of June 31 and failed to make payments to vendors and vehicle owners, according to documents viewed by TechCrunch and sources with direct knowledge of the matter.
It's a hole that even several job cuts and other cost-cutting measures in 2023 couldn't fill for the company described as the Zipcar of commercial trucking.
The board's decision to fire Messrs. Eberhard and Snyder came after two minority investors, Bison Capital and IKEA's venture arm, Ingka Investments, argued that the investors had accused Messrs. Eberhard of mismanaging the company's funds, leading to big operating losses, according to people familiar with the matter.
Current and former employees said Eberhard was a man of goodwill and kindness, but acknowledged he was a major factor in plunging the company into financial difficulties.
Now they worry that these investors aren't putting the company's interests first. They point to a term sheet in a debt financing round offered by Bison and Ingka in 2023 as evidence of this misalignment. These employees asked not to be identified for fear of retaliation. Industry experts say the term sheet is an aggressive lifeline and a sign they've lost faith in Eberhard and Snyder to reform the company.
Now, Eberhard has been replaced by interim CEO Scott Avila, whose firm Paladin Management is guiding the company through a difficult financial, operational and strategic shift.The move has created an increasingly tense work environment at Fluid Track, according to people at the company, with a shift from shorts, flip-flops and casual conversation to quieter offices where executives wear suits, according to a source who saw the transition firsthand.
Further complicating things, the interim CEO took the reins during one of the startup's busiest times of the year.
When asked for comment, Eberhard referred TechCrunch to a Fluid Truck spokesperson; Snyder could not be reached.
Fluid Truck confirmed to TechCrunch that Avila had been named interim CEO, but did not answer numerous questions revealing the source of the information.
“We are aggressively addressing current challenges and pursuing every opportunity to restore financial strength and position Fluidtrac on a solid path for the future,” the company said in an emailed statement. “As we navigate this important transition, we thank our employees, [Fluid Vehicle Investor Program members]”Our confidence in the company, our investors, vendors and customers remains unshakeable.”
Bison and Inka did not answer questions about the terms of service or address the allegations that they forced their co-founders out of the company. They responded to TechCrunch's questions with a similar statement.
“Bison Capital is focused on securing a better future for all of the company's stakeholders and strongly disputes the premise of your questions, all of which indicate that your sources provided incomplete and inaccurate information,” Bison Capital said in an emailed statement.
Yinka also issued a statement using almost identical wording.
“The premise of your question suggests that the information is incomplete, based on misunderstandings or inaccuracies and taken out of context, which we strongly deny.”
All good plans go to waste
Fluid Truck attracted a lot of attention and investment when it was founded in 2016 by offering a product that combined asset management with software as a service (SaaS). The company raised more than $80 million in two rounds of funding and expanded across the U.S. and into Buenos Aires.
FluidTrack, which boasts corporate clients such as Amazon, UPS and FedEx, devised an ingenious plan in 2018 to reduce the asset burden of its business and ease its own risk and financial burden.
The startup has introduced a program called Fluid Vehicle Investor Program (FVIP) that allows individuals and small business owners to purchase fleets of vans and trucks and rent them through the platform. Fluid Truck manages the fleet on behalf of the vehicle owner, who receives rental income until they sell the fleet. The owner can then ask the startup to sell the vehicles and receive a lump sum payment for each vehicle sold.
In theory, this business model should benefit everyone, but major missteps, including improper handling of insurance claims, have left many FVIP members waiting to be paid for vehicles Fluid Truck has already sold, according to four asset owners who spoke to TechCrunch on the condition of anonymity.
Whenever a driver is involved in an accident or a vehicle is damaged, Fluid Truck files insurance claims on the vehicle owner's behalf. Because insurance companies can take up to two years to pay off claims, Fluid Truck covers the repair costs to get FVIP vehicles back on the road quickly, according to multiple FVIP members and an email sent to FVIP members by Fluid Truck Chief Operating Officer Leo Amigoni.
This meant that Fluid Truck was using its own cash reserves to pay claims and wasn't getting money back from insurance companies in time to pay vendors.
A source familiar with the matter told TechCrunch that the company's cash shortfall has widened significantly as management has decided to use proceeds from vehicle sales to pay down the company's debt in order to stay afloat.
Fluid Truck currently has about $9 million in outstanding insurance claims, according to information obtained by TechCrunch. The company also owes millions of dollars to vendors.
FVIP members who spoke to TechCrunch confirmed they are waiting on payments from Fluid Truck after selling their vehicles. They received purchase and sale agreements. Claims of payment amounts vary, but some say hundreds of thousands of dollars are still outstanding.
One of the asset owners, Cina Global, filed suit against Fluid Truck in April 2021 for damages for 150 cargo vans, seeking $100,000 in damages. Another company, Van Go, filed a complaint against Fluid Fleet (one of the company's other entities) in September 2022 for breach of contract and material default. The company claims Fluid failed to properly maintain and repair the vehicles as promised and delayed the decommissioning and return of Van Go's fleet of vehicles, causing the company to suffer significant economic losses.
Hostile takeover
Power struggles between investors and startup founders are a story as old as venture capital, and it's not uncommon for a loss of faith in the founders' abilities or personality clashes between founders and VCs to lead to executive turnover.
Bison Capital led Fluid's $63 million fundraising in 2021, with participation from Ingka Investments in that round. Neither firm owns a majority stake in the company, but they were able to take advantage of Fluid Truck's liquidity problems under Eberhard's leadership and oust him in mid-July, according to current employees.
Sources say that while Fluid Truck continues to struggle with cash flow, it has achieved its first positive EBITDA of $3 million in 2023. Fluid is expected to achieve revenue of nearly $60 million and a positive EBITDA in 2024. But for investors, profits alone are not enough to instill confidence in management.
The tension between Eberhard and Ingka and Bison investors — Cees Arnahanen of Ingka and Andreas Hildebrand and Doug Trussler of Bison — was palpable, according to the sources.
Pressure mounted last year as the company tried to cut costs. Several job cuts in 2023 reduced Fluid Track's spending, but the measures didn't solve the company's liquidity problems. Messrs. Bison and Inka offered Eberhard and the company a term sheet for further investment in Fluid Track, providing the company with badly needed cash.
Sources and industry experts who have seen the term sheet have called the proposal, which calls for three installments of $10 million in debt financing, “aggressive.” According to the term sheet, the investors asked Eberhard and Snyder to step down from their director positions and give up their voting rights as stockholders. The term sheet also called for cost-cutting plans and for Fluid Track to repay at least $50 million within 36 months.
If the company couldn't generate a significant amount of cash within a tight deadline, it could be forced into liquidation or have its shares further diluted. In the meantime, investors would have been protected, even at the expense of other shareholders.
Despite its financial problems, Fluid Truck continued to grow, a benchmark encouraged by some venture capitalists: In three years, the company expanded from operating only in Denver to operating in 60 U.S. markets. Typically, that kind of growth is rewarded by investors providing working capital to maintain and even accelerate that growth.
The term sheets from Bison and Inka were meant to be a lifeline, but they came at a cost to Eberhard and Snyder, so Eberhard turned down the offers and began raising debt from Trinity Capital to help pay off Fluid's debt.
External market forces got in the way: Wholesale prices for used vehicles began to plummet, particularly after car rental company Hertz filed for bankruptcy in 2021, flooding the market with a plethora of commercial vans and trucks.
The deal fell through because there was no guarantee that Fluid's existing investors would match Trinity's loans with equity. In the wake of the losses, the board voted to fire Eberhard and Snyder.
Fluid Truck, Bison and Ingka did not respond to TechCrunch's questions about whether they plan to invest more money to get the company back on track. Investors have not made an offer to provide Fluid Truck with more capital, according to a source familiar with the matter.
“We recognize the challenges Fluid Truck is currently facing,” Inka told TechCrunch. [they] VC said, “We remain committed to supporting Fluid Truck during this time.[s] There is strong potential for long-term growth and success.”
As it stands, Fluid Truck has new management with no direct experience with how the company operates, and the company still faces the same financial challenges it faced when Eberhard was at the helm.