Sexual-assault allegation may have led to downfall of Apttus founder

Apptus; iStock; Skye Gould/Business
Insider

• 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.

Multiple lawsuits

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.”

San Mateo,
California.

Shutterstock

In their respective lawsuits, both Baker and De La Cuesta allege
that Krappe sold them on Apttus as a company with a $400 million
sales pipeline, but that pipeline didn’t exist. He also sold them
on key customers, including Intel, Clorox, GE, HPE/HPI, and
McKesson, and both allege that parts of the customer base were
fictionalized or misrepresented.

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.