Last fall, employees at one of America’s fastest-growing startups began making anxious phone calls. They believed that CEO Vishal Garg—a volatile entrepreneur with a history of disgruntled business partners—had been giving huge amounts of equity to one of his most loyal lieutenants, in a way that violated norms and seemed to defy explanation.
Those employees may have been right.
New public filings, interviews with high-ranking company officials, and internal documents reviewed by The Daily Beast reveal that the executive, Elana Knoller, was given stock options potentially worth tens of millions of dollars. Unlike normal employee packages, it vested immediately. It isn’t clear how much the board knew in advance.
She also received at least $8,000 per month for two homes, including one in Puerto Rico, and other perks. It does not appear that any other executive got a comparable deal at the firm, a SoftBank-backed mortgage lender called Better.com, which is about to go public via a SPAC at a massive $7.7 billion valuation.
“It’s crazy,” says a former senior employee, of the fully vested stock. “It’s like a handout. The whole point of options is to incentivize four years of work. This is like handing her cash.”
This year the pay kept coming. Around early February, Garg announced to his board that he had granted Knoller another 1.25 million options, easily worth eight figures, insiders say. For technical reasons, he couldn’t authorize more without the board’s approval, so he sought permission to issue her an additional 1.15 million options. It’s unclear if that approval was ultimately granted.
Just four months later, in June, Knoller left the company after she was placed on administrative leave for alleged bullying and other workplace grievances. Those allegations had swirled for over a year. But even in her absence, major questions remain about the handouts and about the company’s oversight structure.
In fact, one of Better’s key investors, Pine Brook Capital, is threatening to sue the company and Garg, according to a recent company filing, claiming there have been “fiduciary breaches in connection with Better’s corporate governance.” (Pine Brook, which is already suing over a dispute related to stock sales, declined to comment.)
Another prominent backer, Goldman Sachs, recently sold much of its stake; the firm declined to comment on why.
The tumult comes in the wake of other allegations made in lawsuits involving Garg: that he or his companies may have misappropriated tens of millions of dollars from prior businesses; that his companies engaged in fraud; and that he used ill-gotten money and stolen technology to found Better in the first place. As Forbes reported last year, the litigation has grown heated. In one deposition in 2019, he told a former business partner—once the best man at his wedding—that he was “going to staple him against a fucking wall and burn him alive.” (Garg later apologized.)
Reached by phone, Garg called the former business partner “a total charlatan who used to be my best friend.” He firmly denied handing out equity without the board’s knowledge, and declined to say much more on the record. “If you’re gonna do another hit job, you might as well,” he added.
Knoller declined to comment. A spokesperson for Better simply said, “We grew our business tremendously in the last year and are extremely prepared for the discipline required by the public markets.” The company previously said it was confident the lawsuits involving Garg were “baseless.”
Undeniably, though, Garg’s web of controversies has impacted the business. This winter Morgan Stanley informed the company that, due to the lawsuits, it would no longer work with Better on a possible IPO, according to a source with direct knowledge of the situation. Hence why the firm turned to a SPAC.
Around the same time, as concerns over corporate governance reached a boiling point, two members of the board resigned. The firm’s outside counsel, Wilson Sonsini, stopped working with Better as well.
Nobody has claimed that Garg’s compensation handouts are illegal, and the board—perhaps unable or unwilling to rein him in—apparently knew that he was making many decisions on his own. Yet the flare-ups display a potentially hazardous reality, according to almost every person The Daily Beast spoke with: Better operates at the whims of its founder, a man who seemingly has not exited a venture before torching every bridge.
“That’s just his deal,” a former employee says. “Vishal is obsessed with power, and with perceptions of his own self in the world.”
Better specializes in offering fast, low-fee approvals for mortgages. It is perhaps the least sexy startup concept imaginable, but a hugely lucrative one. Last year, thanks to a frenzied housing market and low interest rates, the company’s revenues exploded tenfold, to $876 million.
The origin of this money machine is very much in dispute. Garg claims he founded Better in 2014 after he and his wife struggled to buy a new home. They had lost out on an apartment after a cash buyer swooped in, even though the offer had been 7 percent worse. “How is something so big and so important still so broken?” he later recalled saying.
Former business partners tell a more colorful story. They have alleged in litigation that, in the years prior, Garg controlled a kaleidoscope of shell companies that may have improperly diverted tens of millions of dollars from earlier deals. (The deals were hugely complex, involving hundreds of thousands of mortgages, multiple debt holders, and, of course, an investment group based in the Cayman Islands.) The crucial gist of things: Some of those plaintiffs allege that their money and technology may have been used to launch the startup.
As the initial claims played out in court, Garg charged ahead. He was a shrewd operator, early employees at Better say, capable of scaling an idea into an actual business. And he kept his eye on even the smallest of details. Office managers were chastised if they filled the mini fridges with water brands other than Fiji or Perrier. Garg also insisted on a stockpile of Gerolsteiner, his sparkling beverage of choice. “Why do we have biscotti here like this??” he once demanded to know.
Staff came to expect these kinds of dress-downs. A sample email from Garg, which Forbes obtained: “You are TOO DAMN SLOW. You are a bunch of DUMB DOLPHINS... SO STOP IT. STOP IT. STOP IT RIGHT NOW. YOU ARE EMBARRASSING ME.”
The aggressive tone belied a man who preferred to eschew face-to-face confrontation. In 2017 Garg found a solution. He hired a woman in her mid-twenties off the commodities desk at Goldman Sachs. Elana Knoller, his new chief of staff, allegedly became his enforcer.
“[She was] firing people left and right,” a former staffer recounts.
Knoller ascended rapidly at the company. A little over two years into the job Garg made her an executive vice president. Four months after that she replaced the company’s chief product officer. The move confused and frustrated some of her peers, who felt that Knoller had little experience for the role. She had recently taken a crash course in product management to learn more about it, recalls a coworker she told about the classes.
Meanwhile, Knoller continued to serve as Garg’s gatekeeper. According to some of the allegations that eventually resulted in her departure, she was known to place employees on performance improvement plans when they voiced dissent or were otherwise marked disloyal. (A spokesperson for Knoller later told Forbes that “Ms. Knoller is an incredibly accomplished executive who demands a great deal of herself as well as those who work for her. She has served in numerous leadership roles at Better.com and has significantly contributed to the company’s success.”)
Knoller’s compensation, like her ascent, also appears unique. The company granted her large sums of options fully vested, in contrast to the standard four-year vesting schedule conferred on most employees, including other C-suite executives. It is still not entirely clear why. Nominally, the options were not worth eight figures, owing to the low exercise price they were granted at. But insiders say the shares commanded dramatically more on the secondary market, and their value was expected to rise further as the company headed toward a public offering.
Knoller wasn’t the only employee who sparked governance concerns. As one example, the general counsel at Garg’s venture capital firm is his longtime associate Nick Calamari. He concurrently serves as general counsel at Better.
Calamari, who declined to comment, is deeply enmeshed in the lawsuits filed by Garg’s old business partners, and their financial futures appear closely intertwined. In a 2019 opinion, a federal judge wrote that Calamari had “significant conflicts of interests about which he was less than fully forthcoming and transparent,” and that “from directly observing Mr. Calamari’s demeanor, the Court found his answers to be evasive and non-credible.”
SoftBank, which invested $500 million in Better this spring, is evidently not worried. The Japanese conglomerate agreed to hand all of its voting rights to Garg, a surprising concession considering the governance disaster it helped cultivate at WeWork. But Garg doesn’t have those votes quite yet; as part of the agreement, he’ll need to first resolve some of the litigation against him.
SoftBank declined to comment.
As Garg enters a new chapter as the leader of a public company, he is doing so without Knoller at his side.
It is unclear how much equity she walked away with. Company filings tell only part of the story, since Knoller was loaned millions of dollars to exercise options while she still worked at the firm—a benefit also enjoyed by other employees.
And she left as Better’s honeymoon stage may have been nearing a close. Due to the refinancing boom, the company ended 2020 with its first profitable year ever. To the contrary, in the most recent quarter it posted a net loss. Better said in its registration with the Securities and Exchange Commission that it “may not maintain profitability in the future.”
Whatever happens, Garg will be fine. His equity in the business is worth at least $1 billion, The Daily Beast estimates, and he’s made lots of money along the way. Last year, as questions about oversight simmered, Better handed Garg a token of holiday cheer: a $25 million bonus, paid entirely in cash.