Iterable co-founder claims he was ousted because of racial discrimination, not LSD use

While Justin Zhu admits to micro-dosing, he alleges that his ethnicity was an issue for investors

The co-founder and former CEO of marketing tech startup Iterable is suing the company and some of its backers, claiming that losing his job was less about micro-dosing LSD at work and more about racial discrimination.

Twitter alum Justin Zhu founded the company with former Google Adsense veteran Andrew Boni in 2013, building a 400-plus workforce and eventually achieving unicorn status after gaining traction with investors.

But in April 2021, it was announced that he had been shown the door after admitting taking very small quantities of LSD before an investor meeting in 2019. Boni told staff that this "undermined the board's confidence in Justin's ability to lead the company going forward."

In a complaint [PDF] filed with the Superior Court of California, County of San Francisco, Zhu has now called the company's stated reason for his ouster "pretextual and a subterfuge."

The court documents mention Boni's concerns about Zhu's LSD use, saying that he informed the board, which then confronted the CEO, leading to his termination.

Zhu argues he "faced substantial stresses, and experienced mental health strains including depression and anxiety" during Iterable's Series C funding round in 2019 and after hearing of its therapeutic properties in tiny doses, he tried it "because he wanted to make sure that the company would be successful, and he needed to do what it took to make that happen."

The complaint says his "body was more sensitive to the dose than he expected, and it impacted his vision during a meeting with a minor potential investor" but that the experience ultimately "brought a positive change to his work life."

Rather than this being the reason for his firing, however, he claims that his involvement in the Stand with Asian Americans organization – founded after eight were killed in shootings at spas in Atlanta, Georgia, in March 2021 – was brought up during a meeting with Iterable investors Murat Bicer of Charles River Ventures and Shardul Shah of Index Ventures. The group "called for a national awakening and a dialogue that involves leaders from every community to undo the generations of systemic bias and racism," the complaint says.

Zhu claims that his identity was integral to the company he had built but that the board believed a "white CEO" would be needed to succeed.

According to the complaint:

After having a drink, Shardul and Murat stated they wished to bring on a chairman of the board. Justin asked whether they were thinking of replacing him as CEO. He reiterated that Iterable's ethos was based on who he was: an Asian American, an immigrant, and a technologist in Silicon Valley; someone who believed that the American Dream is for everyone, equally. Justin shared the story of how, pre-series A, an Asian growth investor advised him that when the company gets bigger, that success will require hiring a white CEO because that's what it takes to succeed in America. Justin suggested that this was the investors' plan.

But Bicer and Shah were said to have "stated that if he cared about Asian causes, he could invest in them, not serve the goal by being a role model as CEO. Shardul pointed to the statement by a potential investor who said that Justin did not look like an enterprise CEO. The potential investor stated that the company's Caucasian COO looked more like a CEO than Justin did."

Micro-dosing is far from unheard of in Silicon Valley. Proponents claim that small doses of psychedelics (usually magic mushrooms or LSD) can enhance lateral and creative thinking in a business context. One only needs to Google the term to find a wealth of articles from groovy startup founders and CEOs espousing its supposed benefits.

Apple co-founder Steve Jobs was a big fan of lysergic acid diethylamide, saying that taking a large dose was "one of the most important things in my life." Francis Crick, co-discoverer of the structure of DNA, also credited LSD with broadening his mind.

But that doesn't mean it's OK with venture capitalists who are taking huge bets on billion-dollar businesses. Whether Zhu's drug use or his ethnic background are behind his ousting at Iterable will be down to the court to decide.

Iterable, Charles River Ventures, and Index Ventures have been approached for comment. ®

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