Hacker News Reader

Comment by _sentient | Hacker News Reader

We obviously only know one side here, and this issue will doubtless bring all the contrarians and tinfoil-types to the yard.

However, even if we entertain the notion that Jeremy had some sort of de-facto equity interest in the company (a claim for which there is seemingly zero present evidence); can we at least agree that is uniquely shitty to suddenly level these claims days after the acquisition is announced?

One does wonder why this moral injustice wasn't righted promptly in the days, weeks, months, or years following his involvement in the company. More facts will likely emerge, but the timing alone seems like prima facie evidence of rank opportunism on his part.

View on HN

>can we at least agree that is uniquely shitty to suddenly level these claims days after the acquisition is announced?

Would you prefer that he wait until after the acquisition closes and then have to fight a multi-billion dollar corporation and a newly minted billionaire cofounder? He obviously feels he is owed something, and strategically, it was now or never.

I cofounded a company, named it, was listed as the inventor on the company's patents, wrote its first product, had a written equity deal, and still got screwed on an acquisition like this. It wasn't for billions, but it was for more than $60 million. The acquirer was a multi-billion dollar company and once the deal was done (I didn't find out about the acquisition until after the fact) it was impossible for me to fight them.

I don't know what the merits of his case are, but looking at this from Jeremy's side, having been similarly positioned, he had no choice but to do this right now. Once GM has the company, unless Jeremy has some insanely wealthy backers willing to fund a very expensive legal fight for many years, all bets are off.

"He obviously feels he is owed something" Does he feel he is owed something just now? Why didn't he feel he was owed something at their sizable Series A [1]? It all just seems Opportunistic, someone just waiting to maximize their returns.

[1] http://techcrunch.com/2015/09/18/cruise-2/

I find that business is opportunistic in general, and those who are successful are generally opportunistic. To constrain oneself and to not take advantage of opportunities likely means your going to get beat by those that do.

I meant opportunistic in the "You knew you had no leg to stand on but are now trying anyway because the stakes are higher", sort of way,

not the "This is the right time to start a certain business" kind of way

> I meant opportunistic in the "You knew you had no leg to stand on but are now trying anyway because the stakes are higher", sort of way,

This fully describes most of the VC-backed startup world. 95+% of the businesses fail and a few get lucky. Part of making that happen is trying just about anything and shooting for the moon.

What exactly was he waiting for? Hedging his bets? I get that this may be legal, but he seems to have only become interested in his stake because it might suddenly be worth something (alot). I'm actually surprised he's not worried that his sudden claim might not cause enough problems to lower it's value, i.e. scaring off GM.

Again, I don't have any insider knowledge here, but: you pick your battles. After the sizable Series A, the company was still going to potentially fail, and thus it may not have been worth Jeremy's time to fight it. Here, it is clearly worth his time. Spending a ton of time fighting for a small amount of nothing is clearly not worth it for anyone, and thus he may have chosen not to fight it until now, when it's clearly not worth nothing.

The question is not why didn't he wait until after the sale closed. The question is why he didn't bother to come forward and ask for his equity at any point during the previous 2 years.

Without taking sides, the answer seems pretty obvious: why spend the time and money fighting for a percentage of nothing.

Yup, and the whole point of doing it right now is that it gives him the most leverage. No one wants to stop the merger and the longer you wait, the more risky it gets (buyer's remorse, another startup comes up with a competing product, etc.) so you might be willing to pay a small but substantial sum to make the problem go away.

Given he didn't take the offer of a sum to make it go away and instead let it drag longer in a way which affects the merger, either that wasn't his logic, or he executed it poorly.

Or they lowballed him. Its hard to make assumptions here without the full story.

Fair point, but from the way Sam wrote it up it sounds like he ignored them and let it get far enough that they filed a suit against him, whereas if his plan was to be something they can get rid of quickly before the merger he surely would have come to the negotiating table before it became too late.

> newly minted billionaire cofounder

Keep in mind you're talking about Kyle Vogt, cofounder of Justin.tv and Twitch.tv, acquired by Amazon for $1B, and Socialcam, acquired by Autodesk for $60M.

I guess he probably isn't a billionaire if he only got a percentage of those acquisitions but he isn't some poor college kid hacking away in a garage either.

Note that I am not saying anything about the merits of this case one way or the other, just pointing out who we're talking about.

Would you mind sharing a bit more about what happened to you with your startup?

Were you due millions and got nothing, or did you just lose some of what you felt you were due? What would you suggest others do in order to avoid that situation of yours?

I lost nearly $13M in equity. I got $0, plus I spent most of what I had at the time trying to pursue it legally. Basically, my business partner (who was already very wealthy before we started the company) and I had a personal falling out (believe it or not, over a woman). He decided that since he had financed everything, that it was his. He pushed me out, but I still had my equity.

It turns out, however, that the moment I was out he transferred all of the company's IP to a different corporate entity that he owned 100℅ of (same exact company name, just a different structure). He eventually sold that entity. The only thing he couldn't erase was my name being on the patents, but apparently the acquiring company never bothered asking who I was. But in the end it didn't matter, I simply didn't have enough resources to see it all the way through.

Omg, I would definitely talk to a litigation attorney again, even if it's been a while.

Thanks for sharing that story with me. It's so stressful thinking about the stuff that can happen, esp when doing business with peeps you know.

I'm really interested by these kinds of IP transfers... is there any reading material about them? This is not the first time I've heard of them, it sounds like one of the only viable ways of removing shareholders that you don't want in the company.

But it also sounds batshit crazy... shareholders should have more than just 'trust' that a founder isn't going to screw them over so easily.

It is of course actionable, but that assumes that everyone involved is on equal financial footing. Me, independent developer, vs a $13.65 billion market cap company and a cofounder worth more than $100 million usually won't end well no matter how egregious the conduct was.

You can hire lawyers on a contingency basis, which means they don't get paid unless they win. Typically they want half of the settlement money. $7 million dollars is still a lot, and it could be more if there are damages.

I know someone who went up against a Dow 30 tech company like this, won $8 million, and walked away with $2 million after tax. Let me know if you want more details, I'll email you.

Here is downandout's full story from 5 years ago on HN: https://news.ycombinator.com/item?id=3120052

I'll reserve my opinion.

Yeah, I made that post out of frustration. After that post I start putting personal and borrowed money into it that I couldn't afford to lose at the time, and nothing came of it. Complete stonewall. The additional details I offered above (the transfer of the IP to a different company bearing a similar name etc) came out as a result of the legal leg work that was done, but I couldn't afford to pursue it further, and now the statue of limitations has long passed.

So yeah I wasn't going to name names, but since you posted this old link, in my opinion, no one should ever do business with Allan Camaisa. He is the CEO of a different tech startup today in the mobile space, and I can only assume he is screwing people both inside and outside the company in the same way and possibly new and improved ways.

If you would like to see the ire this guy inspires in business associates, look no further than http://eyevelocity.com . This was a dot com era implosion that he was the CEO of. Allan blew through $40 million of "smart" money - Intel Capital, Chase H&Q, etc. and the company went bankrupt. A spurned employee bought the old domain and 15 years after they blew up is apparently still bitter based on the home page lol (HTS was the parent company of Eyevelocity). His very next venture after that disaster was the one we started together.

If we were being 100% generous to Jeremy, one possible explanation is that he legitimately believed he held stock in the company, and wasn't made aware of the fact that he didn't until he inquired about it prior to the merger. It's not like it's typical to be in physical possession of stock certificates or anything like that.

In any case, it's just more evidence that getting something in writing re: ownership is worth it from the first conversation you ever have about a potential startup. If these two guys did something simple and standard like 50/50 with vesting, this wouldn't have been a problem.

I would guess that from his perspective (which may not be what the court decides is the right perspective, of course) he might be thinking something like, "hey, we started this together, I had these 10 ideas, we parted ways because we have the wrong personalities to work together, now I see 8 of my 10 ideas in the finished product (even if it's out of, say, 100 total ideas or whatever) -- and I feel like you never actually compensated me for about a month of genius that I provided. By helping you start this thing it was secretly our baby all along, and I was okay with you doing whatever you pleased with it while it was a bunch of crazy ideas that hadn't proven their mettle; but now that they have, this is my last chance to speak up for my fair share."

Again, that's not necessarily the truth, but if you want to understand the psychology of how someone can claim this stuff and feel reasonable about it, that's how. We've very much only heard one side of this discussion and while Altman's side is very reasonable, it'd be interesting to see the other side.

Well stated.

We were involved in a fracas something like this, but on a smaller scale.

One of my key learnings was exactly this. Our lawyer (a magnificent guy who stewarded through the ugly process) said early on "you can bet that the other guy's lawyer is getting an entirely different story from what you've told me".

Much as we (especially techies) like to think of ourselves as binary,rational types, the fact is that two intelligent people can each hold conflicting, but sincerely held worldviews. Its very hard to get your head around this - the natural thing is to got full on fight instinct - he's a bastard, he's lying, he's out to screw me and my family, he'll say anything.

Add on top the fact that things often are gray - likely in this case there are two sides to the story, other guy probably has a rightful beef about this.

> the fact is that two intelligent people can each hold conflicting, but sincerely held worldviews.

THIS! A thousand times over. The mere fact that a generous settlement was turned down seems to indicate both sides sincerely believe they are in the right and not some "out of the woodworks charlatan as sama has us believe..."

> One does wonder why this moral injustice wasn't righted promptly in the days, weeks, months, or years following his involvement in the company.

Both the following statements are true: 1) lots of these cases are filed right before a merger because plaintiffs hope to maximize defendants' incentive to settle a weak claim; 2) lots of these cases are filed right before a merger or acquisition because until then the defendant has no money and there is little incentive to bring even a strong claim against them.

"can we at least agree that is uniquely shitty to suddenly level these claims days after the acquisition is announced?"

Assuming someone has been legitimately wronged, they are entitled to surface their claims at the time that would give them the best chances of righting that wrong - ie, the time at which they have the most leverage.

There are legal arguments bearing on delayed claims (eg laches) but those are for the court to resolve.

https://en.wikipedia.org/wiki/Laches_(equity)

I think there are many valid ways to attack this behavior, but I don't believe you chose one.

It could be as simple as the plaintiff living a busy life and realizing this was his last chance to make things right before he'd be facing GM's lawyers. GM is definitely of the size where they can bring a trial outside the means of an individual to litigate.

The valid reasons to attack are listed at the bottom of Sam's article.

I agree with you, although: it's got to be a pain in the ass and a huge expenditure of social capital to try to negotiate some equity in a contentious situation like this. Most startups will not result in a meaningful financial outcome, so it sort of makes sense waiting to go through this mess until it's clear that it's going to matter because there's money on the table. (Whether the claim is legit is another matter...obviously extraordinarily shitty to do this if your claim is bogus)

> Most startups will not result in a meaningful financial outcome, so it sort of makes sense waiting to go through this mess until it's clear that it's going to matter because there's money on the table.

That's not how it works. We have great, special-built instruments for this purpose, commonly known as stock options. They come in many flavors, but all of them share the important feature of defining terms of ownership before it's obvious what the final value of a company will be. These tools exist for the express purpose of avoiding shadow claims and massive litigation every time a company is bought or sold.

Unfortunately, very early-stage founders don't always do paperwork before starting to work together (which seems to be the case here, although it seems very little work was done). Obviously, it would be easier if they did.

> but the timing alone seems like prima facie evidence for rank opportunism on his part.

Or a result of feeling the full weight of his mistake/perceived injustice.

Or, a result of the fact that there is now something to receive. Why waste everyone's time correcting stock accounting if the stock is effectively worthless?

> Why waste everyone's time correcting stock accounting if the stock is effectively worthless?

If you know for sure that the stock is effectively worthless, obviously there's no point.

If the stock might be effectively worthless, or might not, then there is a point: you are establishing your claim before its value is known. That puts you in a much better position to rebut accusations that you don't really have a valid claim but are trying to milk it for whatever you can.

There's no accusations to rebut. He either has a valid claim to that equity or he doesn't (as determined by a court of law, if it gets to that point).

> There's no accusations to rebut.

It certainly looks like there are in the court filing that sama's article links to.

Reply on news.ycombinator.com