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Comment by yingw787 | Hacker News Reader

Holy crap. The only way forward for Bessemer et al. VCs is to immediately withdraw their funding for this “company” and cut all ties in order to prove that they had no forewarning that this is how their money was being used. There are so few actors this visibly bad that if they didn’t do anything they would become “that guy” everybody avoids, in both the deals and funding space, when orgs do their due diligence.

So they could choose to not do anything, which means the only companies approaching them in the future are the desperate ones, and they lose the capital anyways to the markets due to a shoddy portfolio.

Don’t knife your intangibles.

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There is no such thing as "withdrawing funding" in this context. The Series A is long closed and Bessemer is deeply entwined with the company's governance.

The most severe move they could take would be to enforce whatever contractual mechanisms they have to block additional financing pending an independent investigation and replacement of responsible parties. Or they could directly force the matter if investors hold a majority Board vote.

If the investors have a board and shareholder majority (which they may not), and really thought this was a terrible investment decision that they want to get out of, then they could vote to wind down the company immediately, redistributing the assets pro-rata (with possible liquidation preferences). This would be roughly the same as "withdrawing funding".

They could recoup a huge part of their investment before things get worse. But again, afaik this requires a shareholder majority, barring any strings/triggers on the investment terms that could be activated.

Bessemer & Co. would not spend this kind of money without doing DD to the point where their competitive review would have snagged the OP's efforts. So most likely they know.

Sounds like VCs need a plagiarism detector for websites (think TurnItIn) to make sure their portfolio companies aren't blatant ripoffs.

We always check this sort of stuff for our customers, and more than once it has triggered.

How do you do it? Just using Google on various phrases? Are you checking for your customers our on your customers? If the latter, why do you care (most vendors wouldn't).

> How do you do it?

We have a team of people that exhaustively search for players in the same space. The 'Google on various phrases' is more or less the gist of it, the more unique the better.

It's not an automated process so fairly time consuming.

> Are you checking for your customers our on your customers?

We do not check on our customers, we check for our customers. And usually pre-investment.

> If the latter, why do you care (most vendors wouldn't).

You are probably wrong about that, copying something verbatim will get you a C&D pdq in most cases.

Thanks for clarifying! I'm still confused as to why a vendor would check on a customer or care if they're infringing.

I sell a SaaS reading product and don't care what my customers are using it to read, or whether their own websites our products contain any infringing content.

> I sell a SaaS reading product and don't care what my customers are using it to read, or whether their own websites our products contain any infringing content.

What they are using your product for might very well turn into 'aiding and abetting', make sure your TOS is up to snuff and that you have it checked over by a lawyer to verify that if your customers do something illegal with your service you don't end up being on the hook.

As for the second, that might be a good hint that your customer is not above-board and will bear closer watching.

I'm not sure I follow (and I'm a lawyer). If someone uses my chrome extension to research how to rob a bank, and then they go do it, what is the legal theory that puts me at risk? Is Google at risk because they're using chrome? Or the computer manufacturer?

Napster is one end of the spectrum, but I'm not sure how anything short of that is a legal risk. Are there cases or legal theories I'm unaware of?

There is a lot under 'SaaS' that you could use to further illegal schemes that do not fall under 'chrome extensions'.

Off the top of my head: anything payment related and two sided market places (money laundering, false binning), anything that allows large volumes of data to be moved around (copyright violation, child pornography, exfiltration of data from corporate networks), proxy services and spider services (DOS attacks, harassment, TOS circumvention and copyright violation) etc.

So nothing that would require legal theories, just the usual abuse of service.

> anything that allows large volumes of data to be moved around (copyright violation, child pornography, exfiltration of data from corporate networks)

So could Mozilla be on the hook if people used Firefox Send to do any of these things?

That thought definitely crossed my mind when it was first announced. I sure hope they thought of that before releasing.

They could be on the hook, except the ToS of Firefox Send includes this language:

You hereby represent and warrant that your content will not infringe the rights of any third party and will comply with any content guidelines presented by Mozilla...

We may suspend or terminate your access to the Services at any time for any reason, including, but not limited to, if we reasonably believe:... you create risk or possible legal exposure for us...

You agree to defend, indemnify and hold harmless Mozilla [et al] from and against any and all third party claims and expenses, including attorneys' fees, arising out of or related to your use of the Services (including, but not limited to, from any content uploaded by you).

(https://www.mozilla.org/en-US/about/legal/terms/services/#se...)

The indemnification bit is pretty much testimony to the fact that Mozilla also realizes the abuse potential of 'Send', but it may not work out well for them if they end up as the defendant in some lawsuit and the party breaking the TOS is penniless.

Just because something is a blatant ripoff, doesn't mean it's not a good investment. VCs are doing investments based on predicted ROI, not uniqueness. Lyft and Uber are extremely similar, but the particulars of the business are much more relevant to the investment opportunity.

Sure, but neither of them was illegally copying aspects of the others' business. Business models are not protectable.

illegal or not is for the court to decide.

Are you suggesting that the article isn't describing an open and shut case, our that business models may in fact be protectable? As a former lawyer, I would say that neither of these is even a remotely close call (assuming the description is accurate).

Yes, that depends on how good are their lawyer argue it in court. Maybe they know something we don't.

Technically, yes. But practically, in cases so blatantly obvious it is fine to draw your own conclusion.

In one court case - where a company I had a majority stake in was the plaintiff - the defendant basically had to admit that they copied the code and content of our website. Their defense: 'we did not copy it from them, we copied it from someone else' (without specifying what the 'someone else' was). Needless to say that did not end well, we were surprised they actually went to court but since this was in a country where the loser pays the court costs of the winner that did not overly bother me.

Isn't that testament that their lawyer simply is not good?

Lawyers do not call the shots, clients do. So if a client wants to take a losing battle to court a typical lawyer will caution them but will not hand in their commission.

No client want to lose. Maybe they choose the wrong lawyer? Maybe they shouldn't just use 'typical' lawyer. Especially for difficult case.

That was about as unwinnable as they come. So no, that wasn't the wrong lawyer, that was simply the wrong client.

https://webwereld.nl/overheid/10591-webcamsites-bevechten-el...

(Dutch)

No case are unwinnable. At least not with that attitude. Look at the O.J. Simpson case for example.

He lost the civil suit. And the only reason you bring it up is because it is exceptional. The general rule is that the courts tend to get it right but there are obvious (and glaring) exceptions.

The quality of your lawyer will help in the gray areas, and may get you a reduced sentence in case of a criminal affair but in general you will lose if you go to court with a case where you were in the wrong. It's not a perfect system but for most cases it works out.

He win the criminal suit.

>And the only reason you bring it up is because it is exceptional

So you need exceptional lawyer.

>The quality of your lawyer will help in the gray areas

An exceptional lawyer will make seemingly black and white situation to looks like grey.

> in general you will lose if you go to court with a case where you were in the wrong

Sure, the point of court is argue that meaning of "wrong"

> He win the criminal suit.

You don't 'win' a criminal suit. The standards of proof in a criminal suit are different than the standards of proof in a civil one, because the punishment in a criminal suit is much heavier than in a civil suit (where the maximum is some monetary penalty, whereas in a criminal suit it is imprisonment or in some countries even death).

I really think your view of the legal system is somewhat theoretical, there is no such case that it can always be won given the right lawyer or argument.

He didn't get death penalty or imprisonment is a win to me.

The reality is legal system consist of human in various capacity, judge, lawyer, jury, even public opinion. Its all boil down to convincing these human. Given the right method or argument, you can convince any human. Sure some case are harder then the other but doesn't mean it impossible. Really really hard != impossible.

>there is no such case that it can always be won given the right lawyer or argument

What is your reasoning ?

Deciding it on your own before the court battle might save you millions of dollars of your own invested money.

TurnItIn resells all of the data you submit to them. Any paper a student is required to sent to the service (it's not optional at schools where it's in place) is added to the dataset which they ultimately profit from, with nothing paid back to the students who own the original IP.

It'd be like YouTube using your videos for ContentId, but not having any avenue for you to profit from said videos. Oh and uploading to Youtube would be mandatory.

There was a lawsuit about this, decided on TurnItIn's side, but I still disagree.

I wasn't suggesting they copy the business model, just the functionality. If it's all websites, there'd be no need to have a separate database.

And I didn't think you were. My point is aside from the actual topic at hand.

Bessemer & Co. likely know that Otonomo is building a drop-in replacement copy of Smartcar's API. I'm not sure there's anything terribly controversial about that, although reasonable people may disagree.

Bessemer & Co. probably don't know that the docs are literally being copied though.

A literal copy would show up during tech DD. If they did not flag it that's their problem, if they did flag it it is still their problem.

How do we know that the investment predates the public api documentation?

Bessemer's last round was a series 'B', by then the bits and pieces would have all been in place, whether it was public or not isn't even all that important.

It does raise an interesting question though: how will the OP prove that their work is the original, that might hinge on a lot of unknowns, more difficult still if the work was originally lifted by an employee of the company and then passed on to Otonomo with them being the unwitting recipients.

Yes, seems likely, but user documentation often comes really late in the process.

However, the Smartcar CEO replied in another thread that they use Readme.io for their docs, which can autogenerate using Swagger, which automatically parses hints in code.

So it is definitely possible that the codebase got stolen and the perps missed changing a few hints, resulting in the Otonomo samples generating identical sample code, as shown.

>> Bessemer & Co. likely know that Otonomo is building a drop-in replacement copy of Smartcar's API. I'm not sure there's anything terribly controversial about that, although reasonable people may disagree.

Anyone considering that should be aware that Oracle vs Google is still not finished.

Even a drop-in replacement does not normally go so far as to have verbatim copied documentation. Which makes me wonder how far the copying went, if they actually obtained the code as well.

They would not have looked at the API docs of either the startup they are investing in or their competitor (99.95%). I've worked as VC and technical detail at such a level is basically non existent. Economics, team, market take up the vast majority of the effort.

We do technical due diligence, because at the VCs this specialty is usually not present.

I’ve been through a technical due diligence for an acquisition and the process was severely lacking. In total it took ~8 hours (compared to ~80 for financial diligence). It felt like a once-over smoke test to eek out any major red flags.

I almost wish you had done my technical diligence, Jacques. I spent a week preparing for it and was very proud of what I’d built.

We get that a lot actually. We do quite a few 'B' and later rounds (43 deals last year!) and apparently we're the hardest exam to pass for, but the people we work with are generally really happy that they finally get to show off all their hard work to people who really appreciate what they've done.

It's five of us for a week with a super intensive interview on the Wednesday and it is always the highlight of the week for me. What is also neat is that most of these turn into very long term relationships post deal, not necessarily financial ones, just that the interview day makes the whole thing a two-way street where the tech team will occasionally reach out when they are stumped on some problem or need outsider perspective.

Ya, we got very close to closing with a VC in SV. Their technical due diligence consisted of one of their contacts from Google calling and asking me questions about our tech stack. It appeared that the Google dev derailed the deal because we were building our product in PHP. That's how they decided we must not know what we are talking about.

Did you get funded with another party?

Yes, we raised millions through a few other VCs.

Good to see that that did not reduce your long term chances. I really don't like these out-of-hand dismissals without doing the homework first, PHP is not exactly the worlds most elegant language (to put it mildly) but it is definitely not a disqualifying one either.

This is correct. The odds that a VC investment fails because the company copied work and gets caught/sued is very low. Thus, there is little incentive to dig through all the weeds to ensure that absolutely no work was copied.

Ultimately, the VCs probably just ask the founders "Hey, your product looks very similar to product A, how is yours different and did you develop it on your own?" If the founder denies copying and gives a reasonable answer for how they developed it on their own, the VC then makes a judgement. They also may hire some consultants or have some outside experts look at the tech stack to make sure no red flags pop up.

However, you can't dig through every line of code and every document in diligence and compare it to several other companies code/docs. It would take too long and everyone involved (VCs, lawyers, start-up) would be annoyed.

Getting onboard a company where there is a fast growing but not established market leader might even be a sound investment. Just add more thrust.

> without doing DD

It's a Series A, serious DD doesn't usually happen this early and a jr. analyst with a finance background wouldn't catch something like this.

The latest participation by Bessemer was a series 'B' as far as I can tell:

https://otonomo.io/pr/otonomo-announces-25-million-strategic...

And even then, series 'A' requires DD as much (and sometimes more so) as later rounds.

VCs are not banks and are not staffed like banks, and they don't do DD like banks. I've been in the weeds in six VC rounds and through an IPO, you'll be incredibly disappointed what passes for DD for VCs.

> you'll be incredibly disappointed what passes for DD for VCs.

There are lots of VCs, some are better at this than others, some really suck. On the whole though they tend to do their homework at least on the commercial front and a competitor with a feature-for-feature identical offering would have most likely been spotted even at the 'not so good ones', irrespective of whether or not the API docs were made public.

The interesting questions to me are:

- what was the exact timeline?

- was an (ex) employee of the company involved in the copying?

- is Otonomo itself aware of the fact that they have this sitting on their website?

- How far down does it go? Is it just the API documentation, or also the underlying code?

VCs love to tout how they reject 99.9% of their pitches. What's the competitive advantage for them to fund an investment with minimal technical review? Wouldn't avoiding the next Theranos be worth it?

No. VC is about numbers, getting into as many deals as possible because a very small number return enough to pay for the fund. 99% of deals are expected to fail. In-depth due diligence costs too and would take away money that could be better spent on just another deal.

> The only way forward for Bessemer et al. VCs is to immediately withdraw their funding for this “company” and cut all ties in order to prove that they had no forewarning that this is how their money was being used.

I mean, you might eventually be right. But why "immediately"? What's wrong with taking some time to talk to people, hear the other side, find out more details, do a proper investigation, and then decide what to do?

One side of a story is never the whole story.

Can someone explain me what illegality did they do?

Is it illegal to just copy some docs from somewhere on the web?

are APIs copyrightable?

In the US, whether APIs are copyrightable is a question being currently litigated. https://en.wikipedia.org/wiki/Oracle_America,_Inc._v._Google....

The latest decision in that saga is that yes, they can be. Whether that holds up in the Supreme Court is an open question. Most of us hope it doesn't, I suspect.

Copying documentation is definitely a copyright violation. Similar situation exists with recipes - a list of ingredients can't be copyrighted, but the wording of the steps can be. You have to at least put it in your own words.

The docs are definitely copyrighted. Same as if you wrote a blog post and they copied it, it would be copyright infringement.

Otonomo sounds like a deeply unethical and shady company. If I was doing any kind of business with them I would not continue to do so. While it would be hard to sue them, hopefully when you Google them in the future the fact they ripped of Smartcar will be one of the first results.

As it turns out, probably nothing. Their API docs are apparently open source.

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