One founder's nightmare

I am the author of the article. Unless you've been in a situation like this, it's best not to armchair quarterback. I expected a mixed reaction to this, and that's fine.

I had a choice. 1) do nothing, hope the harassment stopped spontaneously (the private eye I hired caught this manager trying to sabotage an unrelated deal nearly a year after I left, so what would you conclude?), 2) fight back on my own terms. The nature of bullies is that they continue bullying until someone stops them. I couldn't afford to sue, and didn't want to spend the next couple years dealing with them in court either.

I would have rather just moved on. I just wish this individual had been reasonable. There were dozens of ways to deal with the situation amicably, all of which would have resulted in us sticking around, and them making money from the products they acquired. None of us wanted this outcome.

Lesson learned besides avoiding earnouts, also investigate whether a company has experience with M&A or larger investments, and thoroughly check executive history to find prior deals (just being in the room when someone else was running a deal doesn't count). If they have not managed an acquisition before, there's a high risk that they'll screw it up. It's human nature that people don't want to admit their own mistakes, so if that happens, you'll become the scapegoat for it all.

For buyers, the lesson learned is that in a small acquisition, you're also acquiring living thinking human beings, not livestock. Hardball pennywise tactics might save you some money in the short term, but nearly always create resentment, early departures, etc, and degrade the value of what you bought in the first place.

Take all of this with a grain of salt though, as I am a disgruntled employee, etc.

Unlike most commenters, I would like to offer some words of support to Brian. Much like rape victims used to be judged on everything from their dress style to being out late after dark, you are being judged on everything from your writing style to your choice of deal structure. If the blame lies with the victim then surely nothing bad could happen to us, right?

All in all, I think you offered rather good reasons for structuring the deal that way even though hindsight says otherwise. It's staggeringly naive to think that any amount of lawyering could "sort a deal out a 100%". People who make those sorts of comments have very limited business experiences and don't know the true meaning of the phrase "history is written by winners".

I wish you the best in whatever you choose to do next. I do hope you get a lawyer - even if you don't like to think of yourself as a litigious type, it will help you achieve some closure. Please keep us posted on your situation.

Ouch.

I totally agree with "If you are an entrepreneur, _never_ agree to an earnout without substantial up front compensation, there are just too many ways you can get screwed, whether by chicanery or incompetence". I have a friend who did just that, and was also shafted in the process.

Never give your business away for free, and never count on any money after the initial sale.

It does sound to me like this guy needs to get himself a lawyer rather than post stuff on the web, assuming "Paul Hammond" is also US-based. My friend couldn't do that, as his "acquirer" was based in Poland, which made litigation difficult (lesson 2: don't sell to someone you can't sue).

Tip: the more personally you are involved in some dispute, the more careful you have to be to be crisp and understated when describing it. This would be much more convincing if it weren't so rambling. As it is, I read it and think "I don't know the rights and wrongs of this particular situation, but I could easily imagine that this guy would be a huge pain in the ass to deal with."

Seriously, stop writing. If you are aggrieved, take the guy to court. That is what the legal system is there for. Blogging will inevitably only prejudice a case. If the money does not matter to you, then at least do it to set precedent and discourage such behaviour.

I don’t know if there is Legal Aid in the U.S. (like in the U.K.) but at least use the Small Claims Court system (http://en.wikipedia.org/wiki/Small_claims_court) or contact Judge Judy (or whoever is in vogue at the moment) to shame him more publically (as it seems like you are following a name-and-shame strategy).

It doesn't seem like a rant to me.

It would be good to hear the other side but given the fact that litigation is pending, comments aren't likely to come. If it's all true, then clearly Virtual PBX is a company to stay away from.

I appreciate the lessons McConnell provides here and wish him better luck next time.

I dont blame the writer for blogging the incident . he has already said he has facts and witnesses and he would not risk telling a lie to the whole world .. sometimes you have to tell your own side of the story because even potential investors will wonder why youhave not made a statement to defend yourself. If nothing comes out of it readers can learn a thing or 2 from the story ...

Here's one helpful tip that served me well: if you are not a good judge of people's character then don't try to judge their character. Instead, always judge their apparent motives.

This works well in business and politics.

How do you know you are a good judge? For example if you are a police investigator with 500 solved cases behind you, you are a good judge - you got experience. If you don't have similarly large experience you're likely not a good judge.

There appears to be an update on this story - from the Venturebeat article http://venturebeat.com/2008/09/01/when-selling-your-company-...

The company says he used a personal email ID to conduct company work. All the email was on the company computer, and they looked at that account to get the business related stuff. Seems to me like this is a case of an ex employee that is pissed off and seeking personal revenge. Anything on that commputer belongs to the company. Cant comment on the contract stuff, but given the inflamitory way he talked about the email - who knows what the truth is about the contract. Sour grapes - I think his ranting is doing him more harm than good. who will want to do business with him now he shows how he deals with issues in public and not through reasonable normal business channels

Found the official response from the company posted at O'Reilly

There are always two sides to a story. Looks like VirtualPBX offered to rescind the deal and are asking him to resolve the dispute through the dispute resolution procedures that are already outlined in the agreements he's signed

So why is this guy blogging about this - looks like its hurting him as much as anything else

This comes straight from the article ->>>>>"Virtual PBX is a small, privately held, non VC funded, 10-year old family enterprise that took a calculated business risk by acquiring the assets of Brian McConnell's business in an attempt to further the progress of its technology. Brian willingly signed a business agreement with Virtual PBX and subsequently entered into an employment contract with the company. Those facts are not in dispute.

Virtual PBX contends that Brian breached material terms of the agreement as well as the subsequent employment contract. We do not believe it appropriate to discuss the nature of the ongoing contract disagreement publicly, despite the fact that Brian has issued a stream of what we regard as misleading and even malicious statements in his blog about the relationship.

We do take exception that Brian has chosen to invoke the mantle of privacy as a means to avoid taking responsibility for his behavior. He chose to store large volumes of data on a company issued laptop, some of which was unrelated to company business. The laptop and the data stored on it were appropriately retained by the company upon his departure. The company's only interest in the data stored on the computer is that which relates to business issues. Brian's allegation the company committed cybercrime is malicious and unfounded. It is unfortunate Brian has chosen to pursue counter-productive rhetoric in lieu of reaching a mutually acceptable and business-like solution to this contract dispute."

Also says ---- They told me the company "has also requested that he resolve the dispute through the dispute resolution procedures that are already outlined in the agreements he's signed, and that Virtual PBX has even offered to rescind the deal with him and give him back everything he sold to the company including the IP."

Earnouts seem to combine the worst properties of a purchase and an investment.

IANAL, but may I humbly suggest (from what little I know) that the poster take this down, seeing as the consensus here is that this post might hurt your case?

This kind of post doesn't do him any favors. If its true (and that is up for debate) then it's still down to him not sorting the deal out 100% before he gave everything away. Business really can be a nasty place and he should really have had everything tight legally from the start of the deal.

in part it seems like a "the-world-is-out-to-get-me" one-sided rant.. But there seems to be some good lessons to be learnt there, and it may very well be a reasonably accurate statement of events..

This is a post I made which also goes into general some of the range of tactics used by rogue 'competitors'.

http://thenextweb.org/2008/05/24/david-vs-goliath-the-underh...

Maybe the author should rewrite this so that the reader can get to something interesting in less than 15 minutes.