VCs Eagerly Watching The Epinions Lawsuit

from the turning-the-tide? dept

The saga of a bunch of Epinions founders going out and suing their VCs has been told plenty of times. However, it looks like the case is finally going to court, and that has some VCs nervous that a win by those founders could make investing in companies a bit more difficult -- as it opens up additional liability. While VCs don't have the best reputation some of the time (often for very good reasons), in this case, it's hard to side with the founders. After all, these were founders whose whole claim to fame was that they were all experts in startups, as this was the second time around they were all starting a company. That was supposed to let them glide through to an obvious success in very little time. Except... that didn't happen. The company didn't really do that well, and stumbled along until finally merging with Dealtime to become Shopping.com. To make that deal happen, the founders were bought out... at a share price of zero, which had more to do with liquidation preferences than anything else. If these founders were such experts on building a startup, they should have known this was a possibility when they agreed to an investment from these VCs. Suing after the fact just seems like sour grapes from some entrepreneurs who thought they deserved to be rich, even though their startup didn't succeed while they were there.
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  • identicon
    dit, 13 May 2005 @ 10:30am

    No Subject Given

    because they should have known better, it is okay for vc's to screw them over?

    because vc's were able to trick them into giving their company away for nothing, it is the victim's fault?

    vc's are wolves with much expertise in shearing the sheep and all the power and all the lawyers. Very lopsided arrangement.

    To side with the vc's because the founders made a startup before is like saying it's the girls fault when she gets raped because she went on a date once before.

    reply to this | link to this | view in chronology ]

    • icon
      Mike (profile), 13 May 2005 @ 11:49am

      Re: No Subject Given

      No... that's not what I'm saying. I'm saying these guys agreed to the deal with the VC that clearly had these liquidation preferences. If they didn't like it, they shouldn't have signed the deal. They signed it, they should accept it.

      reply to this | link to this | view in chronology ]

  • identicon
    DV Henkel-Wallace, 13 May 2005 @ 8:56pm

    Many misunderstandings

    After all, these were founders whose whole claim to fame was that they were all experts in startups....If these founders were such experts on building a startup, they should have known this was a possibility when they agreed to an investment...
    I am friends with people on both sides of this, and know some of the others pretty well.

    VCs have a reputation for being scum, but although I've certainly met some bad ones, I've met great ones too. The fact people often forget is that your investors aren't your friends, but if you have your interests aligned with theirs then you and they will be trying for the same thing and so you'll likely be happier with the outcome.
    Suing after the fact just seems like sour grapes from some entrepreneurs who thought they deserved to be rich, even though their startup didn't succeed while they were there.
    One fact that makes this especially seem like sour grapes to me, and that is often not mentioned: Yahoo offered to buy epinions for $700MM in, I think, late 2000. The company (i.e. the "experienced team") decided to go for an IPO in which they thought they'd make more money. Of course that bet didn't pay off. Who's fault is that? The investors can never force such a deal to happen over the objections of management.

    What's weird is that I once remarked to a VC not involved in the case, "why would you sue? You'd have to plan never to do another deal around here again." The response? "Oh, the next time someone believes they'll make money out of it, any of these guys will be funded again."

    reply to this | link to this | view in chronology ]


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