
Byte Me: Why you need to be *very* careful when choosing co-founders - geekfactor
http://www.riverfronttimes.com/2011-07-07/news/secureaxis-kalishman-elbring-network-security/
======
tptacek
A year in prison for owing $24,000 in back taxes for a couple years sounds
extremely severe. I mean, any criminal conviction at all for owing $24,000 to
the IRS sounds extremely severe, but I get the circumstance of the plea deal.
Still, though.

~~~
OstiaAntica
The prison time wasn't for back taxes, it was that he didn't file at all for
the foreign company. Frankly 3 months isn't enough for tax cheating.

~~~
tptacek
My guess is most people who owe back taxes haven't filed. It's not "tax
cheating" not to file; it's "tax cheating" to file false returns.

I went a bunch of years without filing, racked up a pretty significant tax
liability, and it was absolutely not a big deal to take care of it.

Years earlier, I did the same thing, but instead of having my accountant clear
it up, the government noticed and just levied me. Again: not a big deal.

~~~
Vivtek
Same here. I failed big in the 2001 recession and it took me a couple of years
to really believe it. I almost have the back taxes paid off now. The IRS
really doesn't do the criminal conviction thing unless there's no other
choice. It's expensive and doesn't really fix the problem - that they don't
have their money. They'd much, much rather set up a payment plan.

Also, for anybody in that situation - talk to them. I've never had a bad
experience talking to the IRS. Sure, it's scary admitting there's that much
debt hanging over your head, but the earlier you get on it, the better. Way
better.

~~~
tptacek
I didn't even not file because of scary debt; I didn't file because I didn't
give a s---. And they didn't either. Something else is going on in this story.

~~~
cheez
Hang on, so they don't pile on penalties and interest?

~~~
Vivtek
Yes. About a factor of two. It's not going to kill you.

~~~
cheez
Hmm... Doing the math.. Nope, would still be too expensive :-/

------
joshu
> He agreed to start a company with Elbring and invest an initial $500,000
> through his trust — in installments, to ensure certain benchmarks were
> reached.

This kind of offer is generally a warning sign, btw.

~~~
geekfactor
Josh may have something entirely different in mind but it is a bit of a red
flag when an investor wants to tranche a small investment.

Part of the art of sizing your round is to do so in a such a way as to give
you a nice bit of running room, but it's much harder to run if you always have
to wonder whether there's a brick wall around the corner.

The investor is taking a certain amount of risk in making the investment. The
way to minimize that investment is to support the team, make intros, execute,
etc. Not dole out the cash a bit at a time like a crack dealer.

Also, the milestones are already built into the process. The seed round
provides enough cash to get you past the first set of milestones. The series A
enough to get you past the second. Etc.

~~~
joshu
No, you were correct.

(BTW: Joshua)

------
vaksel
1\. Jail over 24K in back taxes? That's insane

2\. Getting sentenced to a medium security prison? I mean really, this is a
big wtf...should have been light security...or better yet just house arrest

------
tomkarlo
Peripherally related: one thing I've learned is to never partner on a web site
with someone who doesn't have a lot (and I mean dozens, if not hundreds) of
people connected to him via sites such as LinkedIn or Facebook. If someone's
claiming to have been working on Internet projects for years, and can't
immediately point to a hundred or more people who are least willing to connect
with them on Linkedin or something, there's something deeply fishy.

A great question someone once told me for talking to a potential business
partner: "Who were your past business partners, and can I chat with them?
Also, how well did they do relative to you on those deals?" If someone tells
you that all his past business associates were crooks or liars, walk away.

~~~
lsc
now, I agree completely with your second paragraph. However, as for the first?
the problem is that the more 'connections' you have on social networking
sites, the more likely you just click 'accept' to all requests. A huge number
of my customers, for example, request to be a contact. I mean, I guess that's
somewhat legitimate, but if you pointed me at one of those random people
without access to my customer database? I wouldn't be able to tell you who
they were. I mean, I've had about 4000 customers (I mean, I don't currently
have that many, but over the last five years or so, I've had about 4000.) So,
I think < 100 contacts is fine, if the person is one of those folks who limits
contacts to people they actually know and remember.

~~~
tomkarlo
If someone's been in the industry for a decade (and wants to be an
entrepreneur), or went to school less than 10 years ago, I'd be hard pressed
to believe there's less than 100 people they know and remember who would want
to connect via LinkedIn, etc. I'm a pretty crappy networker and I don't add
connections on FB or LI to people I don't know, and I've still got over
1,000.... I don't think 100 is much to ask. And I'm not saying it's a
dealbreaker, just something that might mean you should investigate further.

(To give a more concrete example, I once realized that someone claimed to have
gone to a particular college, but didn't have a single person on either FB or
LinkedIn from that school in their friend lists. Doesn't that seem a bit
fishy?)

------
geekfactor
Like many who post here, I've often thought it would be cool to be able to go
to a "Founder Match" type of site to identify possible co-founders.

What's interesting to me is that at once, this article speaks both to why a
site like this SHOULD NEVER exist (you should really _know_ your co-founder)
but also why it REALLY MUST exist (some kind of reputation score could have
helped here).

~~~
redthrowaway
I could see someone like pg starting it as a sort of HN-like venture, with no
expectation of making money aside from making YC more prominent, but I can't
see it as a startup. How much would you have to charge in order to be
profitable? How big is your actual market? I just think it's a potentially
useful service that would be _very_ difficult to build a company on.

~~~
spinlock
At first blush, I'd say you have a very serious problem that you're trying to
solve. That's always a good place for a startup to begin. In this one example,
millions of dollars were lost and one founder did time in jail and is hundreds
of thousands in debt. Hind-sight being 20/20, I'm sure these guys would pay
$10k to avoid this mess (not to mention going after the potential upside of
doing this business right).

The risk that I see is that the problem is a latent problem (i.e. one that
founders are not aware of) rather than a realized problem. So, the people who
understand your value proposition are already ruined and don't have the cash
to pay you and the ones who have the cash and need your service don't know
that they need your service.

~~~
redthrowaway
Chicken and the egg. If you've got 10k in cash lying around, you've probably
already found a cofounder and got funded. Even the people who save up before
launching a startup aren't going to want to part with 10k just to find a
cofounder, regardless of how good an investment 10k for the right cofounder
may end up being.

The immediate problem of how to match people is also non-trivial. Reputation
doesn't really work in the startup field, unless you're matching serial
entrepreneurs, who probably don't need your service.

It's a real problem, and it'd be great if someone could solve it, but I just
don't see a business in it. I'd be happy to be proved wrong, however.

------
Vivtek
I can't even read this. It radiates tawdriness.

------
spinlock
Also, why you need to be _very_ careful when filing tax returns. A good
accountant is a god-send.

~~~
ahi
I don't really disagree, but in any other circumstance $24k in back taxes
won't see the inside of a courtroom let alone lead to jail time. The IRS will
typically just send a bill with some penalties and interest tacked on. The US
Attorney realized he got pulled into the middle of a clusterfuck a little late
and Elbring paid the price for pissing off well-connected people.

------
ahi
May this article give the attorneys at Lewis Rice many headaches. If I'm
general counsel with a relationship to Lewis Rice I think I'd be looking for
outside counsel that wasn't going to sell me out when I'm a little
inconvenient.

