
How My Startup Got Robbed - Semetric
http://torgronsund.com/2013/01/07/cofounders-and-thieves/
======
Swannie
"Several consultations and meetings later, however, the company’s board faced
a dilemma. We had to make a decision. The costs of pursuing the case would
simply exceed any compensation from winning it. So, should we then pursue the
case?"

Maybe I don't know how your countries legal system works, but surely the cost
is borne by the state? I assume then you mean the cost of the time you would
need to spend to support law enforcement? But the thing is, now you:

a) can't name this fellow,

b) if someone does a background check of him and his father in the future,
they will not find this

c) his father, a layer (?!), stands a lose a LOT if this really is true, and
would probably be smart enough to settle this ASAP,

d) if a customer had not paid, you'd probably consider writing off that as a
bad debt, but still possibly engage a collection agency to attempt to recover
the debt - you would only get a fraction of it, but you'd get some. You might
have found a willing law firm to pursue the case, in return for a % of the
settlement/award.

e) assuming a successful prosecution, most countries would block this young
man from being a director of a company for a LONG time - that should be enough
reason to follow through alone

I understand it's expensive but I, for one, feel that you have a moral
obligation to take the evidence to the correct authorities, and let them make
the decision on whether they have a case and to proceed or not.

~~~
mseebach
The site is down, so I'm working from inference - but robbery is a violent
crime. Theft is a non-violent crime. Both are matters for the police, not
civil litigation.

Since it's up to the board to decide to pursue the case, it sounds like it's
neither - probably some sort of breach of contract we're looking at, which is
bad enough, but not robbery.

------
X-Istence
I was involved in a company in which one of the co-founders used the company
debit card as his personal card to purchase food, snacks from vending
machines, gas and groceries. He ended up spending almost half of the money we
had made from contracts and equity we had put in and refused to pay it back.

We had a choice here, we could have taken it to the police, we could have used
the law to our advantage because technically he was embezzling. Instead myself
and the other co-founders called for a board meeting, we sat him down and
talked to him. We considered his misappropriation of the funds ground enough
to fire him from the board/company and considered the money taken to be more
than enough compensation for his share of the company (to which he agreed), in
return we wouldn't pursue him. This worked out for the better for all of us,
since it meant we didn't have to spend time and money on a lawyer/court case
and he could walk away without any penalties.

We had him sign a document stating that he no longer held any interest in the
company (we had already long deactivated any and all accounts he had on the
company network/services and his access to the bank account) and let it go.

Every so often I will still get calls from people looking for references (his
name can still be found on Google to be associated with this company), and I
will simply state that I have worked with him the past, and he was let go.

Unfortunately due to various reasons it never really did work out and the
company fell apart. We made some money, I learned a boat-load and had my first
failure. We were trying to bootstrap the company ourselves, so the only thing
lost was the equity we all put in to start the company.

~~~
sbarre
Wow, I'm actually in the middle of exactly the same situation right now
(significant untracked and unauthorized personal spending by a co-founder),
except I don't have a board, it's just me and the other co-founder.. We tried
to work things out together to balance everything, but I finally gave up out
of frustration and hired a lawyer.. Something I should have done from the
start..

I'm going the opposite route though, and forcing him to buy me out of the
company instead (with the alternative resolution being litigation against
him), so he can keep the mess he created, and I'll get out of the liability
and get a lump sum payment on the way out..

~~~
X-Istence
The biggest mess was for our accountant/taxes for the IRS, but that was all
resolved.

------
jaredstenquist
It sounds like a lot of obvious mistakes were made here. #1 on my list would
be to never give direct access to the company's bank account if possible, and
definitely not without limits. There should be 1 or 2 names on it max.

What has personally worked for me is providing company credit cards with a max
limit of $25k to anyone who actually needs to be actively spending. Right now
that's head of tech, head of marketing and CEO. My company is larger and
spends quite a bit. If you are bootstrapping or have done an angel round,
perhaps this number should be $5k or $10k. Either way, the important part is
the limit.

As far as withdrawals go, a 2-signer system on all checks is a no-brainer,
though in this case it sounds like an in-person withdrawal from a branch is
what got you. I would check with your bank to see if they can setup a similar
system for withdrawals over $X. I've worked with Silicon Valley Bank and they
are super flexible to any of these custom needs.

Best of luck with getting back up after this. These are the kinds of events
that you need to creatively persevere through.

~~~
Cthulhu_
> There should be 1 or 2 names on it max.

The founder and co-founder's? Couldn't resist, :+)

------
_k
I worked with a company where there were 2 founders and one of them told the
other guy he would like to retire so he got bought out. He was still working
for the company while the other guy went on vacation. 2 weeks later he came
back, not a single one of all the orders was finished and he had introduced
his new company to all customers.

In the months leading up to all this, the "evil" partner had bought an exact
copy of all the machinery and software.

It was illegal what that guy had done and he was at risk of doing some time in
jail. They eventually settled for a price that was way too low because the
victim was tired of it, he couldn't stop thinking about it, he couldn't sleep,
he wanted it to stop.

Here's the kicker. The evil partner had done it 2 times before and his latest
victim knew about it when they founded the company, but figured it wouldn't
happen again because the evil guy was close to retirement.

Lesson learned ? I don't know. Trust your gut ?

~~~
oz
_"Lesson learned ? I don't know. Trust your gut ?"_

The lesson to be learned is that the biggest predictor of what someone _will
do_ is what they _have done_.

This doesn't only apply when dealing with others, but also with yourself. I've
gotten quite good at recognizing when I'm bullshitting myself about something
that I will do, and often now find myself saying, "Yeah Oz, but that's what
you said last time. What's different this time?" When I don't have a good
answer, I know I need to take a different approach.

Sebastian Marshall (HN:lionhearted) said it best. "Track records don't lie."

------
diziet
It doesn't sound like the person in question was actually a co-founder this
just seems a bit too sensational:

 _My co-founder didn’t have any formal position or rights at the company at
the time. Despite several attempts at formally hiring him, he had insisted on
not being employed. Rather, he wanted to function as a board member and a
contractor._

Co-founders are generally there right from the start (or very close) and don't
become contractors -- they hold equity and are deeply committed to the success
of the company. Also, I'd not been able to find any references to a 'co-
founder' in a search, and given that LingoSocial has a lot of mentions, it
seems unlikely that all traces have been scourged.

------
zyc
Wow.. I personally know the co-founder, and his story is pretty much the
oposite of this.

~~~
aneth4
Perhaps he should identify himself and elaborate.

~~~
zyc
Talked to him, and he pretty much laughed at this, but he cba commenting.
However he is one of my best friends, and he has told me this story a few
times.

He, lets call him Mr X. Created a software product which got quite popular and
started making money, so he decided to start a company with this guy (Tor).
Tor isn't a computer engineer, he is just an entrepeneur who like making
companies or something. Anyway, they recieve some money from the norwegian
governement through something called Innovation Norway. They both keep working
in the company, but in separate offices, so none of them knew what the other
was doing. Mr X keeps coding on the product, and Tor does something else (Mr X
isn't really sure what). After some time, Mr X checks the bank account and
notices that almost all the money they recieved from the Innovation Norway is
gone. Thats when he makes the statement "give me 30 per cent of the companies
cash", because he wanted out. Mr X had done all the work, Tor handled
finances, Mr X realizes he can't trust Tor, so he wants his share and leave.

Long time since I've heard the story (happened like 4-5 years ago), so
probably don't got all the details.

Just had to post this since Mr X wouldn't.

TL;DR

\- Co-founder (Mr X) created a product

\- Starts company with this guy

\- Mr X does the product dev. This guy does the business part (I assume this
also include finances)

\- This guy takes money

\- Mr X found out, and wants to bail with half the money left

~~~
socialist_coder
1) Mr X jumped into bed with Tor without either of them doing their due
diligence

2) Mr X and Tor failed to set proper expectations for what they would be doing

3) neither of them opened up a channel of discussion when things were not
going as they expected

A good lesson.

~~~
Rulero
You absolutely nailed it... and you made me laugh :)

------
JackFr
I imagine there is another side to this story. This doesn't seem to be the
full picture.

~~~
rgbrenner
it doesn't help that he keeps calling him a cofounder, when he says the guy
made it clear he wanted to be a consultant + board member. If your cofounder
is charging you by the hour, he's not a cofounder.

~~~
alexkus
It sounds like he wanted to collect his remuneration by invoicing as a
contractor rather than being made an employee. It can be quite 'tax efficient'
to do this if you don't need the cash straight away.

(In the UK at least) being a director is quite separate from being an
employee. I'm a director of two companies but employed by neither.

~~~
rgbrenner
It's the same way here in the US. Board members aren't employees.. the company
isn't even required to compensate them for serving on the board.

------
colinplamondon
How much money was at stake here? How many actual employees? It sounds like it
was you, a friend, and his dad trying out a startup that didn't work, from the
way the post was written.

------
harel
One thing the Internet taught me is to never pass judgement on a one sided
story. I'd love to hear the other side from the horse's mouth

------
kami8845
If any of this is true then you should at least make this blog post the #1
result on google for their names. So at least future parties they're involved
with stand less of a chance of getting fucked.

------
argumentum
I am undergoing a very similar experience, I don't think it is wrong to name
the parties involved. It would be a benefit to your local community. In the
USA at least, you don't have to worry about "libel" or "defamation" as the
burden of proof is on the plaintiff.

~~~
rprasad
European Libel laws are much more...liberal than they are in the US.
Frequently, truth is _not_ a defense to libel as it is in the U.S. In much of
Europe, the primary element is that the defendant suffer harm to his
reputation. See, for example, the British aristocrat who was truthfully outed
as a Nazi sex fetishist...but won a judgement against the tabloid that
published the pictures.

~~~
timthorn
He was outed as a sex fetishist. The libel action was brought over the Nazi
label, and the judge found there was no evidence of a Nazi theme. If the judge
had found there was a Nazi theme, then the libel action would have failed -
truth is a defence. <http://news.bbc.co.uk/1/hi/uk/7527319.stm>

~~~
rprasad
Yep, you're right. I mixed up the libel action with the invasion of privacy
action. Truth is a defense to the libel claim but not to invasion of privacy.
For IOP, truth is an element in newsworthiness, which can be a defense to IOP.
(See eg <http://www.lse.ac.uk/collections/law/news/libel.pdf> for a long
boring legal discussion.)

------
shocks
A guy stole half of your money and you decided not to do anything about it?

D:

------
kevinprince
Not 100% but assuming this is a US company, isn't this a criminal act? Also if
it's as much money as it sounds surely its a felony.

~~~
jeltz
The website is down currently but if it really is money which was embezzled
from a bank account then I agree. You do not need to sue the guy. Embezzlement
and theft are both crimes in most jurisdictions so the police can handle the
case for you.

EDIT: Seems they were aware it was a crime and just did not want the hassle of
appearing in court when they were busy with the company.

------
jacques_chester
An ordinary suburban accountant can give you good advice about the basics of
cash control.

That the _director of the board_ had access to the accounts boggles my mind.
Board members are not management, they shouldn't have this kind of access.

Also, if you've kicked someone out in a dispute over cash ... get on the phone
at 8am and _lock them out of your accounts_. Or get onto the internet banking
admin screen (you know where that is, right?) and _lock them out of your
accounts_.

------
rmrfrmrf
While you don't announce it in your blog, I certainly hope you're giving your
local startup community a heads-up about this guy (and the board director).

~~~
ZoFreX
I would be extremely wary about taking someone's word that someone else did
something criminal, with zero evidence to back it up. What if this author has
lied to us and you then refuse to hire "this guy" based on those lies - I
imagine he would have a good case against you.

------
debacle
I'm getting HTTP 503s on this story.

~~~
paul-woolcock
[http://webcache.googleusercontent.com/search?q=cache%3Atorgr...](http://webcache.googleusercontent.com/search?q=cache%3Atorgronsund.com%2F2013%2F01%2F07%2Fcofounders-
and-thieves%2F&oq=cache%3Atorgronsund.com%2F2013%2F01%2F07%2Fcofounders-and-
thieves)

------
charlesjshort
Somebody has to figure out the name of the thief and post it!

~~~
ZoFreX
I figured it out! The name of the thief was "James Sanderson", whatever you do
do not start a company with this person.

And if I'd ended the post there, you might have actioned my advice.

It's terrible that this person has lost out, and more terrible that the person
that wronged them got away scott-free. That's not fair, it offends my sense of
fairness and justice, and even though I have no connection to the author I
would be happier if justice was served.

But what would be far more terrible is if someone else, completely innocent,
was caught in the cross-fire amongst our demands for justice. This could
happen lots of ways. Someone with all good intentions could make a mistake
when snooping, and post the wrong name (in this example, I used my own name).
At the other end of the goodness-of-intentions scale, the submitted post could
be a complete fabrication, designed especially for people to snoop out and
target a specific victim.

Acting based on the say-so of someone on the internet that someone else did
them wrong is a very bad idea: you have no reason to trust this person, and if
you do believe what you hear on the internet then whether or not justice
prevails comes down to which party submits their story to Hacker News first -
not ideal.

~~~
diziet
Where is the evidence? Searching for that person's name in quotes along with
either the author's name or the startup name does not seem to return any
evidence.

~~~
zbruhnke
clearly you only read the name not the entire post. the original commenter
mentions that it is his own name and was just pointing out that by doing
research you could post the wrong name and adversely affect someone who was
otherwise innocent.

~~~
blindhippo
I find it enlightening that the post was not read (which takes very little
effort to complete), YET google was opened up and queries commenced.

Not only that, but you were able to successfully determine that this was the
action that took place.

I do the same thing myself far too often - skim something quickly, pick a key
word and then google it myself out of context. Wonder how many things I
misinterpreted because of this behavior.

~~~
ZoFreX
> I find it enlightening that the post was not read (which takes very little
> effort to complete), YET google was opened up and queries commenced.

This is exactly what terrifies me when the mob starts baying for personal
information. I've seen it go wrong too many times now (personally I think HN
should follow Reddit's example and add a rule about posting personal
information)

------
joering2
can somebody point me to some good examples of co-founder/partnership legal
documents? preferrably free of charge and 100% tweakable of course :)

~~~
jacques_chester
Bunches and bunches come up on Google.

But really, it's a few hundred bucks to have a lawyer draft one that is
precisely configured to your requirements. With the added bonus that it will
be written to your local legal situation, which generic templates can't be.

------
codegeek
Site is crashing. Anyone has a cached link ?

~~~
drubio
[http://webcache.googleusercontent.com/search?q=cache:torgron...](http://webcache.googleusercontent.com/search?q=cache:torgronsund.com/2013/01/07/cofounders-
and-thieves/)

