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Bootup Labs' Danny Robinson: "I made mistakes. I was wrong. Lessons Learned." (bootuplabs.com)
69 points by scg on Apr 22, 2010 | hide | past | web | favorite | 53 comments

Bootup Lab's reputation has still been badly damaged.

An entrepreneur's commitment and sacrifice to their business is very serious and they took a very nonchalant approach to handling this situation until the PR blew up.

Of course Danny is sorry now. I'm sure Bootup will continue to do fine with finding new startups since entrepreneurs in need of cash are always in high supply.

But competent entrepreneurs look for competent investors and the real test now is if Bootup labs is capable of getting/being either of those.

Obviously there were screw-ups. But it's possible a major factor was someone else fell through on their investment commitment to Bootup Labs. They hinted at that, though quite rightly Bootup hasn't specifically named who fell through on them. They've taken the hit themselves. Depending on what the inside story is, some might respect them for that.

When trying to make something new happen, you almost have to express preemptive confidence, and gloss over some of the caveats applying to outlier possibilities. You say, "We have the investors all lined up", not "We have the investors all lined up, as long as the people I believe are solidly reliable remain reliable". 99 times out of 100, avoiding such pedantic qualifications helps the joint effort. Sometimes it blows up. Here it blew up, and then slow communication made it worse, but such mistakes happen among the ever-hopeful.

And the first thing they said was : "you must be grateful for all we did to you". Screw them

Jamie Martin: "I just wanted to add that I have no hard feelings for Bootup Labs, for Danny, Boris, or anybody we met, I don’t think it’s anything intentional they did. But there are lessons to be learned from what happened from our situation."

Funny and sad that the commenter lynch mob has a lot more righteous anger -- "Screw them" -- than the people actually involved.

I think he's highly professional in his stance, if I were him and I were angry I wouldn't let it show publicly either.

The rest of us don't have anything to lose here, having an investor bail out that far in to a deal is as good as being shot down, there is no way they could have survived it. Also, your sample size is just one individual out of all the founders that got axed, so not 'people', but person.

How the rest of them feel is any body's guess.

We, collectively can put a fair amount of pressure on boot-out labs, more than Jamie could at this point in time, he hasn't got the money to sue them (I'm fairly sure he'd have a case), but even if he had the money to sue them it won't look good on your future resume if you go and sue a former investor.

The right way to handle this would have been to reverse the deal and to compensate all those wronged by it, there are plenty of ways that could have been done.

We know how at least one of the other booted founders feels, and he suggests he understood there was always a risk the money wouldn't come through:


The 'deal' was reversed in that no equity was requested even though some material assistance was provided. If hypothetically a startup was willing and able to continue in Vancouver even without the foreseen investment, the whole episode could have still been net-positive. If the startup was derailed by the detour to Vancouver (as appears to be the Status.ly situation), the whole episode appears net-negative.

If there's not enough cash to make the full investment, and already ~$10K or more has been spent on the companies released from the program, what's the additional 'compensation' amount that would be fair? Airfare back home? Some hypothetical opportunity cost that was forgone based on their hopes in Vancouver?

Jamie might have a legal case but if there's one email where BL reports, and Jamie acknowledges, that the funding is still pending and conditional on other uncertain factors, that case could be shot.

I think the blog posting (the mea culpa) was carefully crafted to avoid taking a stance that could cost them money, but I think it is crystal clear that if the situation had been outlined beforehand (that the money was not on hand) that they would have never made the move.

That's called pre-contractual information, which is supposed to be given freely so the other party realizes the risk. They did nothing to warn them the money was not available at all, and might never become available.

In a court case that would probably have 'legs', even if getting to a judgment would probably cost more than it's worth, and they seem to bank on that not happening. But there are more ways to skin a cat and the internet is a great place to put such things to right.

The way out is to compensate them for the expenses they made that they would not have made if they would have been properly informed beforehand, so that includes the funds to re-locate back to where ever they came from and a sum of several thousand dollars to get started again.

Figure another 5 to 10 grand per founder and you should call it quits and consider the matter settled as good as possible given the circumstances.

If they don't have the cash they could do an iou redeemable a year from now, or when they take on their next round of funding.

You break it, you own it, and a real 'sorry' includes compensation.

We agree about the one email, if that exists it's a different story, but then I think that mea culpa would never have been written, clearly there is a party at fault here, by their own admission.

While it might be looking funny to you I truly feel for the Status.ly founders (and others screwed). Having burn myself all my savings in the past I know what it takes to start over again. And hearing how these guys at bootuplabs have first helped it happen and then made this sound like it isn't a big deal makes me want to scream.

This is just damage control, nothing else.

Bootuplabs have egg all over their faces and pretty much deserve to be ignored by any serious startup.

An apology doesn't go far enough, if half of what I read about this is true they should send those guys some money to cover the costs they made to move to Vancouver. The thing they're probably really sorry about is that it got as much play as it did, I don't think they expected a not-so-spectacular startup to get that kind of PR on being axed, more so than they probably would have gotten during a launch.

Danny, Words whisper, Actions scream. In order to combat this situation, offer the cut teams tangible help. And, don't let it be something like:" If I could help in anyway!" Jesus Christ man, you already know how you could help; these guys need money. Use your connects to link them with some angel investors/ VC.

After, this am sure everyone would forgive and applaud you. And the publicity and the goodwill gained goes a long way. It is just too easy to say am sorry.

But will this guys take the money now, or even trust anyone connected with them?

Well, at least they can say they did their best to help. Currently, I don't think they aren't going all out to help these guys.

You're right! I will continue to work with everyone involved. Another accelerator was interested in possibly taking Status.ly in for their summer program, and I let Jamie know.

Your equivocal words aren't going to help-"Possibly". And, they don't need the money couple months from now; they need it now.

I think at this point Danny has learned his lesson about not promising more than he can deliver. If he was contacted by another accelerator which said that they might be interested in taking Status.ly, he's exactly right to say "possibly".

My point was to get something more solid.

So, how about you pull your checkbook and compensate those guys for ripping their lives up on your promise?

That seems to be the least you should do, given that you've 'seen the light' and realize how badly you f'd up.

Seriously. I have a hard time believing that anyone who can found a startup incubator can't afford to give at least a couple grand to each of the founders that got nixed. It's the least you could do; compensate for airfare home and give them something to use for housing, food, and other necessities while they try to figure out how to support themselves going forward.

I don't know what the contracts said and I'm sure they were very one-sided, as usual, but this should serve as a lesson to startups that they shouldn't get on without proper legal protections in place.

As Danny says, Bootup Labs has a long road ahead of them to regain the community's trust. I'm willing to give them that chance.

At this point, I certainly couldn't recommend that a startup from outside of Vancouver move here to work with Bootup Labs, but for a startup in Vancouver -- treading carefully and making sure that money is in the bank and that legal agreements don't say anything evil -- I think Bootup Labs might still be an option.

And if Bootup Labs has a few years of success stories, well, that might just redeem them.

Being associated with Bootup labs as a venture they've invested in may actually be a negative for a while.

A second round investor may think twice before entering into a partnership where bootup labs is already present.

As long as Bootup Labs is a silent investor (and AFAIK they don't take board seats), why would future investors care?

The investment world is pretty small, especially in Canada.

Getting an investment from a company that is second rate immediately qualifies a startup as second rate, as though you've tried the more serious outfits and finally had to resort to 'plan b'.

Just like having kpcb (I know they're not Canadian, and not exactly angel investors, just to illustrate the point) on board is an automatic stamp of approval, the reverse also holds true. If I were on board of one of their other investments I'd definitely be concerned about the effect for follow up rounds. It's not just your company that matters, but also the company you keep.

Getting an investment from a company that is second rate immediately qualifies a startup as second rate [...]

Interesting -- so really it's just a signaling exercise. That makes sense, given how poor investors are at directly measuring quality.

Thanks for the explanation! One of the things I appreciate most about HN is the willingness of experienced people to provide this sort of insight to us newbies. :-)

I detect a note of cynicism there.

Some investors are much better than others at judging the quality of the companies they are looking at, but plenty of them are looking at being the 'second' firm to invest after a 'name' is on board, since that dramatically increases the chances of success of that company. Of course every VC dreams of discovering that unknown nugget, but sadly there are plenty that are not able to separate the wheat from the chaff on their own power, so they look to others as a source of guidance. That's also why you'll see a slew of 'copycat' companies getting investment if a company in a certain league grows big. For instance, when Youtube exploded on to the scene there was a flurry of similar offerings backed by a very wide range of VCs, all of them trying to get a slice of the pie after the concept was proven. Some of those would have turned down youtube if it had been offered to them only a few months earlier.

Take Y combinator as an example. If a startup with a crappy product is invested in by Y combinator versus some unknown angel investing in a fantastic product then when shopping for a second round simply having Y combinator on board will open lots of doors and will probably lead to a quick second round at a fair valuation even if the product was bad and a quick and violent ending for the start up that was funded by an unknown. Having a great product and a great team is unfortunately not enough to always secure funding, having a partner with name recognition on board significantly increases your chances. Even if in that scenario Y combinator would not be 'working the network' on your behalf.

Having your wealthy great uncle as an investor will not do much in this respect.

This is sad but really true. Ideally every company should be investigated and judged on its merits, but the number of deals presented to some groups leads to weird shortcuts like this. And it would be even sadder if that meant they miss out on great opportunities, the fact is though that it even works. It is a self fulfilling prophesy, some 'name' is already in, company gets round 2, maybe scores big in the longer term vs company does not get round 2 and dies.

Looking back the VC that didn't go with the company that died will feel they made the right decision.

you'll see a slew of 'copycat' companies getting investment if a company in a certain league grows big

This is why I'm a cynic -- you don't even need a company to get big, you just need the field to be "hot". Back in 2000 I was cold-called by two VCs wanting to invest in my work on distributed computing (I had recently announced the computation of the quadrillionth bit of Pi).

They were interested for no reason beyond the fact that everybody else was interested in the field. I told them that there was no workable business model and that I wouldn't take their money under such conditions -- so they went and gave their money to someone who was willing to ignore reality in order to justify taking the money.

About $100M went into that field in 2000, and none of it came back out. Such a horrible waste.

It happens all the time.

Ideally venture capital (and especially angels) is a force that helps creative people realize their dreams in return for a realistic premium associated with the risks.

They should help with guidance and their expertise to maximize the chances of those dreams becoming a reality, and should use their portfolio to balance the risks between existing money making (and thus now lower risk) ventures and newer high risk early stage ventures.

In practice venture capital all too often distorts the market, creates unrealistic expectations (both for founders, the public and partners alike) and is 'penny wise and pound foolish' when it comes to evaluating new ideas.

Our host is - unfortunately - in this respect, imo not that much different than the rest, even if they do get the mentoring and assistance factor (far) better than most, there is not a single investment in the current batch that I would call worthy of the 'V' in VC, they're pretty safe bets, if they fail they'll fail quickly and if they're going to take off they won't fly too far. The scope of most of those projects is simply far too limited.

It's all about the batting averages, and that's essentially what these small funds are all trying to do, to show a good track record of managing their portfolio in the hopes of landing one that hits it out of the park, more likely than not due to a pivot.

By increasing the dealflow they're playing 'scratch lottery' instead of a strategy game in the casino, statistically speaking if you keep at this long enough sooner or later you recoup your losses with a healthy profit margin and you can continue to play until you score big.

The one nightmare I have is being unfunded, healthy and growing and suddenly getting a copycat me-too project with VC backing and a bunch of inexperienced cowboys in the same space.

That can really ruin your day, and possibly much more than that.

Back in 1997 or so, the real beginning of the .com bubble there was this great cartoon in a newspaper here, it pictured a train with tons of guys in suits, pockets bulging with money trying to get on board. The train was clearly labeled 'Internet', and a reporter was asking one of the guys the question where they were going. The answer: "No idea, but we really don't want to miss this train".

The one nightmare I have is being unfunded, healthy and growing and suddenly getting a copycat me-too project with VC backing and a bunch of inexperienced cowboys in the same space.

I had that nightmare too, until I realized something: Online backup is hard to do right. If you don't know what you're doing, you fail spectacularly.

I don't worry about the inexperienced cowboys any more. They'll fail sooner or later.

And that's indeed exactly what happened at some point in my past, only not with online backup.

The investors in the competitor were actually very gracious about it and did a lot to make up for the damage they caused me, which they really were not obliged to do. Interesting how that played out, we still exchange Christmas cards 12 years later.

Focus on the hard stuff, let the cowboys fail and just keep plodding away and you'll be successful somehow. But they can destroy your market for you by giving the whole field a bad name and they can mess up the timing to the point that you miss out on something substantially bigger.

I don't think proceeding without "money in the bank" is THAT unusual for startups. There is a certain minimum buffer, but once an investor signs up, and paperwork/etc. is executed, most people would go ahead with signing leases for buildings, hiring, etc. with even only a few months more of cash on hand.

Maybe you don't want your incubator/investor to behave like a startup, though.

I think it's pretty easy to take shots from the sidelines. It's fairly obvious that the vast majority of you guys know very little about the start-up environment in Vancouver. We need guys like Danny and Bootup to take some risks in order to develop our ecosystem.

In this case, an error resulted. They didn't want that to happen, but it happened. Crucifying these guys after the fact helps no one.

If there's value in Status.ly, either someone else will step in and fund it or someone will buy it.

Entrepreneurial risk takes many forms.

As for the "slick PR messaging", you guys obviously don't know Danny.

Bootup needs to act like a grown up.

1. Don't intake companies until financing is in the bank. 2. Have agreements for all intake companies before they start. A term sheet is not binding, and frankly, should only be used to reflect the business points in the agreement. Don't rely on it. 3. Recognize that they are dealing with unsophisticated entrepreneurs. Don't try to bullshit them with big words like "capital call." Help them help themselves. 4. Get more people on the board that understand investing. The principals are nice guys, but they are not bankable in the investing world. They need two more people like Boris Wertz on the board, not hide behind some bullshit advisory board. 5. The principals should take finance lessons.

Anyone got a good round up of what happened? The post provided links to parts of the previous conversation but I'd rather read a good article summing everything up.

Here's the summary as I understand it.

Bootup Labs accepted 7 startups into its program this January. The proprietors of these startups agreed and finalized the paperwork and moved up to Vancouver to participate. They were told shortly after arrival that there may be some hiccups with the funding but not to worry and they'd get it all straightened out.

In the meantime, Bootup Labs paid the living expenses for at least some of the startups but the capital never materialized. In March, Bootup Labs had secured new investors, but the investment wasn't enough to keep all seven startups alive. They cut four of the seven loose just like that, with no money to help make their way back to their places of origin, no capital invested, and nothing more than a "Thanks for trying, sorry about this."

Status.ly proprietor Jamie Something wrote a post about it and the thing kind of blew up.

Again, that's the story as I understand it. All corrections are welcome.

nothing more than a "Thanks for trying, sorry about this."

Actually, they got a request that they be grateful that they received some minor expenses, and some whinging that BUL paid some money but didn't receive a finished product.

"Sorry about this" would've been nigh infinitely better, as it would've shown some understanding of the value proposition as viewed by the entrepreneur.

This kind of thing really makes me sick. At the very least we should see an offer of monetary help for the startups that were dropped. Ie he should help out the people he financially hurt even though they dont matter to him anymore. That action would win him points and get him on the way to regaining his credibility.

Looks like statusly is for sale. http://statuslyforsale.tumblr.com/

The post that talks about this: http://livejamie.com/post/522093261/booted-out-of-bootup-lab...

He failed but he didn't fail fast. :) but the important thing is he learned a lesson and wrote about it.

Ehm, what!? The important thing isn't that he "learned a lesson". His actions had real consequences, and an apology (sincere as it may be) does not absolve him. Not in the least.

It's doubtful he's really changed, because he apparently needed advise from many people to figure out that his actions were far from honorable. For all we know he's simply in damage-control mode. Especially to sum it up as "Made a mistake. Lesson learned." (post title) strikes me as especially glib. An apology is now in his best interest, so of course he's going to apologize. It's not as if he has a choice.

That said, I do believe he feels bad about the situation, and I think the apology is sincere. But I also think that his original actions were scummy, and that his instinctive reaction (cover up / hope it blows over / attacking victim on internet) shows his character. And people don't really change overnight, so he's still that kind of guy.

So the important lesson, if there is one, is to stay away from bootuplabs.

Too little, too late.

Its never too late to stand up and admit your mistakes.

Indeed. Normally when a person or company makes a highly visible mistake they make sure it doesn't happen again. I think that Danny's defensiveness was a lot of what fueled the bad PR, since it drove expectations that this could happen again. An explicit commitment that it won't is a big improvement and exactly what was needed.

True, though the impact is somewhat tempered when only done to save your own skin.

Too True, and the apology was professionally written/reviewed by a PR expert with crisis management experience. Anyone wanting to start a business here is so naive they can't discern fact from fiction. Given the young age and limited experience of most of the entrepreneurs this is like fishing in a barrel. Be smart, act on facts, not fiction.

Whoa, I would not like to be this guy right now.

Though it does not help Jamie now, it indeed sounds a honest apology (especially #3). Glad to see that Jason.

"Never ascribe to malice that which is adequately explained by incompetence" - Napoleon Bonaparte.

Would this scenario have broken laws in the US?

Why is this guy any more trustworthy today after issuing an artfully written apology, that was clealry crafted by a PR professional skilled in crisis management communications?

Don't forget, "actions speak louder than words." Startups do yourself a big favour and steer clear of this underfunded, unprofessional slow motion train wreck.

I love it when the shady and duplicitous finally realize they can no longer hide the facts and then apologize as a last resort.

I think this is a tricky situation. Lets say for the sake of argument that they honestly handled the situation _unbelievably_ wrong as opposed to being deliberately shady. They realized, right before the blog post, they needed to communicate better with everyone.

How differently should they have handled it other than what they wrote in the blog post?

I should acknowledge that my knowledge about the situation is only as deep as this blog post and the post they replied to. No knowledge about their past reputation.

For starters they could offer to compensate those wrongfully booted out because of their failure for costs incurred.

That would go a long way to showing they really care about them, instead of just about their own reputation.

I see this as a salvaging operation, probably at the instigation of the new investor they've found, a way to use the fact that they are in the spotlight to do a cheap 'mea culpa' while getting as much mileage out of it for their own shop. There is no such thing as 'bad publicity', especially not if you can spin it to your advantage by showing what an upstanding guy you are by apologizing in public. But words are cheap.

Maybe I'm too cynical here, but really if they did anything over and beyond simply saying stuff I'd be a lot more convinced this is heartfelt.

I think sometimes people put on a show that they have resources that they do not have and think playing fast and loose with other people's careers is alright as it is only business.

This is irresponsible. And once discovered, we'd do well to not deal with such people.

I would not be overly strict about that, though. It would be ok, for example, to have them make license plates for you.

Human nature makes us want to forgive and forget. Donlt get sucked into this. Keep a lear head and select your incubator and mentors based on facts, not emotions.

Bootup sucked young entrepreneurs into their "cool clubhouse" mystique, when there was no substance or cash. The total funds raised by BUL in 2 years is insufficient for even one decent startup - how are they going to fund 11 or 12 companies in any viable way? Don't get sucked into the hype, stay clear of this bullsh*t.

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