For the uninitiated, Fundable was a site where you could input a dollar amount and accept donations towards that 'goal'. If the goal wasn't reached within a certain time period, the money was returned to the individual donors. If the goal was reached, the money was released to whoever initiated the campaign, minus a hefty 7% commission fee.
As far as I could tell (I used it back in 2007 but quickly jumped ship when I realized how rickety it was) it was pretty much a giant Paypal API with bad UX and even worse customer service.
(Disclaimer: I am in no way affiliated to this site, apart from liking a Java project the owner works on)
So for example, if you had a small neighborhood looking to fund the purchase of a $5,000 water well and they only raised $4,000, everyone who donated was supposed to get their money back.
(Also, TipIT doesn't seem to suck.)
Unfortunately, I suspect the answer is "no". As soon as you give one partner the ability to eject the other (for whatever reason), you open the door for all sorts of abuse. Besides which, if a partner wants to cause chaos and destruction, you're in for supreme nastiness, regardless of the legal situation.
So, at the end of the day, I think the best you can do is choose your business partners carefully, keep things above board, and do the best you can to behave morally and ethically. That way, even if things go to shit, hopefully you'll still be able to walk out with your head held high.
I'm sorry Fundable went out this way. Sounds ugly as hell.
If a partner is going through financial difficulty (outside of the company), then the partner with a better financial position can force a sale at a depressed valuation.
Say my mother has a massive stroke and requires expensive ongoing medical care. After a while, I'm financially drained. At that point, my partner can trigger the shotgun clause at an amount larger than my ability to scrape up cash, and wham I'm out. Out with a small payout, but out regardless.
There isn't a silver bullet to these kinds of issues. At the end of the day, people are involved, and people are complicated and difficult.
A horrible, Fundable.com meltdown should be, by far, a bigger fear than getting abused by a shotgun clause.
Even in the land of the do-over, I can't see how this won't destroy the confidence that investors would have in either party going forward. Your future is so very much more important than your ownership in a startup with a co-founder who has no qualms about ripping you off.
As you say, there is no legal solution to the problem of bad humans. But there's no legal solution to death or car accidents, either; what we have are legal measures to manage those risks, in the form of contracts of some kind.
A shotgun clause is a last-resort clause, and from its very nature, it appears to me that it would only be invoked when you would most want it to be invoked.
( disclaimer: mr_luc has no personal experience with shotgun clauses and may very well be talking out of a suboptimal orifice. )
Of course, I realize that theory does not always match reality.
51/49 split, or have 3 partners.
Both methods ensure you never end up with a stalemate.
Money has a funny way of ruining even the best of friendships.
Be careful. Do the right thing. Cover your bases to protect against either of you going crazy.
Team of 2: 1 programmer + 1 non-programmer = bad combination.
Maybe I'm a little old fashioned, but in a 2 person web startup, both should be programmers. I'm certainly not suggesting that this is what caused this situation, but it sure didn't help...
Since only one programmed, the probability of future difficulties increased dramatically, and once they did occur, he was the only one who could have dealt with them. A team approach probably would have been much better for technical problems, both preventing them and handling them.
This product didn't fail because there was only one programmer (heck I'm pretty sure digg started with obyrne and Kevin Rose). Fundable failed because it poorly managed itself.
A lot of successful partnerships had clear division of responsibility - often an "inside man" and an "outside man".
The inside man handles the employees, bookkeeping and systems. The outside man handles sales.
When two cooks are responsible for the same pot, there's trouble. And unwatched pots.
There are many variations on the good pattern - take McDonald's. Ray Kroc handled the franchisees and systems, while CEO Harry Sonneborn handled the money, real estata and investors.
Louis Helm programmed the the payment system.
Based on what was written, I'd be surprised if both "founders" aren't 18.
edit: googled, and found some photos(Pratt looks to be ~26, while the coder guy does indeed appear to be ~16:
You could also skim the article on the page with the photos and look for any biographical information...
The Fundable team is made up of Louis Helm and John Pratt.
Louis, Fundable’s software architect, studied Computer Science Engineering at the University of Michigan. He is co-author of the Seventeen or Bust distributed computing project (seventeenorbust.com), which recently discovered the largest known non-mersenne prime number with the help of 5000+ users. He worked as a software engineer at Jabil Circuits before leaving to work on Fundable full-time.
John graduated in Political Science at the University of Michigan last December, where he worked for the university’s paper as a photographer. He also studied at the University of Havana, Cuba in 2003. John programs, designs and writes documentation for Fundable’s pages.
16 sounds more likely.
It's just another risk and potential downside to partnering with someone in business. Everybody's done something at least a little bit crazy and out-of-character when a romantic relationship has hit the rocks. Maybe you did something innocent but pathetic like burning compilation CDs (i.e. Nick and Norah's Infinite Playlist). But we've all heard of the crazy girlfriend who dumps her (now ex-) boyfriend's stuff in front of the house after catching him cheating. Business partnerships aren't all that different. Really they involve the same levels of emotional attachment and passion.
It's important to try to assess the behaviours that a potential partner reverts to when under stress. For programmers, that might be shutting the world out and ignoring calls/emails rather than facing the music when there's a disagreement over deliverables. For non-programmer business-types, that might be writing and re-writing business plans and coming up with rather dreamy fantasy plans rather than actually getting deals done. These particular cases I think are the more common revertive behaviours (for lack of a known proper term) for programmers and business types. They're also behaviours that tend to drive the other party in such a partnership absolutely bonkers.
You definitely don't want someone who reverts to a temper tantrum like this guy from fundable. To be fair to him, this is most likely a sad case of both partners having individual meltdowns simultaneously.
Why does that make her crazy ?
I understand that this guy needed to blow off steam, but this is basically a trial-by-media attempt and a way to get back at someone. If you can't part well when things don't work you are not made for the startup scene.
seek legal action against Louis Helm personally
should he fail to resolve your payment issues promptly
if they were actually holding funds in a corporate account, and not just a front-end for paypal, they could be in a lot of trouble
This just sounds like a bad deal all the way around. If the two partners are as erratic as they now appear to be. I can't imagine that they were particularly fastidious when money was flowing in.
But then again I'm no lawyer
Companies like this can't thrive if the scales are not balanced in terms of ownership, labor, and results. Animosity and resentment brew and people get selfish and defensive and it all breaks down.
It appears that is what has happened in the fundable case. Perhaps the programmer did not feel like the business guy was pulling his weight. Maybe for him, the upside of working all the time and fixing all the bugs in the code and making the site reliable weren't worth whatever he was getting from the deal. Maybe he wanted the business guy to spend some money on more programmers or maybe the solution was more reliable infrastructure and it wasn't something the programmer could fix with more code.
Who knows. I just know that from the tone, it isn't good and lots of users of fundable are left in the dark now. Sad.
John was actually one of my college roommates, it's sad to see this come to an end like this.
But I definitely see a few lessons here:
1. The need to have performance/milestone based equity sharing vs blindly giving a person 50% based on their POTENTIAL.
2. The need to have a checks and balance system that places control of the domain/trademarks in hands other than the programmer or developers. That way the person controlling the domain can have some control, while the developer has other control (passwords, access). And a third party/person who may control the finances. (Domain/Trademarks/Copyrights)+technology+finances. Like the checks and balances of Legislative+Executive+Judicial systems.
3. The need to repair or remove faulty systems/people at the first signs of unreliability.
[Edited to add: Tipjoy. I knew it was T-something but I ran through about 15 combinations of Twit-X before realizing that it was not from that naming convention.]
BTW, Tipjoy never held the money; they were just a front-end for PayPal, so they didn't have the issues that Fundable apparently is having.
That does not match with my understanding of their business model.
Look for their instructions on, e.g., cashing out.
Communication is important in general, but vital in a start-up situation. If you're of a technical mindset and have a partner who is business minded, you two may have a significant communication barrier.
Any healthy partnership has enough overlap in terms of expertise that the ability of one partner to communicate to another using a language they understand.
Sometimes this takes a third partner who's somewhere in the middle and can intermediate and provide a more objective opinion when the other parties take opposing sides.
That being said, I'm sure there are start-ups where the founders do not have a lot of overlap, but I doubt they will succeed if they do not make the effort to find or create some common ground to have informed discussions on.
If you don't understand "business types", then perhaps it is responsible to not go into business with them. The "poor attitude part" may mean that you're not willing to make an effort to learn more about business, though.
When I commented, the link was to a rant about how the programmer screwed over the business with bad code.
Is there legal recourse either side can take to reclaim ownership and move on?
I know of this one company that decided to move their servers out of a collocation facility. The collocation facility hated to lose a good customer so they just locked the company out, disconnected the servers and did not let the company get to them. But they helpfully offered to reconnect the servers if only the company would sign another long term contract. The litigation took many years, so the data on the servers was pretty much lost for all practical purposes.
So yeah ... keep backups and keep them where you can get to them if the s hits the fan.
Regarding the domain name ... I suppose one person needs to have control of that, no way around that. Well, it is possible to set up a trust where an impartial party (such as an attorney or a professional trustee) controls the domain name according to a previous agreement between the founders, but if you have to resort to this, there is probably not enough trust to do a startup.
Am I the only one seeing a slight bit of irony there?
Comments #5, #13, #23, #25, #30 and #31 between Mr. Pratt and Cory Doctorow are the relevant bits. I'm sure there is lesson here about mega-blog PR.
Better to learn on others mistakes.