Tech Crunch - which is becoming a F*ckedCompany.com 2.0 - adds yet one more company to the deadpool:
We introduced Spotplex in February 2007 as a potential Digg killer that served up popular stories by monitoring how many people read them. Somewhere along the way, it also turned into an Alexa-like analytics service. Unfortunately, neither market worked out for them and they’ve been forced to shut their doors.
CEO Doyon Kim says that Spotflex’s ultimate failure was due to a lack of adequate funding. Spotplex’s developers underestimated the resources that were required to build and maintain their service, and they neglected to seek venture funding after their $450,000 seed round.
Which got me thinking:
If you had to choose between
a) a company that is kicking ass operationally but financially had little to no capital
OR
b) a company that had oodles of capital in the bank but operationally was not gaining traction… what would you pick?
Feel free to chime in.
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WatchMojo NewsletterEditor’s note: this week we commemorate the 2-year anniversary of the lawsuit that almost killed Mojo Supreme back in May 2006.
So two years ago right now, I had come to grips with the reality that my former partners had declared war on me and used the weight of their parent company to try to crush me [see the details here].
When Diplomacy Fails, It’s Time for War
Diplomacy was not an option any more, I had to fight war back the next day at the courthouse. But, seeing how I was the little guy who could not match the spending of a multi-million dollar company backed by a multi-billion corporation, I had to maintain a cordial tone throughout the ordeal because invariably, they would have to drop the case for me to walk away with any semblance of a victory.
In fact, while IGN and Askmen were teaming up to destroy me, I knew that News Corp. had very little idea of what was going on, nor did they care. I could be wrong on this point, but News Corp. is the biggest media company in the world; I was running a company that had made $200 in revenues at the time. Ultimately, I knew that I had to wedge a line between Askmen and IGN, and then, between IGN and News Corp. But that was the long-term game plan. Short-term, I had bigger things to worry about:
I had no idea how to get through the next day and frankly, I had no clue what the next day held for me.
Out of Your Element
By 11pm on May 9th 2006, I had read the thousands of pages of affidavits, gone through the hundreds of screen grabs and began to come up with a line of defense. A part of me actually welcomed the experience, so to speak.
Bear in mind, I’d gotten served papers at around noon that day, spoken to lawyers and decided to represent myself the next day at 9am. Despite my confidence, a part of me felt like a dead man walking.
It would have been really simple to walk into court and say “ok I give up” but reading the paperwork made me realize that it wasn’t a business decision to come after me, it was a personal decision to make an example out of me.
In the face of such a thing, I knew I had to show strength. I really did not know if I had such strength in me; I would find out over the next days.
In fact, I was trying to exude a cool and calm confidence but I was nervous, no doubt. I am not sure if I can say that I was scared… because I did not even know what to expect. I had absolutely no training as a lawyer and had no idea what to expect procedurally.
Overnight, it was literally as if I had been thrown into the operating room of a veterinary and asked to operate on a dog.
Anyway, throughout that afternoon, I’d analyzed injunctions a bit and frankly, I had a bad sense that this was the start of a never-ending nightmare.
By midnight, I drafted what I considered would be my defense outlining what I figured would lead to my innocence.
I also sheepishly gathered a barrage of documents and “appendix” examples. Honestly, imagine Mr. Bean being your lawyer.
I was certainly not prepared to step into court and take on lawyers from venerable Fasken Martineau… but that’s exactly what was awaiting me the next day at 9am.
It’s Always Personal
The one thing that I learned to do was master my emotions. I’d always been a very emotional person. But this experience forced me to change how I channeled those feelings.
Reading the material made things crystal clear: this was a highly personal and frivolous matter. In March when I got that initial threatening letter, I was unsure of who was leading this personal attack; after reading the material, it was clear.
There was no less than seven affidavits:
- Somewhat unsurprisingly, IGN CEO Mark Jung had not submitted one. It was both brilliant on his behalf because it kept his hands clean, but frankly, with all due respect, it was also very cowardly, for he had to authorize and finance the proceedings.
- IGN VP Dale Strang was the highest ranking office to attack me. That was odd since he was the one who had told me IGN might invest in my startup if I chose to leave their company and start my own. This was a bad career move because Strang is a career executive and the type of person I could one day recruit to run some of our company’s operations. He not only burned a bridge with me but ultimately risked his reputation within his company. This was poor judgment any way you diced it then, or look at it now. Strang’s decision was twice as odd, because he had basically moved from Ziff Davis to IGN (direct competitors) and was now accusing me of violating my non-compete, which every lawyer was saying I was not. But, I digress.
- Out of nowhere, IGN’s counsel Todd Murtha - whom I never met and could not distinguish from a squash - was also a willing collaborator. With him, I was baffled. Never met me, never crossed him; he didn’t have a clue as to what actually happened, yet gladly regurgitated the garbage he was asked to put his name next to.
- And of course, at the Askmen level, no less than five traitors lined up: President Ric Poupada was clearly the orchestrator of this personal attack - his signature pettiness all over the affidavits. I’ll spare the details. Following him were his lieutenants Chris Rovny-Bellerose and Luis Rodrigues, along with Armando Gomez and Ric’s brother Andre (who worked at the company with us).
Recall that scene in Seinfeld where Jerry and George are talking about NY Mets first basemen Keith Hernandez when Kramer walks in and says “I hate Keith Fernandez” and then moments later Newman echoes “I despise him”?
You get the idea.
From my vantage point, Poupada and Jung were behind this plot, but the difference between Jung and Poupada, frankly, is that I did not help make Jung wealthy beyond his wildest dreams. Askmen would still be selling penis enhancement systems were it not for the five years of service I - and the rest of the company, in fact - put in that shop.
From March 2001 to December 2005, I played a small part which led to big results: about $10M in sales and about 95% of the company’s sales. This was my thank you note.
All of that being said, at this time 2 years ago, I could not let these emotions take my focus away from the challenge that awaited me the next day when I would enter the biggest obstacle of my professional life.
What happened? Tune in tomorrow for Flashback - May 10th 2006: Judgment Day.
VentureBeat.com has an interesting rundown of people leaving the agency world for digital startups, as well as some free agents, namely: Shane Steele, David Verklin, Moshe Koyfman and Dave Morgan. Obviously some of these will start a company (such as Dave Morgan) whereas others will favor joining an existing company.
This begs the questions:
- What are some of the best companies to join these days?
- If you had to start a company now, what would that company be?
Interesting to see people still taking a crack at the incubator model. I’m not sure incubators work, mainly because people are complex creatures and egos of entrepreneurs are usually too big to fit under one roof…
But, I think I can make it work, not because I am special or anything… but because in Montreal, we can benefit from investment tax credits that give back 30-50% for IT work.
In fact, this is why venerable investment bank Morgan Stanley is investing up to $200 million and creating 500 jobs in 5 years in Montreal.
That’s right: we have some of the world’s best tax credits, which is great, because it makes up for the otherwise so-so investing community and general conservative mindset. What exasperates matters is that most successful entrepreneurs seem to get very risk averse after becoming successful.
After my old company got acquired, I could have retired… not because I had a big payoff (I was a minority shareholder), but because Montreal has such a low cost of living environment.
I joked that I was rich [by Montreal’s standards] but then I started WatchMojo.com and I no longer am. In all seriousness, however… Those tax credits are nationwide, but Montreal offers a lot more:
- a low cost of living environment,
- a talented pool of employees,
- multi-lingual employees that can chase global opportunities from the get-go
Tack on the fact that R&D and IT tax credits give back 30-50% back to investors right off the bat, I think an incubator could work here.
This is something I have talked to one group about… but I am not sure if people realize how much of an opportunity this is.
Anyway, how about this: I’ll also offer our audience and reach as sandboxes to promote these products, services and applications. We reach 99% of the online video universe right now in the US. No one can match that, as far as I can tell.
And, if that’s not enough, I will even handle finding a business model for them.
Any takers to send me a check to get such an incubator off the ground?
It is definitely interesting how blogs have changed corporate communications.
- eBay vs. Craigslist’s lawsuit? Craigslist is using their blog quite a bit.
- MSFT vs. YHOO acquisition? In addition to the press releases, YHOO has used their blog to get people on their side.
- a few weeks ago, Mowser founder talked about the company’s demise, and it helped him sell the company and find a new home.
That is pretty interesting.
Editor’s note: this week we commemorate the 2-year anniversary of the lawsuit that almost killed Mojo Supreme back in May 2006. This is Part 2.
Two years ago at around this time, 12pm EST, I heard a knock on the door.
Was it the mailman? The milkman? Was it Fartman? Nope. It was the bailiff, aka, badnewsman.
You’ve Been Served!
I was served with papers, lot of papers, from Fasken Martineau, a venerable and expensive law firm. Fasken Martineau was IGN Entertainment’s lawyers in Canada. IGN had bought my old employer Askmen, which was basically an online men’s magazine.
I can’t say I was 100% surprised, not because I was doing something wrong, but because two months earlier, in March, my former employer had sent me a letter warning me that I was - according to them - violating my non-competition agreement, which said I could not start “a men’s online magazine”.
In 2006 I started WatchMojo.com, but before that, I was a VP of Sales for AskMen, which was bought by IGN in June 2005. IGN Entertainment itself was acquired by News Corp. in September 2005.
As far as I knew, News Corp. had very little to do with the lawsuit. It was basically IGN and Askmen tag teaming to make an example out of me.
Technically, the paperwork read:
News Corp., Fox Interactive Media, IGN Entertainment and AskMen
vs.
6059350 Canada Inc., and Ashkan Karbasfrooshan.
Yep, you read that right. It was wild. 6059350 Canada Inc. was a company I set up back in 2003 when I launched my radio career and published my first books. It was a side company with little assets, but one that I used eventually to house Mojo Supreme, which included WatchMojo.com.
For reasons that were unclear to me at the time, IGN attacked both myself personally and my company. This was shrewd, I would soon realize, but ironic ultimately.
Knock, Knock… no one is home
IGN launched its pre-emptive attack on May 8th 2006 by sending a bailiff to serve me the papers.
However, because they were suing my company and the Federal Canadian government’s address for me remained my old address (where I lived until 2004), the lawyers for IGN had to send the paperwork to that address, which meant that I did not get it on the 9th. Once they realized no one was there to accept the papers, they sent them to both my home address and our actual office on the 9th of May, 2006.
Technically, a defendant needs to have at least 24 hours to look at the accusations, they were summoning me to show up to court on May 10th at 9am. But since I had only received the papers on May 9th at noon… time was not on my side. Incidentally, this was one more fateful twist that invariably played a part in the proceedings.
Ah yes, the proceedings. I had about half a day to prepare for the fight of my life.
The Prelude
It’s worth noting that in March 2006, when I got that letter, I emailed my former boss, colleague and partner at AskMen, the IGN brass, as well as the lawyers representing them telling them that this must be a miscommunication and misunderstanding for I had no intention to piss off either AskMen, IGN or News Corp. in particular. I could tell my colleagues disliked me, IGN disrespected me; but News Corp. was a company I actually respected and frankly, envisioned one day partnering or selling to.
The whole episode was odd: upon leaving IGN, no less than Dale Strang, then Executive VP of IGN told me that they might invest in my company.
In January 2006, upon launching Mojo Supreme, I emailed Mark Jung, CEO of IGN, and offered him a seat on our board.
I never heard from them until March 2006 when they sent me a letter and I responded with an email.
I did not contact anyone at News Corp. or Fox Interactive Media in March, 2006. I was always pretty careful to draw a line between IGN and Fox Interactive Media.
All to say, on May 9th 2006, it was clear that giving my former colleagues or IGN a call to smooth things out was out of the question. I knew after that letter in March that that would not be the end of it; this Motion for an Interlocutory Injunction was proof of that. Incidentally, I have kept so many emails and documents from the entire ordeal; sitting in my Gmail draft folder today is this email I typed on May 9th but did not send, addressed to Dale Strang and Mark Jung:
Hello,
I know I should probably have my lawyers speak to your lawyers, and of course I do not expect an answer.
I always believed that legal action was a tactical step towards a broader strategic goal, I am still surprised that you chose to pursue me in court, especially since Dale offered IGN to invest in any company I started after I left AskMen and I contacted you Mark to sit on my board.
Today I got served, it is unfortunate. I read through the documents and am more confident than ever in my case. I am also glad that I saved many emails to from my tenure at AskMen to support my arguments.
Of course, as a young entrepreneur facing so many growth opportunities, I obviously prefer not spending any resources on litigation. But if I am not given a choice, I will spend what it takes.
If there is something you want other than shutting me down, now would be the time to voice your wish. If all you want is to shut me down, I am confident that in the end, we will prevail.
Regards
Ash
I did not send it. I have always, always chosen diplomacy and dialog. But this was past that point. So why email them again?
They had even taken my initial email in March and twisted it against me in the paperwork.
Clearly, peace was not was they sought. They wanted war. I had to go to the war room and plan.
Counsel’s Word: Not Good
From March to May, 2006, I spoke to a few talented, well-regarded and expensive lawyers, one of them being a business acquaintance who I would talk to over the years, a prominent intellectual property lawyer at Blakes, one of Canada’s big law firms. He had introduced me to one of his peers who handled employment law.
The points of view were varied but all echoed the same theme:
- non-competition agreements are hard to enforce.
- my non-competition agreement was vague.
- if they would decide to come after me, it would not be via lawsuit but rather a motion for an injunction.
- injunctions are hard to obtain, but very expensive to defend.
- either way, I had to answer the letter officially.
At the time these tidbits of advice were vague and unclear to me. As much as I have always been comfortable with legalese, frankly it was all the same, and I did not understand what it all meant.
One lawyer suggested that they were trying to corner me in order to buy WatchMojo.com on the cheap.
I did not buy that: I had, what I believed, a promise for consideration to invest in Mojo Supreme by a high-ranking executive at IGN. If they wanted a piece of the company, all they had to do was call me.
More importantly, I had offered a board seat to the Mark Jung, which was an overture for talks either for him to invest or for IGN to do so. Mark is now CEO of Vudu.
At the time, Mark was not only CEO of IGN but I also think had been appointed COO of Fox Interactive Media, reporting to Ross Levinsohn, CEO of Fox Interactive Media.
I considered reaching out to Ross, too, to reason with him on May 9th, but I did not. Even at that time, cornered and alone, I chose not to go around the chain of command. This was one more example of my naive, idealistic and innocent outlook of things.
The Lawyer’s Trap
Anyway, backing up a bit:
By mid-March, I had not responded to the letter formally, only in an email. One of the lawyers I had spoken to at Blakes urged me to respond. For the record, Blakes charged me fairly little for that letter and ultimately was more than professional and cool with me… so nothing in this email is a criticism of their firm or the lawyers I interacted with.
In fact, let me state quite clearly, I’m quite over all of this. This is not even going to be a week-long tirade and rant against my former colleagues and former employer, nor the lawyers at Fasken. I should state that News Corp.’s MySpace is in fact a distribution partner of WatchMojo.com’s… but even before that was announced in January 2008, I have always remained professional and courteous to the entire organization there because that’s my style. I forgive, I just don’t forget. What I am doing now is 100% about advice for entrepreneurs when your back is up against the wall.
Anyway, back to the case: “an official letter” was the right protocol, I was told.
In hindsight, I should have responded myself, or gotten an unknown lawyer to respond. Instead, I made the mistake of effectively mandating this big expensive law firm to respond on my behalf.
By doing that, I had stepped right into IGN’s trap: an expensive dance had officially begun.
The War Room
On May 9th, I was not the only one who got the motion for injunction, Blakes did too, for technically they were our law firm.
That afternoon, we held a conference call and they were asking me very technical questions about what precise time I had gotten the papers (to ensure that I had 24 hours), along with many other attempts to win small tactical, procedural things.
I was getting nauseous. I wanted to blow AskMen and IGN away with a nuclear weapon. I cared very little about procedural matters but knew all too well that while I was going to have a strong case on the substantive matters, I could not get too arrogant or confident. In fact, my counterparts expected that and were, in my opinion, counting on me to lose it and go ballistic.
During that call, it was pretty clear that just explaining the details of the case would take a lot of time.
Moreover, a respected law firm like Blakes would take a lot of time combing through the thousands of pages.
This was playing right into Fasken’s strategy.
During that call, I had to ask the inevitable and unavoidable question: what would such a defense cost?
Silence.
Injunctions 101
After a few seconds of dead air: I was told that an injunction was a multi-stage process:
- the Provisional Injunction
- the Interlocutory Injunction
- the actual trial, or Merits.
Mind you, unlike a regular trial, an injunction connotes a sense of urgency. It’s all about an element of surprise. The idea is one party is at threat of suffering unmeasurable damages so the offending party must be stopped, if not temporarily, until we get to the trial. In this case, supposedly WatchMojo.com was causing irreparable harm to AskMen, which was a version of Maxim magazine on the Web, a men’s online magazine producing articles. At WatchMojo.com, I was producing videos for people of all ages. It seemed clear that we were not competing, let alone causing them any harm. But, as I was learning, it was all moot.
We were in the first phase… the whole thing could take years. While this meant that technically WatchMojo.com could operate and prolong this process, just preparing for the first phase would cost me over $50,000.
Actually going through Phase 1 would be well over $100,000.
Preparing for Phase 2 would be far more expensive and simply getting to let alone winning Phase 3 would start to cost me somewhere north of $250,000, if not way more.
These things were unpredictable, I was told. Oh how that was an understatement.
Incidentally, having been a minority shareholder at AskMen, I had walked away with a couple hundred thousands of dollars. My three partners took in over $7M, our VCs $6M and another small partner and I took in less than $500K combined.
I’ve never made it official, but that’s right, everything you see here, here, here and in fact, here was built for less than $500K. We do have revenues to finance operations, too, so by now the investment-to-date is obviously far more than that, but you get the idea: while some clueless frigtards are raising $10M-100M and fleecing investors, we’ve actually built something tangible of considerable value with about $1M.
The point is: at the risk of sounding cocky, I think they knew that I could go on to build something of value with little funds, so they sought to avoid that and make an example out of me for daring to move on with my life after IGN pushed me out of the picture.
The proceeds of the sale, along with my sales commissions over the years (which my classy colleagues broke down every penny in one of the exhibits) was all I had to finance Mojo Supreme. To thank me for my hard work, they were about to bleed me dry to avoid that from happening.
Bear in mind, today WatchMojo.com is a valuable business with one of the biggest content libraries around, syndication deals, revenue, partnerships, etc. At the time, I estimate we had less than 500 clips, had generated $219.39 (not a typo) in revenues Year-to-Date and I had no clue if WatchMojo.com would become something of value. I did not even know the full extent of what they were suing, because they seemed to want to shut down everything: our video site, our blogs, our search operations… At the time this was a slight detail but this, too, would prove to become a factor, I guess.
It was clear, then, that they wanted to make me into an example. This was personal, frivolous and meritless, but they were never counting on getting to the merits.
They were coming at me with a ton of bricks and I had to make a choice:
Give up or Fight Back.
The Decision to Drop Representation
During that conference call, I thanked Blakes for their counsel thus far and took over the case myself. This was probably around 2pm. From 2pm onwards, I had to get cracking on a strategy.
Forget coming at me like a ton of bricks, for all intents and purposes, I was shitting them!
An Early Mistake: Not Listening to My Gut
A mistake I did in March, and continued to make in May, was actually not going public with this. I did not blog about it because I still wanted to maintain diplomatic options. Again, I was naive and an idiot. These guys were about to crucify me and here I was looking out for how they looked.
The Night Before War
From 2pm until about 2am, I hit the Web and prepared a “defense”.
I had a date with destiny the next morning at 9am. What happened? Well, the first thing I did was go through the affidavits and motion for injunction.
Come back tomorrow for what happened on that infamous May 10th 2006.
SAI asks an interesting question: Blinkx might be in play, and News Corp. and Google are suggested to be interested.
Interesting. Disclosure: technically, all three companies are our distribution partners and News Corp. employed me briefly in 2005. Anyway, here goes:
Should News Corp. Buy Blinkx?
Technically, by virtue of being a media company, News Corp. would probably not even know where to start with a technology company like Blinkx. Of course, like all new technology firms, Blinkx is choosing a free, ad-supported route, and in this vein, News Corp. would be able to deliver on that promise.
In fact, News Corp. has bought some technology, namely, Strategic Data Corp., to better optimize its own ad inventory. However, it did so out of necessity because it owns the world’s largest social networking site MySpace which commands more pageviews than any other site out there. It should be noted, of course, that MySpace is also #2 in online video after industry gorilla YouTube. I have long argued that MySpace would be better served positioning itself as an entertainment/media hub (news to Ash: it already does that) and bolstering its video offerings (again, it already does this).
But because not all video is created equally and currently video is largely indexed by metadata (which is not very efficient), it is not crazy for News Corp. to want to buy Blinkx to better manage all of that GREAT video content on MySpace TV. Pardon the shameless plug, but I just linked to our 9 - count ‘em - 9 channels on MySpace TV.
The point is: with MySpace and FIM doing $900M in revenues, Rupert Murdoch knows that giving MySpace’s 75M unique users better search tools to find its burgeoning video content can help it catch up to YouTube in terms of video streams and hit its own internal revenue targets.
What about Google?
Google does not really have a video search tool, let’s face it. Its YouTube property still searches largely by metadata. Google is surely, surely using some of YouTube’s screening systems (you know, the ones that scan for porn and block that) to see how it can internally address video search… but the concept of buying video search is not out of the question because Google is now largely interested in Buying over Building (Blogger, Picasa, Feedburner, YouTube, Doubleclick, Grand Central, etc.).
I am a media guy, I understand technology, but not enough to tell you if Blinkx is the technology Google or News Corp. should buy… After all, what if the tech flops (I’m not saying it will) and then News Corp. can’t go with better technology? Maybe there is a reason media companies like to be license technology and not buy it.
Then again, at $200M, it’s throwing a coin in the air.
I will say this, limiting video search to metadata is - to quote Ford Fairlane, aka Andrew Dice Clay - like “masturbating with a cheese grater, slightly amusing, but mostly very painful.”
All right, sorry for that very wrong imagery and statement, but like I said, I’m not an engineer, I’m in showbiz.
Steve Rosenbush and Paid Content asks: should MSFT break up?
Maybe, but it won’t… much the same way that GE won’t. I think Mr. Rosenbush misses the point here: America rewards size, reach and scale. MSFT is not only the most profitable technology company out there, it is the biggest and strongest one, one that can launch $45B unsolicited offers without blinking. That would not be possible if you had 5 mini-MSFTs.
Moreover, MSFT’s desire to pursue Yahoo! has little to do with strategic beliefs that size is better per se, but rather, a GE-esque ideology to pursue the bigger markets and higher returns. GE is not in the business of lightbulbs alone, anymore, it has moved in and out of appliances, in health systems, jet engines in the pursuit of profits and market share growth.
Advertising is a $500B market, online ads are a $50B market. Those are staggering figures and MSFT is doing that all self-respecting capitalists would do.
