Founders at Work.pdf

336 Founders at Work
firm hadn’t come in and shown them all their mistakes. Basically, they were
flying solo.
Then Jin and I went off to California for some reason, on a guy’s road trip to
California and having a great time. When we got back to Boston, we discovered
that we’d been sued. Me, Eve, and Tracy got sued in Delaware Chancery
Court. I thought, “God damn that lawyer, Sam, he lied to me; he told me we
wouldn’t get sued!” And I later realized that Sam had been right and wrong.
They still had control of the company checkbook. Even after he’d been voted
out as CEO and the new board had been voted in, the VCs had gotten their pet
CEO to write a $1 million check from the company checking account to their
lawyers so that they could have this shareholder lawsuit without paying for it.
This was an unauthorized looting of the company on behalf of one set of shareholders.
It was probably illegal, but in Massachusetts it could take years to
recover that kind of money. And they figured it’s not going to be a big deal
because we’ll still have control of the company; we’ll impoverish this guy with
an onerous lawsuit. He’ll never have enough money or staying power to come
after us in Massachusetts for looting, and maybe he’ll never find out.
So now I had to defend this lawsuit. I had to hire Delaware counsel, which
was very expensive. It basically consumed all my assets over 2 1/2 months. But
they had a case that really couldn’t be won, since they were minority shareholders.
Let’s say you have one share of IBM and you go to the Delaware court
and you say, “I want to control IBM; I feel like I’m entitled.” There’s really
nothing holy left in America: religion’s not holy, the family isn’t holy, marriage
isn’t holy, but the only thing that’s really left that is holy to Americans is ownership.
And that’s what the courts are there for. They are there to preserve the
rights of owners of things. So when you go to court and say, “I don’t own this
thing, but I want to control it,” you are almost guaranteed to have a poor
reception.
Eventually, the VCs simply bought my shares, partly so that they wouldn’t
be prosecuted for the next 5 years in Massachusetts court for the looting, partly
because they wanted control of the company, who knows. It was stupid. If they
wanted to buy the company from me and run it however they wanted when I
was sitting in my bathtub reading the New Yorker magazine 6 months earlier,
they could have done it at a lower cost without all this Sturm und Drang, and
everyone would have lived happily ever after. But it never occurred to them
that I would want to do something else with my life. They were very worried
about me competing with them and starting a new company. I had been programming
sitting at a desk for 23 years, working on Internet apps for 10 years—
did they really think that I would take all my newfound money and freedom and
program some more? In fact, I went traveling for a while, and then I went to
flight school and got my private pilot’s license and bought an airplane and went
to Alaska, and all through this time, they were busy losing money.
Livingston: What happened to ArsDigita?
Greenspun: They finally got a call from the bank saying that they were running
out of money in their checking account, I think. That’s when they woke up to