Lawsuits Allege This Startup Ripped Off Millions From Vendors. Andreessen Horowitz Backed The Former CEO’s New Company Anyway

[Rimbo 25910]

https://www.forbes.com/sites/katiejennings/2023/06/12/lawsuits-allege-this-startup-ripped-off-millions-from-vendors-andreessen-horowitz-backed-the-former-ceos-new-company-anyway/?sh=727398ea3268

Quote

The venture firm made a repeat investment in Munjal Shah, but his previous company Health IQ is facing allegations of millions in unpaid invoices, tens of millions in debt — and one lawsuit is alleging fraud.

Fun fact: I worked for Health IQ for a year.

Read on... horrors await.

[Blotto 23487]

Similar stories have played out thousands of times in Silicon Valley. Startups fail all the time, and when they do they usually leave vendors holding the bag. Vendors that choose to deal with VC funded startups should always be wary of the risks of those companies going tits up.

VC's like Andreessen Horowitz expect most of their investments will fail. They just need a few big winners to cover the cost of the failures. Its how the game is played. According to Shah's linkedin page,  prior to Health IQ he led a couple of startups to successful exits. That's why VC's keep funding guys like Shaw. They dont give a fuck about the vendors who get screwed when one of their portfolio companies fails, they have already moved on to the next round of fundings. 

[Wally Fairway 5539]

20 minutes ago, Blotto said:

Similar stories have played out thousands of times in Silicon Valley. Startups fail all the time, and when they do they usually leave vendors holding the bag. Vendors that choose to deal with VC funded startups should always be wary of the risks of those companies going tits up.

VC's like Andreessen Horowitz expect most of their investments will fail. They just need a few big winners to cover the cost of the failures. Its how the game is played. According to Shah's linkedin page,  prior to Health IQ he led a couple of startups to successful exits. That's why VC's keep funding guys like Shaw. They dont give a fuck about the vendors who get screwed when one of their portfolio companies fails, they have already moved on to the next round of fundings. 

I am working at one right now, well not really a start-up because they have managed to be around for 10+ years and are now looking at a 4th or 5th round of funding (not sure if round 2b is an add-on or should be considered a separate round). 
Anyway, we are getting low on cash (low meaning we can make payroll through the end of the month after that starts to become iffy), vendors are being stretched, we are dipping into one of the last cash accounts to try and bring vendors down to only 30+ past due, and I'm told that their are investors interested in putting funds into the company (some are existing investors, and some new investors). There was optimism in the weekly meetings a month ago, but that additional funding is still on the sidelines.
It is certainly a love/hate relationship to work in one of these deals; and the sad part is this is about as close as I've ever come to really wanting to work somewhere. No worries though I can always fall back on my #stonk investing for financial security.

[swraith 345]

I could not handle being in an environment where making payroll 15 to 30 days out was iffy.  Fuck that.

[Blotto 23487]

Back in my 20's at the peak of the .com boom, I helped a buddy craft his business plan to raise money for an ecommerce startup. He secured a $2M+ seed round, and asked if I wanted to come on board as a founder. I was bored at my current gig, so I figured what the fuck. There were 4 of us, nobody older than 28 and we were trying to convince stodgy old companies to transition to this pie-in-the-sky vision of an industry vertical e-commerce portal. After about a year, we were at ~20 people and needed more funding, so we arranged a summit in Dallas with multiple $1B+ OEMs  who all competed against each other. The idea was they all invest in the second round to show buy-in, allowing us to set up a portal and bring on the hundreds of component suppliers that they all transacted with. We got term sheets out and were feeling pretty good about our chances based on conversations the week after the  meeting.

This was April 2000. We were in St Louis heading into a meeting with Emerson and the lobby TVs were showing the Nasdaq melting down that morning. I think the Nasdaq crashed 20% that week, ecommerce startups all blew up, and that was the end of our funding dreams, lulz. The idea was never gonna work without the industry leaders on board, and once they all got cold feet and backed off, we ultimately shuttered  the company and returned the last ~$100K to the VC that forked over our initial funding. 

But what was crazy about that time was  how many services we got from companies like Ariba, Anderson Consulting, Wilson Sonsini, etc... by offering equity instead of paying cash. And it wasnt even like we were giving out huge chunks of the company. Valuations were so fucking inflated for e-commerce startups no matter the stage, that companies were willing to gamble. Anderson had a team of 5 consultants working diligently on our project and we never paid them a dime. Ariba gave us software and assigned a couple of apps guys to help build out a proof of concept. As "bubbly" as recent times have been, it doesn't compare to the levels of retardation right before that crash. I still laugh about how stupid shit was. The entire exercise lasted like 14 months. 

Edited June 14, 2023 by Blotto

[52-80 19144]

9 hours ago, Blotto said:

Back in my 20's at the peak of the .com boom, I helped a buddy craft his business plan to raise money for an ecommerce startup. He secured a $2M+ seed round, and asked if I wanted to come on board as a founder. I was bored at my current gig, so I figured what the fuck. There were 4 of us, nobody older than 28 and we were trying to convince stodgy old companies to transition to this pie-in-the-sky vision of an industry vertical e-commerce portal. After about a year, we were at ~20 people and needed more funding, so we arranged a summit in Dallas with multiple $1B+ OEMs  who all competed against each other. The idea was they all invest in the second round to show buy-in, allowing us to set up a portal and bring on the hundreds of component suppliers that they all transacted with. We got term sheets out and were feeling pretty good about our chances based on conversations the week after the  meeting.

This was April 2000. We were in St Louis heading into a meeting with Emerson and the lobby TVs were showing the Nasdaq melting down that morning. I think the Nasdaq crashed 20% that week, ecommerce startups all blew up, and that was the end of our funding dreams, lulz. The idea was never gonna work without the industry leaders on board, and once they all got cold feet and backed off, we ultimately shuttered  the company and returned the last ~$100K to the VC that forked over our initial funding. 

But what was crazy about that time was  how many services we got from companies like Ariba, Anderson Consulting, Wilson Sonsini, etc... by offering equity instead of paying cash. And it wasnt even like we were giving out huge chunks of the company. Valuations were so fucking inflated for e-commerce startups no matter the stage, that companies were willing to gamble. Anderson had a team of 5 consultants working diligently on our project and we never paid them a dime. Ariba gave us software and assigned a couple of apps guys to help build out a proof of concept. As "bubbly" as recent times have been, it doesn't compare to the levels of retardation right before that crash. I still laugh about how stupid shit was. The entire exercise lasted like 14 months. 

you should have brought wally onboard as cfo.  he would've put all the runway capital in ndx puts.  then when it melted down and killed all potential competitors you wouldve monetized enough to be the next shopify, and right now you could have been sitting on the beach, earning 20%

[BabaYaga 15286]

Many startups.  Many scars.  They each tell their own story.  Back in it now.  Can't help myself....

[Rimbo 25910]

23 hours ago, Blotto said:

Back in my 20's at the peak of the .com boom, I helped a buddy craft his business plan to raise money for an ecommerce startup. He secured a $2M+ seed round, and asked if I wanted to come on board as a founder. I was bored at my current gig, so I figured what the fuck. There were 4 of us, nobody older than 28 and we were trying to convince stodgy old companies to transition to this pie-in-the-sky vision of an industry vertical e-commerce portal. After about a year, we were at ~20 people and needed more funding, so we arranged a summit in Dallas with multiple $1B+ OEMs  who all competed against each other. The idea was they all invest in the second round to show buy-in, allowing us to set up a portal and bring on the hundreds of component suppliers that they all transacted with. We got term sheets out and were feeling pretty good about our chances based on conversations the week after the  meeting.

This was April 2000. We were in St Louis heading into a meeting with Emerson and the lobby TVs were showing the Nasdaq melting down that morning. I think the Nasdaq crashed 20% that week, ecommerce startups all blew up, and that was the end of our funding dreams, lulz. The idea was never gonna work without the industry leaders on board, and once they all got cold feet and backed off, we ultimately shuttered  the company and returned the last ~$100K to the VC that forked over our initial funding. 

But what was crazy about that time was  how many services we got from companies like Ariba, Anderson Consulting, Wilson Sonsini, etc... by offering equity instead of paying cash. And it wasnt even like we were giving out huge chunks of the company. Valuations were so fucking inflated for e-commerce startups no matter the stage, that companies were willing to gamble. Anderson had a team of 5 consultants working diligently on our project and we never paid them a dime. Ariba gave us software and assigned a couple of apps guys to help build out a proof of concept. As "bubbly" as recent times have been, it doesn't compare to the levels of retardation right before that crash. I still laugh about how stupid shit was. The entire exercise lasted like 14 months. 

It hasn't gotten any better.

One of my former co-workers made the comment that Andreessen was more focused on getting Forbes to write an article about him than he was making a successful insurance business.

Well, looks like he got his Forbes article. 🤣

[HonkeyVape 107]

The same Andreeson who was getting pantsed when talking about NFTs? The one who spurred/encouraged the SVB bank run? The one who is moving and opening an office in London to focus on crypto?

These guys have lost their fastball and are a long ways from “software is eating the world” and “pay me my money you are better than that and you know it” voicemail tirade that made them legends.

Anyways, what were we talking about? Startups? I’ve consulted for startups for a decade— never hit a home run like some of the 20 something’s in customer service reps and BDRs at Snowflake who cashed out for like $6mm, but then again I’ve never joined or worked with or for a true risky startup. Mostly late series B/C-F rounds with already unicorn status. You won’t make multiple millions on equity that way, but I’ve bought a house on one.

Edited June 16, 2023 by HonkeyVape