Help from HN: Investor wants to sue me

Hi all,

Throwaway here. I'm 21, I raised investment from an angel when I was 18 (or 19) - <£100k, but a decent chunk of money. I raised this money in the days before I knew how stuff worked, and before I'd "learned my lessons" like, outsourcing your software dev rarely ends well. Hindsight is a fabulous thing.

Fast forward to now, we're 2 years into the investment, the money ran out 6 months ago, I stopped getting paid 12 months ago and we've been trying to make it work/recover ever since. I've even put all of the money I had into this (keeping the servers on etc).

Now I've been offered a job, it literally fell into my lap with a group of guys I used to work for - good salary, back in the city doing what I used to. Its brought us to a bit of a cross-roads because obviously I won't have the time to put into this to make it work.

(I have to accept the job due to financial commitments)

We've put a lot of blood sweat and tears into this.

I should preface this with, our investor isn't technical, and he's a bit direct - he believes what he believes and thats it.

Ultimately, he wants to sue us based on 2 things:

1) in the contract, he would give us the second batch of money when we told him the tech worked. This provision was there because they were worried we couldn't actually make the tech.

When our developers finished the code, we checked it and signed it off. The tech was then delivered to us.

We sat down post-second batch and said "hey, if we want this to fly off the shelves we have a few things we might want to add/change". The changes we made improved on what we had, and also allowed us to go after new markets. We discussed this with him and he agreed - he even wanted to send me abroad to where our developers were based.

He's now saying that we're in breach of contract because it should have been working when we said it was. Even though, well, it was and he agreed we should make the changes. As you software guys know you can add a couple of things and improve something massively. Its not as though its ever really "finished".

I even demo'd the software to him at his house. He saw it work.

I have a letter from the developers saying the software works.

2) in the email with the scanned letter confirming "the tech was working" our FD said "we're real excited we can get out and sell, and talk to the patent guys". We spoke to the patent guys who said we didn't really have anything patentable, we just had business methods and algorithms (and we're based in the UK) - he advised us to use the money to develop the product and work on competitive advantages.

This point came out of nowhere, two or three months after I think I managed to convince him his opinion about the tech above - was wrong. He said we'd promised to patent it, even though we just said we were going to look into it. He refuses to accept that we were advised otherwise.

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I guess having written this I don't really know what I expect anyone to say. I guess if someone can answer the question "does he have any grounds to sue me/us?"

The thing is - none of the information he has, or has spoken to his lawyers about has come direct from the software developers, or from the patent attorney. He has formed an opinion literally from discussions we've had, he's interpreted some things completely wrong. I'm not talking about things that perhaps he could see differently, but in a way a non-techy would look at a software project. He doesn't appreciate that its not like solid goods, they have bugs, things might need to be changed when you get some customers testing it.

He's really difficult, his response to "the developers have written a letter saying the software worked when we signed the agreement and the patent attorney told us not to patent it" is just to repeat his earlier point.

He's literally going to sue us just because he can. I may very well go bankrupt, which to be honest doesn't really bother me. Our FD might have to put his hand in his pocket. I say that knowing that he has to win first, and I actually don't think we've done anything wrong. There is just no telling him.

If anyone can lend any advice I'd be greatly appreciative, I just don't think this is going to end well.

Can he sue us? What should I do? What do you think? What would you do?

Major thanks in advance.