A $5000 Chair

http://battlehardened.wordpress.com/2012/02/07/a-5000-chair/

by kentonwhite • 14 years ago

217 58 14 years ago

battlehardened.wordpress.com

hartror• 14 years ago

Something I have come across when dealing with frustrated investors. I have heard it said since and it still gives me butterflies :/

Some more background on the term: http://en.wikipedia.org/wiki/Prejudice_(legal_procedure)#Com...

staunch• 14 years ago

They got rid of an asshole for a mere $5k. I've seen people pay 100x more than that in extreme cases.

A great bargain!

wvoq3• 14 years ago

Half of the world sucks cock. What's your problem with it?

pavel_lishin2• 14 years ago

> Half of the world sucks cock.

[ citation needed ]

Or were you trying to cleverly point out the sexism in his comment, while completely missing out on your own?

kayman• 14 years ago

I think 5k is cheap. And lesson learned here is don't bring ppl on unless they bring a valuable skill set to the team. Because when people hear "startups" they don't see creating something good, they see a lottery ticket hoping to be on bandwagon of the next facebook IPO.

Confusion• 14 years ago

I see no reason whatsoever to suppose this guy was an asshole. He may have been mistaken about what he could bring to the table to be a part of this startup, but that doesn't make one an asshole.

As 'wheels' says in another comment: he did some work and now that there is money, he thinks it is reasonable he gets some payment for that work. The amount he asked for is reasonable as well.

GFischer• 14 years ago

The article says they "bounced ideas off him". That usually has a cost if a lawyer is involved.

So he did do some work as you say, it ended up costing them.

ssharp• 14 years ago

To anyone more familiar with the law: is this the type of thing that could be recovered later?

I think the lawyer was smart enough to ask for an amount that he'd be okay with, but kept it small enough to make paying it easy enough to not warrant the startup being distracted.

But say the amount was more and the amount was low enough to pay the guy off, but high enough to be concerned about. Maybe you still pay it right away because you have to in order to get your funding, but is there any case law that supports recovering this money later on because the startup was essentially held hostage by the lawyer?

It seems fairly reasonable that a contract made under duress could not be enforced, or could at least be brought up at a later date.

rprasad2• 14 years ago

There is no duress here; they reached out to him about how getting him to waive his claims. He had no obligation to do so. Likewise, they had no obligation to accept his offer and could have simply decided to risk it.

IOW, there's a snowball's chance in Saudi Arabia that these guys will be able to recover any money they pay to the "lawyer" to settle his "claims" against them.

The lesson to take away: have an employment agreement with everyone you bring in to work for you, even if it's just a simple one page document.

jarrett• 14 years ago

As a general rule, money paid pursuant to a settlement agreement is gone for good. The bar for duress is pretty high--specifically, it usually (always?) requires a threat of bodily harm.

And, even if you could somehow prove a settlement agreement to be unenforceable, what would be the point? For one thing, you'd cancel the release of liability you obtained. And secondly, you already performed your part of the agreement (paying the money). In general, I wouldn't see any benefit in this course of action.

asr• 14 years ago

This is right, I don't think duress is relevant here.

As a hypothetical, if the company hadn't already paid the $5k, just agreed to do so in the future, they could have some legal arguments for not actually paying after the round closed. See http://www.lawnix.com/cases/alaska-packers-domenico.html.

(Of course, that's talking about whether or not there's any tenuously-supportable legal argument. Back in the real world, they should obviously just pay him.)

IANAL. TINLA.

leak• 14 years ago

Can someone please enlighten me on how to avoid this kind of situation? Is this because these guys didn't have any papers signed with the guy about him being a temp until they decide later?

rprasad2• 14 years ago

Yes, that is the entire problem in a nutshell. They hired a lawyer and then completely failed to use him in a legal capacity.

On that note...they could potentially have a malpractice suit against him for his failure to advise them on something as basic as an employment agreement. We'd really need to know a lot more to know if this is the case.

pavel_lishin2• 14 years ago

I thought they hired a CEO who happened to have a legal degree and the ability to practice law in their state.

PStamatiou• 14 years ago

I thought this was going to be a story about the Eames lounger or Le Corbusier haha. Know one too many Facebook designer friends that have them..

dsr_• 14 years ago

It wasn't the chair that cost $5K. It was the lack of the most basic possible written employment agreement.

asanwal• 14 years ago

Very true although I suspect the larger issue was they pretty casually decided to try "him out for the junk drawer job in the startup — CEO."

wheels• 14 years ago

Well, and even at that, $5k isn't really exorbitant. It basically sounds like, "Now that you actually have some money, how's about paying me for the work that I did?" Whether it was good work or not is another matter, but he basically let these guys off the hook for 1-2 weeks' pay (at a time when the company was valued at a few million). This isn't a story of them getting screwed.

josefresco• 14 years ago

Who was going to write that agreement ... The lawyer they were hiring? Please, their biggest mistake was doing business with an attorney at all. I've made that mistake before and had the same experience where the "big deal" was always one meeting away. 3 years later and this d-bag lawyer was in my office letting me go (I hired him). Lawyers are like hired killers, unless your hiring them to kill someone else, your the one who's gonna get axed.

mseebach• 14 years ago

The fact that you hired and then failed to fire for three years an employee of a given profession does not translate in any way to a general advise to never do business with lawyers.

It DOES, however, translate to a general advise to think hard about what skill sets your startup needs, and when.

rdtsc2• 14 years ago

It is a metaphor. A cute title to catch your attention.

danko• 14 years ago

At first, I read this and thought to myself -- "charming, but they didn't really pay $5K for the chair, so much as for their lack of proper legal documentation."

Then I thought on it a bit more and realized -- it was the chair that cost them $5K, because if they hadn't established the paper trail via the e-mail chain about giving the chair back, they wouldn't have had the hangup on 'without prejudice'.

Be careful with email, folks. In the end, that is your paper trail.

kahawe3• 14 years ago

Isn't there something about email not being strong evidence in a trial because it is way too easy to fake? At least in Euroland, a lot of things still run on fax for that very reason.

sunchild• 14 years ago

I think the investor's lawyer was being overly cautious. Anyway, small price to pay for peace of mind. Always get a release!

ww520• 14 years ago

Well, he has to prove his worth. If everything sails smoothly, people won't notice his value. If he caught something however small, he can justify his bill.

capkutay• 14 years ago

It's interesting that saying "without prejudice" is a keyword for "I'll sue you later if it's worth my while". It seems like lawyers get a lot of power purely from that fact that our legal system makes no sense and they can just warp it against you at any time.

brazzy• 14 years ago

The legal System does make Sense, it's just too complex to be completely consistent.

Good lawyers are basically hackers of the legal System who work with (or around) These inconsistencies. Some use this power for good, others for bad ends.

stankal2• 14 years ago

Interesting story with a lesson to remember. But can anyone comment on how did his or investor's attorney find that email? Is it common practice to give attorneys full access to all your company's email accounts and then have them search through for any land mines as part of due diligence? Seems a little extreme and very labor intensive. And who pays for it?

romland• 14 years ago

In the comments he wrote:

Our lawyer was concerned about the possibility of prior claims against technology and the company. As we were relatively young he asked for a copy of correspondence that might fall into that category. So it wasn’t that he went through every email in our in our inbox. We prescreened and the email from Bill was one we included in the package which we forwarded.

stankal2• 14 years ago

Thanks. I should have scrolled down to the comments before posting.

damian2000• 14 years ago

Only three things are certain in life: death, taxes and lawyers behaving like aholes.

wtvanhest2• 14 years ago

"How can you honestly not remember this guy's name" - A commenter from the original post.

This comment makes me think about whether this story is even true. I'd say it probably isn't based on that one statement alone. How can the guy not remember the lawyer's name? He has emails exchanged and the guy supposedly stole money from him. I like to forget negative stuff, but I can assure you I would remember this guy's name.

pyre2• 14 years ago

It could just be a way to side-step calls to 'out' the guy.

megablast• 14 years ago

Why lie? It doesn't obfuscate the story any more than just saying 'not his real name'.

TwoBit• 14 years ago

Their real mistake was dealing with a lawyer in the first place. My dad told me years ago that you want to avoid dealing with lawyers at all costs, because most of them are vicious selfish sharks. Sure there are exceptions, but there are few, if any, occupations with as high a percentage of people like that in it.

Drbble2• 14 years ago

Like CEOs and VCs?

arethuza2• 14 years ago

"Of course I've got lawyers. They are like nuclear weapons: I've got em coz everyone else has. But as soon as you use them they screw everything up."

[Danny DeVito]

The problem is that an awful lot of people and companies will always involve your lawyers - if you don't get your own lawyers in those circumstances then you will be screwed.

Drbble2• 14 years ago

The "without prejudice" is phony storytelling. It sounds like they got a legal threat letter and ignored it.

Also, if this lawyer was good enough to get $5k for nothing, maybe they should kept him on. Or paid him a fair wage or equity for his work.

ajhit406• 14 years ago

$5000 is a gross understatement of the actual costs at play. Drafting a full release can sometimes cost thousands of dollars, and the emotional toll and time-sink of negotiating the terms of release should also be considered.

The author was lucky it only took one phone call and that he didn't mention the cost of drafting up the release perhaps signifies it didn't cost him too much.

bitanarch• 14 years ago

One of the lessons I've learned in my startup life (2 years) was to never deal with people who aren't competent with execution - what's the right thing to do, how to reason about it in a logical way, how to do it, how to finish it, contingency plans, etc.

"Try him out for the junk drawer job in the startup — CEO" is a terribly easy mistake to make, when you're still at early stage with nothing to show. I've done this for almost all the positions in my previous companies - programmers, "product" guy, all the way up to the CEO and investors look-alikes, and I regretted it every time.

When my CEO was still a business school student of a certain prestigious university, I thought he's well connected and would be a valuable partner later. The company did well for a time - but mostly besides him. Once he took over the reins, everything went downhill and the company never came back to its former glory - despite the CEO's claims of "funding is near", "I'm good friends with <insert big name here> and he'll cough up $50k without a blink" for a full 2 years. Every time I called him out for non-performance, he plays the "CTO is not a team player" card. But I believed him, for 2 years - all the way until he badmouthed his partner - me - to his friends right in front of my eyes. And for quite some time I actually thought I should keep the company breakup somewhat secret. Silly me.

Bad "product" guy... got him because he's a friend and he looked somewhat experienced. Ok.. now we've agreed the product would do this and that, now draw me something please? Uhh... wtf is that? He stayed for a few months, was fired, but caused the company some trouble after that.

Bad programmers.. went through quite a few of them, mostly contracted. Some even from big named universities with very impressive looking resumes. Again, hired them because of a sense of urgency (e.g. need to demo X to VCs soon!), so I lowered my bar to what I thought I could get. Wrong - those ended up wasting time rather than contributing.

At the end of the two years, I think I must have went through 2 dozens of people, co-founders included. Of the 2 dozens, only 2 of the choices were right - one programmer, one junior product guy. The others are all a waste of time.

If I were to do a startup again, I'd be super careful at picking who I work with. PG's advice at getting a co-founder? Yes it's definitely needed. But trying to do something investors like while sacrificing quality? That's the #1 startup mistake to make, IMHO. Don't do that.

kahawe3• 14 years ago

Please excuse my blatantly rude question and over-analyzing from across the pond but... you hired fresh-out-of-college/university hotshots into leading and crucial positions: CEO, CTO, "product guy", co-founders and programmers positions - what the frakk were YOU doing there? I always had the impression that, if it is your "shop" one way or another during starting-up phase you fill those positions and do those tasks, you are the CEO, CTO, "product guy" and if you are lucky and get things off the ground and only when things get TOO much to handle on your own, THEN you start taking people on board to help you out - but then you are stuck with having to lead them?

It sounds a terrible lot like you hired good résumés, probably even ready and able people, but never succeeded in uniting them, giving them a common vision, a direction to go into and you had no idea what you could request and expect from them or you failed to communicate it well, so you could only believe their big promises even they had nothing to show for it. Which would also be in accordance to that CTO bad-mouthing you, obviously you were no authority or respected person to him because you never managed to effective "jump the chasm" and switch into "boss-mode" and make the whole bunch of them row to the beat of YOUR drums.

> what's the right thing to do, how to reason about it in a logical way, how to do it, how to finish it, contingency plans, etc.

I think that also takes good leadership - not everyone who might even be FANTASTIC at their job has that quality of being a SEAL-type "lonesome wolf" who can move heaven and earth completely on his own, commando style. Most people need some sort of guidance, a feedback between expectation and how they met them to get them to a productive level.

> hired them because of a sense of urgency (e.g. need to demo X to VCs soon!),

In your position, there is no excuse to NOT knowing that throwing bodies at rapidly approaching deadlines will only make things worse and more complicated, not better... you have heard of Tom DeMarco, right?

> At the end of the two years, I think I must have went through 2 dozens of people, co-founders included.

That can also potentially poison the whole team that probably hardly ever existed to begin with because there must have been people coming and going ALL the time...

rdtsc2• 14 years ago

> Bad programmers.. went through quite a few of them, mostly contracted. Some even from big named universities with very impressive looking resumes

This is baffling to me. We hired some graduates from big named universities and I am constantly amazed at their incompetence. Now they don't lack enthusiasm and are good talkers but not great doers.

We also hurried and hired because we had large contracts coming up and management has slipped and fell into the trap of "well one experience programmer left, we can hire 3 graduates to replace him for about the same salary!". I don't mind that we grow and train our own but these are not a replacement for a experienced engineers.

tmh88j• 14 years ago

>We hired some graduates from big named universities and I am constantly amazed at their incompetence.

I experienced the same exact thing due to my ignorance of programming. I wanted to launch an idea that a friend and I came up with, but neither of us knew how to program. A friend of a friend attended a top university for CS so we assumed he competent. Two-three months after joining us he had not done much except write code full of bugs and didn't understand the concept of OOP. He had some half-assed PHP scripts written; that's about it. When I confronted him he said "it's too hard, I can't do what you guys want." Well, needless to say we were both upset because we pretty much wasted 3 months. I was so frustrated one day that I decided to look up some PHP tutorials and see if I could fix his code. Well, after a couple tutorials I felt pretty comfortable and said "screw his code, I'll write my own." Three months following that (puts us to about a month ago) and I finished nearly 75% of the coding for our website and I feel pretty good knowing that I was able to do what this guy said couldn't be done (also knowing he has a CS degree and I don't).

I learned that you can't pass responsibility to anyone during crucial times unless you truly know that person's abilities , or if you know the basics well enough to keep tabs on that person (who hopefully knows more than you).

meiji• 14 years ago

I was expecting an interesting nugget of info. Too many companies employ someone to do something vague because they like the person. It rarely works out and then someone has to deal with the fallout. As loads of others have said, that was a relatively cheap lesson. People pay hundreds of times that amount to learn things sometimes.

kahawe3• 14 years ago

> Damn. That chair just cost us five grand I remember thinking.

The chair was still only 99 bucks - what cost you only measly 5k was a lesson in "swimming with sharks" and why you do not frakk around in business matters and why a lot of things in business (sadly) work and run the way they do...

And chances are he understood the situation and was nothing but an opportunist and took advantage of it, so you woke those sleeping dogs - but your lesson should be: make sure such things cannot happen, make sure everyone knows and understands the terms and get things IN WRITING.

Mordor• 14 years ago

He sounds prejudiced to me :-p

A $5000 Chair

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