iStoleYourStartup: A story of an iPhone Company Con Man

http://www.connersc.com/blog/?p=58

by alttab • 17 years ago

69 36 17 years ago

naz• 17 years ago

The Secret? Is this a joke?

kalendae2• 17 years ago

Ha I actually had a similar take. The story started very nicely like a good startup story should and in my mind i thought here is possibly another good story about the pitfalls of doing startups that one can learn from. Then got to the secret part and it kind of just completely vaporized that notion and the story became how a sucker got suckered. but the real downside was that he didn't even get suckered out of that much. he did some prototyping, almost partnered up and then decided they were not a good fit. it's not like the couple and his friend made it so no other yoga apps can be made.

kwamenum864• 17 years ago

I'm not sure I would call the author a sucker. He had serious reservations from the beginning. His friend? Definitely gullible. But many of the decisions the author made were out of loyalty to his friend, not out of gullibility. From the start he considered the possibility that his friend was brainwashed but gave him the benefit of the doubt. I think that even the least gullible people on HN are susceptible to this.

jason_tko• 17 years ago

He got suckered out of a lot of his time, and all of the IP he worked on.

Having some aspects of a book resonate with you != being gullible, or a sucker.

The guy in the story seems well intentioned and trusting, but out of his league in dealing with people who are underhanded and nefarious. I think this was a good article about early warning signs for this kind of person, and I'm sure it was a great lesson for him on what to do in the future.

Some lessons spring to mind.

#1 Always expect people to look after their own interests. This is human nature. It also gives you the opportunity to be pleasantly surprised by people who are genuine and principled. As such, you should be creating mutually beneficial and sustainable deals that reflect this reality.

If you let someone have free reign to create whatever structure they want, without any controls or checking, don't be surprised if you don't like the outcome.

#2 Always have some kind of written documentation before any work is done. "We're friends", "We trust each other", "We'll work it out" are not acceptable reasons for not having this documentation. Things, people and friendships change immediately as soon as money is introduced.

Nail down what you think is fair and sustainable, and ask someone to check it. Other businesses or partnerships are a useful yardstick in determining what is fair in your situation. Ask a friend with business experience in these specific kinds of deals to review your structure if your team consists of two friends. Ask a lawyer for anything more involved.

I imagine this story would have turned out very differently if the author had said something along the lines of :

"Listen, I'm excited about what you can bring to the table, and I think you're going to be a very valuable asset to our operation, but in my past experience I've found it's very easy for misunderstandings to happen in any kind of business relationship.

In recognition of this, me and my co-founder have a written document detailing the breakdown of the company, the revenue, and the IP, and we've been best friends for 10 years!

So, I think it would help us build a sustainable and long-lasting relationship if we take some time to think about the value we're all contributing, and the best way for this value to be recognised and compensated in a fair way.

Let me try to get the ball rolling. Based on what you've said, you're able to contribute X and Y. I've asked a couple of friends who know a little about business, and they've mentioned that in the past, they've compensated people providing X and Y by providing them with Z% of revenue sharing for W timeframe. Does that seem fair to you?"

Tanner : "No, thats ridiculous, you don't understand what I'm bringing to your little operation, etc, etc"

"I see, then what would you propose?"

Tanner : "I should get 50% of everything."

"Well, I don't quite see things like that, but I'm open to discussion. Could you provide me with your reasoning behind your figure?"

Then you can take his reasons and consult a friend (or a lawyer).

These are all the kinds of discussions you should be having before the fact, rather than during or after. If you're worried about initiating this kind of discussion, think about how you'll feel initiating it after you've put in 400 hours of work.

#3 Sometimes in order to learn, you have to get burnt. It's very different to read this kind of story compared to experiencing it for yourself, along with all the bundled emotions, shock and gut-wrenching realisations. Accept your failed dealings and failed ventures as valuable lessons that are impossible to glean from any amount of book learnings.

enjo• 17 years ago

I'm always fascinated about how we see one of these articles every month or two.

You don't have a business until you have an organization. Get a contract in place. Determine ownership before even 1 second of time is dedicated to the undertaking.

It's really not that hard.

Tangurena• 17 years ago

I've been trying to study up on how conmen succeed, and how to innoculate myself against them. I've been taken to the cleaners a lot in my adult life, but one thing I've figured out is that when someone tries to manipulate me with fear (buy now or be priced out of the market forever! or with the typical threats from a lawyer), I have learned that the most effective technique I can do is dig my feet in and do the exact opposite of what the fearmonger preaches.

petewarden2• 17 years ago

Never trust a hippy

My two worst business experiences have been with ostentatiously 'spiritual' people. It's not that they're insincere in their beliefs, it's just a lot easier for them to deceive themselves that the selfish things they do have justifications in them somewhere.

Give me a straightforward 'coin-operated machine' (as an old partner described himself) any day, you can at least trust them to behave as advertised.

CamperBob2• 17 years ago

Congratulations. You just blew off Steve Jobs.

petewarden2• 17 years ago

I spent 5 years at Apple and Steve spends zero time blowing smoke about spirituality. He may be a private hippy, but at work he's pure business.

gridspy• 17 years ago

How horrible for you.

It just shows that you have to choose your partners extremely carefully, and you must write up legal contracts that will back up your agreement.

More importantly, don't partner with anyone you don't know and trust already.

swombat• 17 years ago

"This dude even got his black belt from a man trained by Chuck Norris"

He got his black belt from a man trained by Chuck Norris? Wow! That's like, so impressive. Amazing. That must mean he IS Chuck Norris.

More seriously, yes, stay away from those uber-charismatic types, and trust your gut! Never do a deal with someone if it smells fishy or doesn't seem to add up. Your gut is your best weapon.

KevBurnsJr2• 17 years ago

trust your gut

KevBurnsJr2• 17 years ago

You can't please everyone. If you try, you will eventually leave yourself open to manipulation.

A lesson best learned as early as possible.

I call it a win.

peripatetic• 17 years ago

What a squalid petty affair.

I think you need to keep a little perspective. You aren't the first guy to waste a bunch of time on a side project that didn't go anywhere.

1. this was a side project!?! you can't expect great results from a side project. if something happens, then great, if not, well .... you still have a job.

2. Don't you first need to _have something_ before it is conned from you. I certainly didn't hear of any great technical achievements that would have lead to success.

3. Maybe you didn't like the direction the project took. But it sounds like your partner was right about one thing, dealing w/ your dojo guy did get the attention of the Secret guru. It seems like the involvement of the Secret guru is the only thing the project had going for it at one point. And as I mentioned prior, you didn't mention any great technical successes that would have lead to a breakout.

Like i said, welcome to the club of failed side projects.

kwamenum864• 17 years ago

Sounds like the con-couple charged tens of thousands of leisure expenses to the business, which leads me to believe there was some revenue to speak of and at least some of that was generated by work the author completed.

I admit this is not the worst it could have been, but the author got out fairly soon. His friend seems to really be getting screwed.

alain94040• 17 years ago

I'm biased to defend founders, but in that story, I'm not particularly on the author's side.

Yes, the guru was probably abusing the situation. But the author refuses to quit his job and rejects an offer for a $250,000 seed investment. The guru does provide a key connection.

Even a legit guru would have become frustrated with the author by then, and tried to get rid of him.

I'm also not shocked by someone who spends $900 on flowers for their home. If you have the money, why not? The author is just showing how young he is. Driving a BMW is also not proof of cardinal sin :-)

alttab4• 17 years ago

The money never came - the work continued after I left, and the guy is apparently in a lot of debt.

FreeRadical• 17 years ago

The $250,000 was not a hard offer

tdm911• 17 years ago

"he paid $300 for a manual on how to make money on Twitter and gave it to me"

I'm assuming that's how to make money on twitter. Sell books on how to make money on twitter for $300!

mattwdelong• 17 years ago

I once picked up a book at someones house titled "Everything Good About George W. Bush"; It had a nice fancy cover and everything. I opened to the first page, blank - the second page - blank..the middle of the book? Blank!

I picture this $300 manual to be very comparable.

mattmaroon• 17 years ago

"To this day I simply can’t believe that someone out there exists who would con and manipulate people like this"

Yeah, truly shocking that there could be someone out there able to manipulate people who think The Secret is "just so true".

melito• 17 years ago

All parties involved seem super flakey.

Even though he was made out to be the 'villian' and is in fact probably a douche, the guy running the zen dojo or whatever sounds like he has a good thing goin.

This story has given me the idea of collecting stories about failed startups from the perspective of those involved.

That way if you find yourself in a shifty situation you have something to consult that should confirm whether or not you're in a textbook train wreck.

brown9-22• 17 years ago

What rubs me the wrong way about this story is all the references to "the iPhone millionaires" and "the millions to be made" and the "iPhone gold rush".

Gee, when you're only aim is to get rich quick, it's not too surprising that you are vulnerable to being taken for others than want to get rich even quicker.

flipper• 17 years ago

This article reads like a case story out of 'Winning Through Intimidation' by Robert J. Ringer (a book anyone who is thinking about starting a startup should read). "Tanner" sounds like a Type Number 2 Master Intimidator.

The author escaped with only getting the tips chopped off a couple of fingers rather than losing his whole hand (read the book and you'll understand what I mean).

alttab4• 17 years ago

I am the author and co-founder of this failed start up. And you guys say a lot of things that were definitely true. The comments here made me realize I left some important information out. I'll try to clear these things up here.

1. I never really thought that what we were doing was revolutionary. We were creating cool looking applications on a new device and that excited me. Once we had a reputable name that had the marketing acumen, I thought that we could push a lot of $0.99 units.

2. The poster about saying I stayed around for the loyalty of my friend was spot on. I probably stayed too long, and in the future I will definitely pick my friends a little more carefully. His arrogance didn't help.

3. My fascination with "The Secret" was true and simple naivety. Had I had walked around the block a couple more times I would have realized that this was complete snake oil wrapped in a snappy, marketable message.

4. "Tanner" hasn't been that successful since. His business relationship with Ryan rotted after the poor handling of their eventual contract and his Dojo's attendance has been suffering as it has apparently clearly affected his charismatic performance. I've been told he is in a mountain of personal debt as well as over $100,000 in the hole at his Dojo. This is merely what I was told by a source I trust but take from it what you will.

5. I made a lot of dumb mistakes and wanted to "play business" like it was some game and that if I sat in my room and wrote code all day the mail man would deliver a pile of money to my doorstep. I was an ass hat and I've learned a great deal of humility since then.

6. It was emotional, and maybe I played that up a bit here. Its a personal story and its taken a long time to get over it. Simply knowing I've had people read my story is enough. It was my first true business endeavor outside the safety of a large corporate structure and I got burned.

7. The company is still operating, but still haven't managed to get even one of their 12 applications onto the app store. They have since produced zero revenue, the seed money was probably a lie from Tanner, and there's so many cuts in the pie these days that I'd be surprised if anyone made their investment back.

Half of me had wished I had posted for advice here earlier on, I get the feeling I would have been served up a large slice of reality pie. I'm doing my best not to walk around with my head so far up my own ass this time around, seeking professional advice where needed.

Thanks for taking the interest and time to read and respond to my story. Hopefully someone avoids making the same mistakes I did from it.

cubicle67• 17 years ago

kudos for your honesty

wisty• 17 years ago

There's one point this highlights - even if you're working with friends, you must have a contract.

You don't need a lawyer to write it (it's better, but in the early stages you can economize), but anything written on paper that divvies up the IP amongst the founders will prevent a lot of heartache later on.

I guess that guy would have complained about creating "negative energy" though.

schammy• 17 years ago

A lot of you are being pretty hard on this guy. It's a good story, and if you don't have business experience you can learn a lesson from it.

Just because he liked "The Secret" doesn't mean he's some asshat who deserved what he got. Hindsight is 20/20 and it's obvious he had a lot of reservations throughout the ordeal. But when you're dealing with a good con artist (I have), they can make you believe anything. Reading this story brought back a lot of memories of what I went through. But I could see all the sings from a mile away while I was reading it.

Once you've been conned, it will never happen to you again. Unless you're an idiot.

michael_c• 17 years ago

Scott, thanks for the story and I sympathize that things did not work out as well as you would have hoped.

BUT having re-read your post a few times, and obviously not being involved at all, I am not sure that Tanner is the malicious con man you make him out to be.

ie being a douche != a con man && things not working out != being manipulated.

For example: 1. Additional cut to Zen Club - Zen Club the company is separate to Tanner, the individual. If both are contributing to the App Company (eg you mention the brand, the photoshoot etc), then it seems reasonable to both to be part of the split. I agree that you should probably have negotiated both Tanner's and Zen Club's contributions together, but it seems irrelevant whether you split it as Tanner gets X% and Zen Club gets Y%, or Tanner gets (X + Y)% and Zen Club gets 0%.

2. "We started reporting to Tanner like a boss" and Ryan always agreeing with him. - These seem to be interpersonal dynamics that doesn't necessarily point to Tanner being a con man. I assume there was no backroom deal where Tanner paid Ryan $X to always agree with him etc, in which case Ryan made his own decisions which simply happened to disagree with you. Similarly if there were no deals that forced you to start "reporting" to Tanner, then it seems like everybody simply fell into this dynamic.

3. Invisible Lawyer and Boilerplate Contract - Did you ask to meet the lawyer? - The lawyer is presumably busy, and you mentioned he wasn't being paid for his services, so the fact that you got a fairly generic first draft and the whole process took a long time doesn't mean anybody was being malicious. Even in the best circumstances contracts take some time and always with multiple revisions first.

4. If the runway ran out you would have no income while Tanner still had his gym. - you not having an income if the runway runs out is a standard risk for founding a startup - yes Tanner still has his gym. He presumably spent some separate time and investment to set up and keep running, so this also doesn't sound malicious.

5. After you quit, domain / email / ftp accounts were changed - standard practice I would think

6. Ryan got 5% - I agree it does seem low, but it is possible this is a fair deal. Think of it this way - the investor put in $250K, Ryan did not put in any money, was working part-time, and none of the apps got approved into the app store (is that a technical responsibility?).

7. Other 'grievances' (eg drives BMW, not using real names, acting career, charging you for an 'overpriced' gym membership and DVD series, alcohol, charging for $30 pillows, 'squatting' in the spare office, etc) - apart from adding color to your story these details are irrelevant at best - at worst it makes Tanner a douche, or wasteful with money, but does not necessarily make him a con man

Obviously I don't know the full story so take what I wrote as you will. It just seems a shame if you take the belief that you were conned (and more importantly, take an overly-sceptical / distrusting view into your next project where it could become self-fulfilling) based on only 1 of several possible interpretations of what happened.

alttab4• 17 years ago

You make a lot of great points and in some cases I will agree with you.

The cut to Zen club had little to nothing to do with its brand or the photoshoot. While it was "helping" - I will agree - he owned the gym and blurred the lines between what was his partnership and what was the gym - and wanted an equal share cut between him AND his gym.

2. Absolutely true.

3. I asked to meet the lawyer plenty of times. If he was the best partnership lawyer in town, I would think a google search would turn his name up. It didn't.

4. You make a good point and I realized those risks. That said I wasn't confident enough that I wouldn't get screwed as I had already set the precedent for how I could be pushed around. Plus, its not like HE was quitting his gym to go full time with us, he simply wanted it done faster and didn't care if it put us into harms way.

5. Yes, yes and yes. I was stupid for not getting my e-mails and records off the servers first, but its like at this point my friend didn't even trust me. This was an emotional response.

6. The investor did not put up $250,000, in fact, he barely even marketed the product to his own consumer base (so far, Nov 2009), which was the only reason I was playing along because I thought it would work (which is still a mistake).

7.I agree here too. There were other comments as well. He was taking a business coaching course run by the Joe Ansaldi and a couple of times said to us "There is a science to making money. Like you hear sometimes, step 1, 2, 3, profit. Works every time" There were similarly scammy things he said that rubbed me the wrong way.

You have a completely unique and valid take on the situation. My emotions blurred a lot what happened and while accurate from my perspective, wasn't necessarily everything.

Thanks for your input, as it is posts like these that help me get the full story and stop my inner-brooding on getting pounded in the rear by business partners (my failure was from a long series of my own mistakes).

iStoleYourStartup: A story of an iPhone Company Con Man

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