Ask HN: Investor went dark after getting startup financial information

[ohwhataweb]

Our 11 person startup had an expression of interest from quite a reputable VC and we had few months of communication regarding growth, revenues etc.

Finally the VC agreed to invest he wanted to do due-diligence by going through the customer's list rather than checking our business bank accounts. I was a bit hesitant but wanted the funding to go through, to take my mind off it and focus on the startup.

I sent the list of customers, their contact details and the revenues from each of them and the investor just vanished after that.

I know PG said that in silicon valley a verbal commitment is as good as a deal. This VC gave us verbal and email commitment and then vanished without the common courtesy of explaining why.

There has been no response to my multiple emails or phone calls. The VC is very well known and not a flyby shop.

The main issue is that the investor already has a startup in his cohort that is in the same space as us. Few months later my customers started receiving emails from this other startup.

I have no idea how to ask this VC , who has infinitely more money and power than our startup, to destroy all of our data and not use it in any way whatsoever.

I don't want the funding and I don't want to burn the bridges but I want to protect our customer data.

[mchannon]

Sounds like you got mugged, and you're trying to decide if you got mugged.

The VC obviously got what they wanted, so take the hint. The only recourse you have at this point is legal- something like tortious interference with contract if you can prove they poached your customers. You might be able to put together a fraud case if you can prove the loss.

Lawyer.

Be sure you name names on thefunded.org so this VC can't bamboozle the next victim as easily.

[ohwhataweb]

I would like to believe that I didn't get mugged and someone or something in the list ticked him off. It would have been nice for him to open up a channel of conversation as the list is genuine and we have bootstrapped our startup so far to profits

[mchannon]

EDIT: it's thefunded.com.

[mapster]

I think he or she had sufficient time to vet your list so send a firm email stating to 'destroy the list and do not share. and that you hope to heard from him/her soon.

if you feel he/she conned you to serve his other master, then name them publicly.

[arjunvpaul]

Unless you have some kinda smoking gun, dont act on this. Move on.

If stealing your customers is as simple finding out who they are and reaching out to them, then you dont have a sustainable business model.

Focus on building your business. Get back to work.

[matt_the_bass]

That sucks but it is possible your conclusion is not correct. Possibly:

- Vc was looking at you bc they already have experience in that market. Maybe they were considering hedging their bets with multiple companies with similar products but decided not to move forward. Now they are just too busy to get back to you. Annoying but not nefarious.

- how did you find your customers? Could the other company have found them the same way? If your product is better then your customers should stay with you. If not, maybe your product is lacking somehow.

- the VC is a D##K and did what you suspect. In that case did you vet the vc at all? Did you check who were their other companies for possible conflicts of interest?

With all due respect, an investor saying their interested verbally does not make for a firm investment.

[2_listerine_pls]

Please... it's quite obvious the VC screwed him:

-The VC firm ONLY cared about the startup's CUSTOMER data. Not the FINACIAL data.

-The startups's customers started getting emails afterwards.

-The VC not only stopped contacting the startup afterwards, the VC refused to answer them.

[ohwhataweb]

True, a verbal commitment is not a deal and the VC had even given an email confirmation.

We found our customers through facebook groups.

Maybe your first scenario is correct. and maybe the other startups found our customers the same way. There is no way to prove anything. That's why all I want is for the VC to delete our list from their emails and servers

[bartozone]

Did you put any kind of NDA in place before sharing confidential information? If so, you can politely remind him that it's appropriate to destroy the data. If not ... well, he sounds like a dick.

I understand not wanting to out this investor too, the truth is, he is more powerful than you and it sucks. The best advice is take it as a lesson, and focus on your startup. You know not to do business with him, and later when he wants in on one of your oversubscribed funding rounds, you can politely point him to earlier conversations when he was not interested. :)

Don't make this into something more than it is. This will not break your business, but making it a big deal when you don't have the power/resources to do so could.

[ohwhataweb]

>Don't make this into something more than it is. This will not break your business, but making it a big deal when you don't have the power/resources to do so could.

This is correct. I totally forgot about them until one of our customer pointed out an email they received from the other startup and wanted to know if we shared our customer's contact with third parties.

It's impossible for us know what's the correct answer here. We have to share customer information for due diligence but does that mean investors are third parties? What if the investor uses this info for their startups?

> on one of your oversubscribed funding rounds

We are not in the silicon valley or even in North America.

[ganeshkrishnan]

NDA is a mood killer. And it would have done nothing in this scenario. Not sure if OP required a NDA but most VC wouldn't progress after asking for NDA

[mullen]

Get a lawyer and talk to them. However, I think the main thing is to work on their reputation. If this VC gets their name tarnished, less people are going to work with them. I know if I was looking for a VC and I knew who this person was, I would not work with them ever.

[ohwhataweb]

>Get a lawyer and talk to them.

Ha! We are a startup from a developing country and our budget of $10 per day of facebook ads is killing us.

[rajacombinator]

Naming and shaming very appropriate here. I see no reason to worry about blacklisting by other scum bags in this person’s network.

[cimmanom]

Speak with a lawyer. You may or may not have a case that will hold up in court, but regardless a lawyer will be able to tell you more about what your options are (including a number of options well short of going to court) and what leverage you do have, as well as potential repercussions.

[saluki]

If a well know VC is interested in your company and resorted to underhanded tactics to get your customer list you must be doing something right.

Lesson learned, you will not make that mistake again.

Move on and continue building and innovating.

[egberts1]

Always see your customer database with baits.

[danieltillett]

I think you mean seed, but yes. The other thing is only provide a subset of your customers.

[x0054]

Exactly. OP should send an "updated" list and see if they take the bait.

[gesman]

When VC == BS

[dale14]

Tricky. I think a firm dissuasion email might make them budge. Something stating, for example:

- The facts - The fact that your customers started receiving emails from his startup - The fact that what he's done is dirty - And that you're contemplating a couple of serious actions, while staying vague.

The idea is to make him react and open dialogue, because the thing is, I don't think you have the resources for an actual legal action, so an off the table deal might be your best shot.

[ohwhataweb]

This is how we can get blacklisted by VCs and they talk to each other which means we are royally screwed even by other VCs