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Why You Don’t Want to Give Financial Information to All of Your Investors

154 points| sahara | 11 years ago |bothsidesofthetable.com

39 comments

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[+] EvanMiller|11 years ago|reply
Why You Don't Want To Use The Panini Presses in the Downstairs Cafeteria (bothsidesofthesandwich.com)

We all know the downstairs cafeteria is changing fast. Others have discussed the new panini presses and greater variety of pizza recently added to the cafeteria menu. Most of these developments have benefited diners, although I've previously written about the darker side of things in these blog posts:

* Why I Don't Love Meat-Lovers Pizza

* Ham Is A Sandwich Best Served Cold

Now, you might think that the panini presses to the downstairs cafeteria are an unmitigated good. They only increases the number of things you're able to eat, right? Hot sandwiches in addition to cold?

Wrong.

Let me give you an example from just last week.

I was at the panini machine heating up the Mark Suster Special -- an culinary invention whose ingredients, until recently, were known only to myself -- when a classmate of mine asked if he could put his sandwich into the machine at the same time. Normally I don't let other people use the panini machine at the same time as me, since it takes longer to heat the sandwiches with two in there instead of just one. But sometimes, their sandwich ingredients will infuse the Mark Suster Special with extra aromatic zest, so this time I agreed.

The sandwich turned out fine. Or so I thought at first. What I didn't know was that this individual -- who I will not name, but who sits in the front row of Mr. Boyd's 3rd period English class and the last row of Mr. Lowry's 7th period chemistry class -- would later go around claiming that he invented the Mark Suster Special and its near-perfect ratio of meat to cheese. In fact he divulged this ratio to everyone sitting in the second row of Mr. Vining's 4th period algebra class.

When I found out about this, I was flabbergasted. This classmate was trying to get all his friends to try out a sandwich that wasn't really his -- a clear violation of my intellunchual property rights. I only found out about it because this unnamed individual was bragging about the sandwich while sitting in the second row of Mrs. Roth's 2nd period history class, just to the left of my friend Ken.

I don't know how this will play out, but I've already filed a complaint with the appropriate authorities. The only reason I tell you this story is that it's becoming more and more clear to me that you can get "burned" by panini presses in more ways than one. If you absolutely must use the panini press, it's best to wrap your sandwich in tin foil first, lest unnamed individuals -- who are co-captain of the JV lacrosse team -- try to claim your sandwich idea as their own.

These days, it seems the thieves aren't just in the second-floor study area. They're in the downstairs cafeteria as well.

[+] omarkassim|11 years ago|reply
Brilliance.

I'd suggest snagging Bothsidesofthesandwich.com and translating the rest of Mark's content for consumption by the rest of the world. You clearly have a knack for it.

[+] dkarapetyan|11 years ago|reply
This sounds like a story that Cartman would tell in the principal's office.
[+] johnvschmitt|11 years ago|reply
I'm sorry to see evidence of a rare bad actor, but that doesn't warrant holding back critical data from the many good actors who want to invest.

Simple P&L statement & balance sheet: Provide it to all investors who ask. That's just basic common sense.

Would YOU invest in a company that wouldn't even tell you these basic financial metrics? Would this author invest without it?

And, I've seen far too many "startups" who don't even know what simple financial things are (balance sheet, P&L, cash-flow, margin), and that illiteracy is NOT going to end well.

So, the pain may be real, but the advice given is not IMO correct.

[+] DevX101|11 years ago|reply
Agreed 100%. Suster is way off base here with his conclusions. Any investor worth his/her salt will need to review basic financial info before putting money down.

If you can't trust an accredited investor with your financial data then don't take their money.

And if that investor inappropriately divulges confidential information, then take it up with a lawyer as it seems the company in question is in the process of doing right now.

[+] lpolovets|11 years ago|reply
I think it really sucks that there are shady investors out there, but I think the solution should be outing them, not punishing good investors. This blog post by Derek Sivers comes to mind: http://sivers.org/punish
[+] unknown|11 years ago|reply

[deleted]

[+] srcmap|11 years ago|reply
"VC and angles don't sign NDA."

Is it only at the beginning? Would there be some kind confidential agreement in place to guard against these kind of leak at some point?

[+] softdev12|11 years ago|reply
I'm of the opinion that it's perfectly fine for the author not to name names. While there was a clear message that this VC would never want to work with the "unnamed" name, there are countless examples of people being forced to work together in the future, even after making such claims. Not naming names provides a degree of wiggle room if such a case arises.

I may be offbase here, but I read all the details provided by the author as a sort of trail to be used for an implicit identification. I'm guessing the author is smart enough to know that these details could be used, given all the work displayed for every Satoshi post on the board.

So, I read the post as the author not explicitly naming the investor, but at the same time, providing enough information for someone motivated enough to track them down. It's the mark of a clever investor, having it both ways.

[+] kyro|11 years ago|reply
Bringing on a VC is such a huge commitment and with capital becoming easier and easier to come by, I'm often baffled by why there's currently no place online to openly talk about investors and others' experiences with them.

It seems terribly one-sided that investors demand company financials, founder profiles, go through the entire due diligence process, while the community is relatively hush-hush about openly discussing bad experiences and shitty investors.

[+] jacques_chester|11 years ago|reply
> I'm often baffled by why there's currently no place online to openly talk about investors and others' experiences with them.

Defamation laws are, depending on where you are, very powerful and very expensive to defend.

[+] ajhit406|11 years ago|reply
The tacit identification in the post is an interesting strategy. Why not just explicitly identify the individual? Are there legal implications here or is he trying to manufacture more drama by getting the reader more involved?
[+] emcarey|11 years ago|reply
i think in general, given this landscape, it's just safer to publish without 'naming names' as a way to also protect the company. The last thing all the investors would want would be for the company to get a bad name for leaking information to one bad investor- putting the fault on the founder for his or her mistake, which takes away from the product and team with a silly scandal.
[+] elsewhen|11 years ago|reply
i presume he doesn't want to be the one to out the guy, which might be viewed negatively. instead, he gave just enough details to let someone else to do the outing.
[+] elsewhen|11 years ago|reply
although he didn't out the individual, i'm surprised that Suster made it so easy to figure out who he is speaking about by disclosing so many details.
[+] mathattack|11 years ago|reply
Is it legal to not share 100% of the information with all investors at the same time? Or is this just a requirement of public companies?

I respect the OP, so I assume it has to be legal for private companies, but it would be good to get confirmation.

[+] nroets|11 years ago|reply
I am not a lawyer. The directors can share "inside" information with specific investors and other parties. Those parties then become "insiders" themselves and may not buy or sell shares.
[+] tbrooks|11 years ago|reply
What does [flagkilled] mean?
[+] dang|11 years ago|reply
It means a story or comment was killed because enough users flagged it.

We added that recently, partly because people like transparency and partly because I got tired of typing "This post was killed by user flags."

[+] sumbulagha|11 years ago|reply
They're posts someone on a power trip hid, you can see them by enabling showdead from your profile.
[+] throwaway77077|11 years ago|reply

[deleted]

[+] sdrothrock|11 years ago|reply
> If someone's a bad actor, just do us all a favor and name the bad actor.

I agree with this, but accusing someone when you're not 100% sure and only have circumstantial evidence seems even worse.

[+] abduhl|11 years ago|reply

[deleted]

[+] pbiggar|11 years ago|reply
The HN guidelines don't discuss whether it's OK to post information about individuals like this. @dang, if you're here, can we make it explicit that this isn't OK on HN?

[disclosure: I don't know the doxer, doxee, or Mark Suster] [edit: I thought doxing was the word for this - have clarified]