Angel Investment Gone Bad - A "Successful Failure"

Published: 3/15/2007 10:54:34 AM

A while back I wrote about a company that I made an angel investment in that imploded when the founder clashed with the new CEO and Board.  The founder went to court, dissolved the board and fired the CEO.  The convertible note holders - us - called the notes and the company was on a terminal dive.  I promised to share the final outcome of the saga. 

Since the founder passionately believed that his original approach was the correct one, and since there was only about 20% of our original investment still in the company's bank account, we negotiated a 20% payoff in return for a warrant to purchase the difference at a second follow-on financing if the company succeeded in securing it.  We also obtained a payback of up to 200% of our remaining balance if the company was sold at a profit.

The rationale was that since the company had used 80% of our money for further development of their system, it was only fair that we receive some of the upside if it ever came about.  With this founder, we're not holding our breath, but at least we received some money back and have the "hope" of an upside.  Stranger things have happened.

Don Jones



Don Jones
CEO, VentureDeal

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