I was the CEO of a fast-growing high-tech company with a wildly successful technology.

I took the company from virtual bankruptcy to a valuation exceeding $100 million in 2
years.

We saved eBay’s brand by developing a fraud detection engine that stopped internet
fraud in its tracks. It was so successful, Forbes published a feature story and eBay
wrote it up in its annual report.

We built the fraud detection systems for State Farm, GEICO, and over 70% of the
insurance industry. Our patented Similarity Search technology later became the
foundational tech for the TSA No-Fly List.

Then came the DotCom Bubble.

We were not a DotCom – like PC.com, Gardentools.com, Whatever.com – whose stratospheric valuations collapsed.

Our VCs invested in that crap.

When DotComs collapsed, the VCs came to me and said “…we are screwed – we need you to GIVE us more stock to offset the valuations that collapsed.”

They wanted me to dilute all the employees, the individual investors – some of whom were local policemen who invested college funds.

I refused, because it was illegal, and it was wrong.

I met with the board and told them this was patently unethical, and I would not do it nor allow it to be done. I told them if they forced the company to do it, I would lead a class action suit to recover the equity for the founders.

At the next board meeting, they fired me and hired someone with zip experience in high tech.

90 days later, this new CEO fired a bunch of developers, forgetting to back up the company’s source code.

A software company’s source code is like the Coca Cola secret recipe – to this day protected in a vault.

The source code is the company – and losing it is the single most catastrophic event that can occur. 

At a staff meeting, the CEO asked why the new logo developed by his girlfriend – who he hired as marketing director – was not showing up in the product screens.

The remaining developers said:

The company LOST THE SOURCE CODE.

The developers he fired scorched the source code, deleted all backups, and the over $100 million company valuation became dust.

In a single action, an incompetent CEO – chosen by the VCs to get them stock they did not buy – lost a $100 million valuation!

The founders and I sued the company – thus the VCs.

It’s called a “derivative lawsuit.” That means the company is suing itself sort of – and it’s very complicated. The bad news for the company, the VCs and the CEO is we moved to discovery. 

They had to protect the fact they lost the source code!

The VC’s investors – the guys who gave them the dough – were going to learn the VCs subsidized about the dumbest act that can happen in the tech world.

They were terrified and we had great fun pulling all of them through knotholes and publishing all over Austin, Texas that these knuckleheads lost the company source code.

We prevailed in several lawsuits returning all the invested money to the outside founding investors.

We got the dough back for the little guys!

The company was later sold for scrap – but there is a fascinating after-story.

Because the idiot CEO lost the source code, the valuable patents became useless.

They have now expired.

They aren’t useless anymore.

Today, our teams are taking some of these expired patents, rebuilding them into a new technology – used in fraud systems in over 20 states.

We are doing it without any VC money – and our company is already valued at over a billion dollars.

VCs are toxic.

VCs are not your friend, they are not a partner.

Find a way to market, without VC money and your chance of success increases dramatically.

And remember to back up the source code.