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Holy crap. The only way forward for Bessemer et al. VCs is to immediately withdraw their funding for this “company” and cut all ties in order to prove that they
by yingw787 8y ago
Holy crap. The only way forward for Bessemer et al. VCs is to immediately withdraw their funding for this “company” and cut all ties in order to prove that they had no forewarning that this is how their money was being used. There are so few actors this visibly bad that if they didn’t do anything they would become “that guy” everybody avoids, in both the deals and funding space, when orgs do their due diligence.
So they could choose to not do anything, which means the only companies approaching them in the future are the desperate ones, and they lose the capital anyways to the markets due to a shoddy portfolio.
Don’t knife your intangibles.
- jacquesm 8y agoBessemer & Co. would not spend this kind of money without doing DD to the point where their competitive review would have snagged the OP's efforts. So most likely they know.
- gnicholas 8y agoSounds like VCs need a plagiarism detector for websites (think TurnItIn) to make sure their portfolio companies aren't blatant ripoffs.
- jacquesm 8y agoWe always check this sort of stuff for our customers, and more than once it has triggered.
- gnicholas 8y agoHow do you do it? Just using Google on various phrases? Are you checking for your customers our on your customers? If the latter, why do you care (most vendors wouldn't).
- jacquesm 8y ago> How do you do it? We have a team of people that exhaustively search for players in the same space. The 'Google on various phrases' is more or less the gist of it, the more unique the better. It's not an automated process so fairly time consuming. > Are you checking for your customers our on your customers? We do not check on our customers, we check for our customers. And usually pre-investment. > If the latter, why do you care (most vendors wouldn't). You are probably wrong about that, copying something verbatim will get you a C&D pdq in most cases.
- gnicholas 8y agoThanks for clarifying! I'm still confused as to why a vendor would check on a customer or care if they're infringing. I sell a SaaS reading product and don't care what my customers are using it to read, or whether their own websites our products contain any infringing content.
- jacquesm 8y ago> I sell a SaaS reading product and don't care what my customers are using it to read, or whether their own websites our products contain any infringing content. What they are using your product for might very well turn into 'aiding and abetting', make sure your TOS is up to snuff and that you have it checked over by a lawyer to verify that if your customers do something illegal with your service you don't end up being on the hook. As for the second, that might be a good hint that your customer is not above-board and will bear closer watching.
- gnicholas 8y agoI'm not sure I follow (and I'm a lawyer). If someone uses my chrome extension to research how to rob a bank, and then they go do it, what is the legal theory that puts me at risk? Is Google at risk because they're using chrome? Or the computer manufacturer? Napster is one end of the spectrum, but I'm not sure how anything short of that is a legal risk. Are there cases or legal theories I'm unaware of?
- andechs 8y agoJust because something is a blatant ripoff, doesn't mean it's not a good investment. VCs are doing investments based on predicted ROI, not uniqueness. Lyft and Uber are extremely similar, but the particulars of the business are much more relevant to the investment opportunity.
- gnicholas 8y agoSure, but neither of them was illegally copying aspects of the others' business. Business models are not protectable.
- matz1 8y agoillegal or not is for the court to decide.
- gnicholas 8y agoAre you suggesting that the article isn't describing an open and shut case, our that business models may in fact be protectable? As a former lawyer, I would say that neither of these is even a remotely close call (assuming the description is accurate).
- matz1 8y agoYes, that depends on how good are their lawyer argue it in court. Maybe they know something we don't.
- jacquesm 8y agoTechnically, yes. But practically, in cases so blatantly obvious it is fine to draw your own conclusion. In one court case - where a company I had a majority stake in was the plaintiff - the defendant basically had to admit that they copied the code and content of our website. Their defense: 'we did not copy it from them, we copied it from someone else' (without specifying what the 'someone else' was). Needless to say that did not end well, we were surprised they actually went to court but since this was in a country where the loser pays the court costs of the winner that did not overly bother me.
- huffmsa 8y agoTurnItIn resells all of the data you submit to them. Any paper a student is required to sent to the service (it's not optional at schools where it's in place) is added to the dataset which they ultimately profit from, with nothing paid back to the students who own the original IP. It'd be like YouTube using your videos for ContentId, but not having any avenue for you to profit from said videos. Oh and uploading to Youtube would be mandatory. There was a lawsuit about this, decided on TurnItIn's side, but I still disagree.
- stanleydrew 8y agoBessemer & Co. likely know that Otonomo is building a drop-in replacement copy of Smartcar's API. I'm not sure there's anything terribly controversial about that, although reasonable people may disagree. Bessemer & Co. probably don't know that the docs are literally being copied though.
- jacquesm 8y agoA literal copy would show up during tech DD. If they did not flag it that's their problem, if they did flag it it is still their problem.
- WillPostForFood 8y agoHow do we know that the investment predates the public api documentation?
- jacquesm 8y agoBessemer's last round was a series 'B', by then the bits and pieces would have all been in place, whether it was public or not isn't even all that important. It does raise an interesting question though: how will the OP prove that their work is the original, that might hinge on a lot of unknowns, more difficult still if the work was originally lifted by an employee of the company and then passed on to Otonomo with them being the unwitting recipients.
- WillPostForFood 8y agoYes, seems likely, but user documentation often comes really late in the process.
- ch4ch4 8y agoHowever, the Smartcar CEO replied in another thread that they use Readme.io for their docs, which can autogenerate using Swagger, which automatically parses hints in code. So it is definitely possible that the codebase got stolen and the perps missed changing a few hints, resulting in the Otonomo samples generating identical sample code, as shown.
- FailMore 8y agoThey would not have looked at the API docs of either the startup they are investing in or their competitor (99.95%). I've worked as VC and technical detail at such a level is basically non existent. Economics, team, market take up the vast majority of the effort.
- jacquesm 8y agoWe do technical due diligence, because at the VCs this specialty is usually not present.
- leesalminen 8y agoI’ve been through a technical due diligence for an acquisition and the process was severely lacking. In total it took ~8 hours (compared to ~80 for financial diligence). It felt like a once-over smoke test to eek out any major red flags. I almost wish you had done my technical diligence, Jacques. I spent a week preparing for it and was very proud of what I’d built.
- jacquesm 8y agoWe get that a lot actually. We do quite a few 'B' and later rounds (43 deals last year!) and apparently we're the hardest exam to pass for, but the people we work with are generally really happy that they finally get to show off all their hard work to people who really appreciate what they've done. It's five of us for a week with a super intensive interview on the Wednesday and it is always the highlight of the week for me. What is also neat is that most of these turn into very long term relationships post deal, not necessarily financial ones, just that the interview day makes the whole thing a two-way street where the tech team will occasionally reach out when they are stumped on some problem or need outsider perspective.
- jjeaff 8y agoYa, we got very close to closing with a VC in SV. Their technical due diligence consisted of one of their contacts from Google calling and asking me questions about our tech stack. It appeared that the Google dev derailed the deal because we were building our product in PHP. That's how they decided we must not know what we are talking about.
- foobiekr 8y agoGetting onboard a company where there is a fast growing but not established market leader might even be a sound investment. Just add more thrust.
- tomnipotent 8y ago> without doing DD It's a Series A, serious DD doesn't usually happen this early and a jr. analyst with a finance background wouldn't catch something like this.
- jacquesm 8y agoThe latest participation by Bessemer was a series 'B' as far as I can tell: https://otonomo.io/pr/otonomo-announces-25-million-strategic-investment-to-expand-the-worlds-first-connected-car-services-platform/ https://otonomo.io/pr/otonomo-announces-25-million-strategic... And even then, series 'A' requires DD as much (and sometimes more so) as later rounds.
- tomnipotent 8y agoVCs are not banks and are not staffed like banks, and they don't do DD like banks. I've been in the weeds in six VC rounds and through an IPO, you'll be incredibly disappointed what passes for DD for VCs.
- jacquesm 8y ago> you'll be incredibly disappointed what passes for DD for VCs. There are lots of VCs, some are better at this than others, some really suck. On the whole though they tend to do their homework at least on the commercial front and a competitor with a feature-for-feature identical offering would have most likely been spotted even at the 'not so good ones', irrespective of whether or not the API docs were made public. The interesting questions to me are: - what was the exact timeline? - was an (ex) employee of the company involved in the copying? - is Otonomo itself aware of the fact that they have this sitting on their website? - How far down does it go? Is it just the API documentation, or also the underlying code?
- sgustard 8y agoVCs love to tout how they reject 99.9% of their pitches. What's the competitive advantage for them to fund an investment with minimal technical review? Wouldn't avoiding the next Theranos be worth it?
- jforman 8y agoThere is no such thing as "withdrawing funding" in this context. The Series A is long closed and Bessemer is deeply entwined with the company's governance. The most severe move they could take would be to enforce whatever contractual mechanisms they have to block additional financing pending an independent investigation and replacement of responsible parties. Or they could directly force the matter if investors hold a majority Board vote.
- cobbzilla 8y agoIf the investors have a board and shareholder majority (which they may not), and really thought this was a terrible investment decision that they want to get out of, then they could vote to wind down the company immediately, redistributing the assets pro-rata (with possible liquidation preferences). This would be roughly the same as "withdrawing funding". They could recoup a huge part of their investment before things get worse. But again, afaik this requires a shareholder majority, barring any strings/triggers on the investment terms that could be activated.
- PunchTornado 8y agoCan someone explain me what illegality did they do? Is it illegal to just copy some docs from somewhere on the web? are APIs copyrightable?
- ceejayoz 8y agoIn the US, whether APIs are copyrightable is a question being currently litigated. https://en.wikipedia.org/wiki/Oracle_America,_Inc._v._Google,_Inc https://en.wikipedia.org/wiki/Oracle_America,_Inc._v._Google.... The latest decision in that saga is that yes, they can be. Whether that holds up in the Supreme Court is an open question. Most of us hope it doesn't, I suspect. Copying documentation is definitely a copyright violation. Similar situation exists with recipes - a list of ingredients can't be copyrighted, but the wording of the steps can be. You have to at least put it in your own words.
- deleted 8y ago[deleted]
- Androider 8y agoThe docs are definitely copyrighted. Same as if you wrote a blog post and they copied it, it would be copyright infringement. Otonomo sounds like a deeply unethical and shady company. If I was doing any kind of business with them I would not continue to do so. While it would be hard to sue them, hopefully when you Google them in the future the fact they ripped of Smartcar will be one of the first results.
- icedchai 8y agoAs it turns out, probably nothing. Their API docs are apparently open source.
- edanm 8y ago> The only way forward for Bessemer et al. VCs is to immediately withdraw their funding for this “company” and cut all ties in order to prove that they had no forewarning that this is how their money was being used. I mean, you might eventually be right. But why "immediately"? What's wrong with taking some time to talk to people, hear the other side, find out more details, do a proper investigation, and then decide what to do? One side of a story is never the whole story.