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It's interesting how nobody talks about due-diligence being completely broken. We raised $$$ from many VCs and the DD for some of them was crazy: line item by l

It's interesting how nobody talks about due-diligence being completely broken. We raised $$$ from many VCs and the DD for some of them was crazy: line item by line item with calls to customers etc. Tech folks were on phone with me and had to explain them stuff step by step, revealing a lot of confidential recipes. Also did this for bigger customers. And the $175M deal.. isn't there an earnout? Like $10M cash now, 1/4*$175 wired on 1yr cliff, and then the rest over 4 years if some milestones are hit? The whole thing looks weird.

Aurornis 1y ago
> It's interesting how nobody talks about due-diligence being completely broken. The majority of the talk around this case has been about the due diligence failures. The judge even called it out. Consumer businesses are harder to vet. It's not like a B2B with a dozen top customers where you can call them all and confirm that sales are happening. Non-response and customer churn is expected to be a high and changing number. From what I read she also invoked various privacy law excuses to give them the run-around while they were pressured to close the deal. But JPMorgan's failures don't excuse the criminal actions. If someone enters your house and steals your computer, it doesn't matter if you negligently left the door unlocked. A crime is a crime.
- NickC25 1y ago
  >From what I read she also invoked various privacy law excuses to give them the run-around while they were pressured to close the deal. And that should have been a massive red flag for JPMC. They should have nope'd out of that deal on the spot. I run a hybrid B2B and B2C consumer packaged good company. I have a few small investors. They know who my top clients are, because they ask in good faith, and I answer in good faith.
  - Aurornis 1y ago
    > I run a hybrid B2B and B2C consumer packaged good company. I have a few small investors. They know who my top clients are, because they ask in good faith, and I answer in good faith. Right, because it's easy to share your customer list when you have a small number of customers and they are repeat customers. Her company helped with student loans. Her customers were mostly one-time customers. The customer count was supposed to be indicative of how many new college students they could expect to sign up each year.
    - dboreham 1y ago
      Right but the privacy law excuse is nonsense. All such laws (possible exception of medical data) allow for 3rd parties to be "read in" on the data for legitimate purposes. Source: worked as a consultant for companies with private data for 20 years.
      - Ifkaluva 1y ago
        I seem to remember she actively forged accounts. Even funded a genAI project with a university professor on how to credibly forge accounts
jedimastert 1y ago
Oh don't worry, the judge absolutely LIT UP JPMorgan in the judgement. This is only a taste > Still, the judge criticized the bank, saying “they have a lot to blame themselves” for after failing to do adequate due diligence. He quickly added, though, that he was “punishing her conduct and not JPMorgan’s stupidity."
qingcharles 1y ago
I think there is so many factors involved. I've been in ones where they are cutting the check before the elevator pitch has finished. If the founders are rock stars with prior receipts, then that DD goes out of the window. Especially if there is likely to be a ton of competition.
yokumfloster 1y ago
That’s not how it works in venture. Investors want to be rewarded immediately. There might be an earn-out, but it’s relatively minor as compared to the purchase price – maybe 10% to 25%. And just as often, it’s not an earn-out of the original purchase price – it’s an incentive to outperform on top of the purchase price.
TwoNineFive 1y ago
Anyone who was an adult in this industry back in 2021 remembers the wacky funding shit going on. This is not surprising in any way.
blitzar 1y ago
Bringing the court case and winning it is to demonstrate a lack of professional competence from JP Morgan. The team should be fired for cause.
- cindyllm 1y ago
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Aurornis 1y ago

> It's interesting how nobody talks about due-diligence being completely broken. The majority of the talk around this case has been about the due diligence failures. The judge even called it out. Consumer businesses are harder to vet. It's not like a B2B with a dozen top customers where you can call them all and confirm that sales are happening. Non-response and customer churn is expected to be a high and changing number. From what I read she also invoked various privacy law excuses to give them the run-around while they were pressured to close the deal. But JPMorgan's failures don't excuse the criminal actions. If someone enters your house and steals your computer, it doesn't matter if you negligently left the door unlocked. A crime is a crime.

NickC25 1y ago
>From what I read she also invoked various privacy law excuses to give them the run-around while they were pressured to close the deal. And that should have been a massive red flag for JPMC. They should have nope'd out of that deal on the spot. I run a hybrid B2B and B2C consumer packaged good company. I have a few small investors. They know who my top clients are, because they ask in good faith, and I answer in good faith.
- Aurornis 1y ago
  > I run a hybrid B2B and B2C consumer packaged good company. I have a few small investors. They know who my top clients are, because they ask in good faith, and I answer in good faith. Right, because it's easy to share your customer list when you have a small number of customers and they are repeat customers. Her company helped with student loans. Her customers were mostly one-time customers. The customer count was supposed to be indicative of how many new college students they could expect to sign up each year.
  - dboreham 1y ago
    Right but the privacy law excuse is nonsense. All such laws (possible exception of medical data) allow for 3rd parties to be "read in" on the data for legitimate purposes. Source: worked as a consultant for companies with private data for 20 years.
    - Ifkaluva 1y ago
      I seem to remember she actively forged accounts. Even funded a genAI project with a university professor on how to credibly forge accounts

jedimastert 1y ago

Oh don't worry, the judge absolutely LIT UP JPMorgan in the judgement. This is only a taste > Still, the judge criticized the bank, saying “they have a lot to blame themselves” for after failing to do adequate due diligence. He quickly added, though, that he was “punishing her conduct and not JPMorgan’s stupidity."

qingcharles 1y ago

I think there is so many factors involved. I've been in ones where they are cutting the check before the elevator pitch has finished. If the founders are rock stars with prior receipts, then that DD goes out of the window. Especially if there is likely to be a ton of competition.

yokumfloster 1y ago

That’s not how it works in venture. Investors want to be rewarded immediately. There might be an earn-out, but it’s relatively minor as compared to the purchase price – maybe 10% to 25%. And just as often, it’s not an earn-out of the original purchase price – it’s an incentive to outperform on top of the purchase price.

TwoNineFive 1y ago

Anyone who was an adult in this industry back in 2021 remembers the wacky funding shit going on. This is not surprising in any way.

blitzar 1y ago

Bringing the court case and winning it is to demonstrate a lack of professional competence from JP Morgan. The team should be fired for cause.

cindyllm 1y ago
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