I didn't know Jody, so I won't comment on him personally. Speaking as a former investor regarding the financial situation though...never ever ever ever. Finan

I didn't know Jody, so I won't comment on him personally. Speaking as a former investor regarding the financial situation though...never ever ever ever. Financial controls aren't important just because VCs are greedy: they keep companies alive and keep you out of court (or jail). I've seen situations in which cash didn't quite reconcile to what was expected; in some, the people involved made restitution and were fired. In others, they went to prison. A company with no effective financial control is flying blind and, someday, will run into the mountain in the clouds. The article identifies some key warning signs. 1. "...not even sharing the company's financial information with his co-founder, Emily Blakeney. Sources admit that was strange in retrospect. ... Sources say Sherman was the only person with access to the company's bank account and invoices. Only he knew how much cash Ecomom was using up every month." In many startups, any payment over $X requires dual signatures for exactly this reason. Also, contract bookkeepers aren't expensive (contract CFOs can be, but they're worth it). A second set of eyes--and hands--on the corporate checkbook is crucial. Also, why aren't investors aren't looking at the cash position every month? That is the one critical number--the only one with sudden corporate death at stake--for every single Board meeting until the company is solidly and predictably cash flow positive. 2. "'There wasn't ever full disclosure, and that leads me to believe there was a reason he didn't want anyone to have full disclosure,' says a source." Totally 100% unacceptable. The key execs and the board should be looking at the financials, at least at the bank account/quickbooks level, every month and management should be reviewing them more frequently yet. Especially in a metrics-driven business like e-commerce that requires cash investments for inventory and advertising. 3. "He put the company's inventory on his credit card, a black American Express, which caused him to go into deeper personal debt. He refused to get a corporate card, despite complaining to colleagues when AmEx would call and question company expenses." A huge red flag. If there is intermingling of corporate and personal finances--whether this extreme or just the CEO's sister's law firm does the legal work--investors and co-founders need to fully understand and ensure it's arms-length. Then they need to disentangle the two right away. If you own 100% of the company, feel free to run it "out of your back pocket." But with outside shareholders, whether employees or investors, such a practice is indefensible. In my experience, intertwined personal and professional finances is often the tip of the iceberg in terms of accounting shenanigans. I don't mean to imply that investors should have seen this coming or that Jody set out to do this. But every experienced investor who's been burned this way--and many have--makes financial control issues a topic at the first (and every subsequent) board meeting post-investment until adequate controls are in place.