Epinion co-founders take it to court

Posted on January 28, 2005 
Filed Under Uncategorized

I was recently recommended by a friend to use Banana Boat After Sun lotion to help with my daughter’s eczema. I immediately checked it up on epinions.com and came up with this. The reviews were mostly positive.

Epinions hasn’t let me down yet. It was one of the early forms of “shared knowledge” websites that made the net really useful.

It was a surprise to find out that three of the co-founders are now suing the venture caps that funded them and another co-founder who allegedly screwed them on a deal by rendering their shares worthless when Google was on the horizon.

“It’s rare for the founders of a company to sue their financial backers,” said Paul T. Friedman, a partner at Morrison & Foerster in San Francisco. “Venture is a small world in which relationships are very important. Most people find a way to avoid disputes so they can live another day.”

The basis for the suit is the proposal made in February 2003 to merge Epinions and DealTime, a comparison-pricing site. By then four of the company’s five founders–Naval Ravikant, Ramanathan Guha, Mike Speiser and Dion Lim, who did not join the suit–had left the company but still owned a total of more than six million shares of Epinions common stock.

The four owned enough shares to scuttle the merger but gave their blessing, even though it meant valuing those shares at zero. At the time, investors holding preferred shares, including Benchmark and August Capital, had a claim on the $45 million they had invested collectively.

The four founders, the suit says, were led to believe that the company was worth $23 million to $38 million, making common stock worthless.

I guess some of us who missed out on the dotcom rise are still itchy and keen on going back in time and riding the wave again. All together now…..“Day O! Day-ay-ay O! Day light come and me wanna go home!”

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