Relationships between startup founders and their venture investors can get messy. But in a case that messes up to an extreme, a company in Santa Monica, California Sure It is being alleged that its Series A investor launched a very similar, New York-based startup to use privileged information encouragement.
Sure to have further assets that venture firm – 29 years old IA Capital Group For New York – has continued to “disturb” sure that on the right to information that it is no longer entitled to receive, given its conflict of interest.
As he thinks his company is still interested, Shure’s founder and CEO, Wayne Slavin, explains that this is because Shure’s growth is higher than Boost’s. “We’ve had almost 50% headcount through COVID,” Slavin says. Now make sure that the annual recurring revenue is in the “double digit millions” and is profitable, he says Boost hasn’t done that either.
Andy Lerner, a managing partner at IA Capital, who has been with the firm since 1995, disputes Shure’s character of events. “It is very important [to note] We did not intentionally invest in two companies that were direct competitors, ”he said earlier today when asked about Shure’s claims.
Alex Maffeo, a former IA Capital Group investor who sat on Sure’s board before incubating Boost inside the venture firm, then to become its CEO, said in response to Sure’s claims: “We need to be sure There is no knowledge of the situation. , Nor do we get any information about any company in IA’s portfolio. I have not worked at the firm for nearly four years now, and Boost focuses on the same mission for Power Insurtech Startups and other digital distribution partners from the start. We always wish Wayne and his team all the best, but both of our companies thrive in our respective streets. “
So what went on airing here? The conflict between the two sides lasts until around 2017, when IA Capital led the $ 8 million Series A Round for Sure. Specifically, it wrote a $ 2 million check from a fund to the company, whose only limited partner is insurance giant Prudential.
Lerner says that at the time, Shure was a “mobile insurance distributor” focused on items in transit, including “flight insurance, smart phone insurance, baggage insurance”. Slavin says this is incorrect. He says that Shure – which sells its software to big companies like Tesla, Intuit, MasterCard and other customers that use its technology to run its digital insurance programs – has an embedded insurance API soon after the seed Started working on the strategy. The round closed in 2015.
Today Boost provides the same service which may be a coincidence, but Slavin does not think so. In fact, according to both sides, a crack began to emerge soon after IA Capital, which invests only in Insuretech startups, began work on an internal program called “Project Boost” led by Maffeo. The original idea, Slavin says, was that the company needed to bring new insurance products to market to offer capital to the Insuretech startup, and raised $ 40 million for it. When a big round did not benefit, IA Capital and Mephio pivoted and with seed funding from IA Capital, Mephio resigned as an investor and joined Boost Insurance as CEO.
The crucifix of the problem, says Slavin, is that without discussing these moves with Shure, Boost quickly began to “drift into our lanes”.
For Slavin, it was particularly worrying that Maffeo had spent nearly a full year on the board of Shure and understood its possibilities, some of the intricacies of its technology, and what was on its roadmap. Unheard of how to fight back, it decided to implement the provision of its investment documents with IA Capital along with its board to at least enable it to provide IA Capital with the same level of information , To which he was first entitled. By the end of 2019, it stopped sending anything to IA Capital.
She is not seated so well with Lerner, which ensures that Shure and Boost are “not the same,” and that, in any case, because “once they overlap,” her firm took the board. Closed when Shure closed it. Series B round in 2018, a $ 12.5 million financing led by WR Berkeley, a publicly traded insurance holding company.
More, Lerner says, after some “back and forth”, IA Capital agreed to accept more bare-bones “income statements and balance sheets, so we [could] On price and report make sure our LP every quarter. We did not ask for any sensitive information or technical information or who its customers are. We basically just wanted financial information to audit us and value our stake. . . And sure they wanted to send us zero information.
With some hostility on both sides, what happens from here is the biggest question.
Slavin suggests that he was willing to endure the evil regime quietly “the nightmare that we are living and that is [IA Capital] Just won’t accept, “he says. But for the past few days before Christmas, a surprising letter from IA Capital’s lawyers – private shareholders asked for information – went too far, he says.
Earlier this week, he wrote to all of Shure’s shareholders and told them about such behind-the-scenes for the first time. Through Shure’s attorney, Evan Bienstock of Fenwick & West, the company also told IA Capital that if its investor, Prudential, wanted more information about Shure, Shure would provide it directly to the insurance giant. (Prudential did not respond to a request for comment this afternoon.)
“I probably should have stood up early for bullying,” Slavin says. “But it’s really hard when, as a founder, you know that you might need that reference check. You might need a gatekeeper who helps you, even if they are interested in the interests of the company and other shareholders.” Don’t look for interests. “
Meanwhile Lerner suggested that all of this is a major misconception, that IA Capital did not realize that a potential conflict was going on until the boost was “already not going well”.
He added that IA Capital “wants a great relationship with [Sure]. We are sorry that there is a dispute. All we want is for them to send us the minimum information so that we can audit our report to our LP in future. “
Lerner said: “I think we’re fair, and we wanted to make things work. They’re an insured that’s doing a good job, and we’re a big insurer VC, and we’re definitely supportive of them. Can. “
Asked why IA Capital did not sell its shares to existing shareholders, or to settle the situation and make sure to let them buy back, Lerner claimed that his venture company would be willing to sell his shares, but he Said it would first “need something” information to evaluate what is the fair value. “
Ellas, Slavin, who says that Shure has collided against Boost twice to win recent deals, says he doesn’t see how that happens at this point. Too much damage has been done. In addition, he says, “Andy can consider the revenue run rates from a financial statement; he can find out how big our contracts are, based on his asking.”
And so it is for all parties.
From Menlo Ventures and FF Venture Capital, $ 23.1 million has been raised for funding in due course.
The Coast, meanwhile, has raised $ 17 million, including Koteau, Grecroft and Tusk Venture Partners.
Slavin says IA Capital owns less than 5%. Lerner today declined to say how much boost IA Capital has.