We spin in an ever-turning circle, and it is our delight to change the bottom for the top and the top for the bottom. You may climb up if you wish, but on this condition: don’t think it an injustice when the rules of the game require you to go back down.
—Boethius, The Consolation of Philosophy
SEPTEMBER 10, 2010
We were sitting in a celebratory post–Demo Day mood in the living room of Argyris’s Mission apartment, the same space where we had hacked the first throwaway prototype whose non-demo had launched this whole YC adventure. The beers were out, and we were still surfing that wave of intoxicating startup high that fluctuates between elation and terror.
My phone rang.
“This is Rodger Cole.”
Rodger was a partner at Fenwick & West, one of the big three Silicon Valley law firms. Via wiles we’ll soon explore, we had rather improbably secured him to represent us, and then even effectively pay us for the privilege.
Unexpected phone calls from lawyers are never good. I straightened up in Argyris’s Ikea chair and mentally braced myself.
“I’m sorry to inform you that today Adchemy filed suit against you in Santa Clara County Court.”
As our lawyer of record, Rodger had been served the court documents. “I’m sending them now.”
I checked my email, and there it was:
SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA
ADCHEMY, INC.
Plaintiff
v.
ANDREW F. GARCIA-MARTINEZ*
MATTHEW R. McEACHEN
ARGYRIOS ZYMNIS
ELECTRON MINE d/b/a ADGROK
FOR MISAPPROPRIATION OF TRADE SECRETS; BREACH OF CONTRACT; INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS; BREACH OF THE DUTY OF LOYALTY; & INJUNCTIVE RELIEF
That litany of boldfaced transgressions was our rap sheet. It covered just about every suable offense a Silicon Valley employee could commit, which mostly boiled down to stealing intellectual property. Since AdGrok was vaguely trafficking in the same area of paid search marketing as Adchemy, our former company was using that as the pretense for a lawsuit. Mostly, though, it was sheer Murthy ego.
We had been forewarned, Adchemy having sent legal hate mail weeks before, the sort of menacing recital of employment-agreement restrictions that serves as the warning shot across the bow in corporate litigation. This triggered our securing a preemptive relationship with Fenwick, and why Rodger was there to receive the lawsuit paperwork. I had hoped Adchemy would be slow to action, slow enough for us to finish the Demo Day fund-raising. The lifelong Machiavelli fan in me remembered that memorable line from The Prince: war is never avoided; it’s only postponed to someone’s advantage. I had thought it would be postponed to our advantage, but we’d clearly miscalculated Murthy’s vindictiveness.
Most shockingly of all, we had been personally named. This wasn’t a company thing, where we could hide behind the corporate veil. These charges were personal, and we stood to lose everything financially.
Wilson Sonsini Goodrich & Rosati, the most expensive and formidable law firm in Silicon Valley, had been contracted to murder us via litigation. We had maybe $2,000 in the bank at that point. An hour with a top-shelf Silicon Valley lawyer costs around $800. The only way out of this mess was by raising money and using that to defend ourselves. But Murthy had, with exquisite sadism, timed the lawsuit for precisely the worst time: at the very peak of our fund-raising power, right after YC Demo Day. Now that hard-won momentum was all gone.
We were well and truly fucked.
I’m a catastrophic thinker. I enjoy apocalypse films and zombie-invasion flicks. The Road Warrior (a.k.a. Mad Max II) is probably my favorite action film. 28 Days Later is a close second. I don’t know if it reflects a murderous antipathy to all humanity, or just a taste for anarchy and societal collapse. Either way, I always expect the worst.
Here’s what I thought would happen to AdGrok in our impending legal meltdown:
MRM, who had a family to support and no stomach for a protracted fight, would quit and find a regular job.
Think about it: he had a little cash in the bank, but he had been spending that to get by while building AdGrok. Beyond some equity in a modest home, he had nothing at this point. If we lost the suit and were sent up the river, his whole family would pay the price. Gone were the karate lessons, the school trips, maybe even the house itself. The entire household would be ruined.
So what if he did leave?
Argyris and I would slog on, with him doing the technical side and me doing everything else. If we had no luck raising money, we’d turn my blogging and marketing skills to embarrassing Adchemy as much as possible. With my musings on New York tech, Goldman Sachs, and whatnot, we’d already garnered a sizable fan base of thousands of readers, many among them gossipy Valley insiders. Such a sordid legal altercation would surely draw that chattering and judgmental crowd. We’d publish every legal document with every ridiculous claim.
If that still went nowhere, and things looked really bad, what would happen?
Remember: we were personally named in the suit, and faced full personal liability for any awarded damages. The allegedly stolen Adchemy intellectual property in question, although in actuality completely worthless, had been developed after tens of millions of dollars in funding, and would be considered worth as much by the courts. With civil damages to pay, we’d be completely ruined. More than ruined, we’d be in hock up to our eyeballs. Our names in the Valley would be hopelessly sullied, as we’d be considered trade-secret thieves, practically the sexual predator of the tech world. With no job prospects, there’d be no way of paying any awarded damages.
In the event of the final apocalypse, Argyris would get on a plane to Greece, cursing the United States all the way, never to return. The suit wouldn’t follow him there.
And me?
I’d burned my bridges on Wall Street with the Goldman post, so there was no going back there. British Trader could take care of Zoë, but I’d be destitute for the foreseeable future.
My real fear, and something I never shared with the boys, was that Murthy, in his manipulative rage, would offer them a job back on ridiculously good terms. They’d abandon me.
In fact, in one of the legal broadsides they sent our way, Murthy mentioned welcoming Matthew and Argyris back to Adchemy (and very pointedly not me), as if they were wayward sheep. But he never really tried to woo them back with a special job offer, or a personal appeal. Given how poorly he had treated both MRM and AZ on departure, it’s not even clear that would have worked. But either way, Murthy was out for blood, and would stop at nothing short of destroying the entire AdGrok construct. And here he made a serious mistake.
As Sun Tzu informs us, no matter how cowardly by nature, anyone fights to the death when his back is against the wall. A wise combatant always allows his opponent a way out, something Murthy in his maniacal pursuit of us hadn’t provided. Faced with no choice, even the skittish boys would fight to the end, particularly if the actual cost of the fighting, if not the risk of losing, had been passed on to others.
Despite my fears, MRM stuck it out. He would bet his family’s future on AdGrok, staking the future of the very kids Argyris and I grumbled were distracting him. For all of his usual trepidation about everything, MRM was the actual daredevil here, playing capitalism all-in, and for keeps. As much as I’d often get annoyed with MRM, he took the biggest risk of all of us. I have never forgotten that.
Argyris also held firm. Just as when Adchemy threatened to report him to the immigration authorities, our Greco-Argentine PhD manned up and did his brave duty on the foundering AdGrok boat.
Here is a key insight for any startup: You may think yourself a puny midget among giants when you stride out into a marketplace, and suddenly confront such a giant via litigation or direct competition. But the reality is that larger companies often have much more to fear from you than you from them.
For starters, their will to fight is less than yours. Their employees are mercenaries who don’t deeply care, and suffer from the diffuse responsibility and weak emotional investment of a larger organization. What’s an existential struggle to you is merely one more set of tasks to a tuned-out engineer bored of his own product, or another legal hassle to an already overworked legal counsel thinking more about her next stock-vesting date than your suit.
Also, large companies have valuable public brands they must delicately preserve, and which can be assailed by even small companies such as yours, particularly in a tight-knit, appearances-conscious ecosystem like that of Silicon Valley.
America still loves an underdog, and you’ll be surprised at how many allies come out of the woodwork when some obnoxious incumbent is challenged by a scrappy startup with a convincing story.
So long as you maintain unit cohesion and a shared sense of purpose, and have the basic rudiments of living, you will outlast, outfight, and out-rage any company that sets out to destroy you. Men with nothing to lose will stop at nothing to win.
Shortly before we had announced our departure, an early investor and mentor of Adchemy had somewhat improbably died.* Rajeev Motwani was a legendary Stanford computer science professor who had mentored countless students and entrepreneurs, including the Google founders. He was a showpiece adviser to the company, and Murthy made a big display of mourning his unexpected demise.
After all the threats and strong-arming to keep us from leaving, in the same way that an abusive husband brings home flowers to make it all right, Murthy gifted us an unsolicited intro to one of the big power attorneys in Silicon Valley, Ted Wang of Fenwick & West. With much to-do, Murthy declared that this going-away present was a posthumous homage to Rajeev. He might even have gotten a bit misty-eyed as he said it.
I immediately scheduled a call with Ted to relay our fears about the guy who had brought us together. I didn’t trust Murthy to let us go so easily.
Ted turned out to be a savvy and knowledgeable Silicon Valley player. From the earliest days, his was a voice of wise counsel in dealing with Murthy. When that conflict escalated into a full-on lawsuit three months later, he unhesitatingly threw Fenwick into the fray, less because of the value of AdGrok as a startup, and more due to outrage at the offense against the informal Silicon Valley rules. A large company didn’t sue a small company just because it could. This was bullying on the startup playground, and Ted Wang wasn’t going to stand for it.
Once the legal bullets started flying in earnest, Ted introduced us to another Fenwick partner, Rodger Cole. Cole was a litigator for Fenwick, the frontline soldier who’d conduct the actual war. He was not the swaggering legal gladiator you’d expect, and his absolutely calculated and frigid demeanor led to our nicknaming him “the Undertaker.”
There was still the little issue of payment, though. Ted liked us, but not enough to do this for free. Ted and the Undertaker each billed out at something like $600 to $700 per hour. But the rapport we had built with Ted was worth more than money in the bank, as was our pathetic underdog role. We’d have to convincingly count on that somehow.
As matters turned out, without Fenwick, we would never have been able to mount a defense. To say Murthy was punished for his one iota of kindness would be an understatement. The lesson here is: if you’re going to be an egomaniacal, sociopathic prick, then do it properly and murder your enemies outright, rather than throw them a bone and expect to kill them later if there is trouble. They might just turn that bone into a weapon.