I haven’t seen this much public drama between founders and their investors since the FilmLoop forced merger in early 2007. Earlier today I wrote that Israeli startup KnockaTV was heading to the DeadPool. Employees, who are apparently going unpaid, are pushing the company into liquidation to try to get at least some of what is owed to them.
We dug a little more into the story, because it just didn’t make sense: the startup was well funded with $3.5 million in capital from mid 2007 and the founders, who were among the creators of ICQ, had a $407 million payday in 1998. That doesn’t guarantee the startup would be successful, but it suggests that employees wouldn’t have to worry about their paychecks this early on.
Based on rumors going around Tel Aviv, there was some sort of major fallout between Evergreen Venture Partners (the venture firm behind the financing) and company founders, particularly Sefi Visiger. Product development may have been seriously delayed. Burn rate was so high that an additional funding round was needed, and Evergreen may have demanded the founding team put up more cash instead. Tempers flared, the founders elected to shut the company down, and are reportedly supporting the employees in their efforts to liquidate it. According to one source, the liquidation will ensure that employees are paid before other creditors become too numerous.
A liquidation would knock out existing stockholders, leaving the company assets to be sold off. Quite possibly they would then be acquired by the original founding team, leaving Evergreen without any stock, or their original investment.
How much of this is true? Sefi and Evergreen won’t comment directly to us. But there is little our contacts in Israel want to discuss today other than KnockaTV and what they heard happened. Companies that closed substantial funding just a couple of months prior don’t generally fall apart immediately before launch. Evergreen’s reputation in Israel is considered excellent, whereas some members of the KnockaTV founding team are said to be major league partyers first and serious business people second. More will likely be said on this story, from both sides, before it is finally put to bed.