Jason Calacanis, our former partner on our TechCrunch50 events, is threatening to sue us. His demand letter and draft complaint are embedded below. In a nutshell, he wants part of the proceeds from our sale to AOL.
Calacanis has spent most of the last year saying some of the most ridiculous things about me and about TechCrunch, and I’ve stayed completely silent. Mostly because I knew he just wanted attention, but also because I assumed he’d eventually calm down and move on to doing more productive things. Also, somehow, I still consider him a friend. Now, though, the whole story has to get out. Here it is.
A few years ago Jason suggested we put on a conference to give startups a place to launch. None of us liked Demo much, the long standing startup launch conference, because they charged as much as $20,000 to get in. It didn’t seem like they were picking the best startups, it seemed like they were picking startups that could pay up.
So we put on an event with Jason in 2007. It went well and was profitable. 2008 was also very successful, but stresses started to show in our business relationship. Our relationship required unanimous decisions. For the most part that worked well, but occasionally Jason would simply veto things we wanted to do. We also noticed that while profits were split 50/50, Jason wasn’t putting much into the event compared to us. Everyone at TechCrunch wanted out of the event, except me. I thought we could work things out. At one point though Jason became so abusive on a phone call that he actually made one of our employees cry. Yes, cry.
Among other things, he wouldn’t “approve” some expenses, meaning we could either sue him or just take the loss ourselves. We chose to take the loss.
And his most shining moment – he got so drunk the night before the last day of the 2008 conference that he couldn’t show up to be on stage until hours after the event started.
I tried to negotiate with Jason after that 2008 event to at least get the economics of the conference in line. We offered him 10% of TechCrunch, a board seat and ongoing profit sharing from our events (even the events that didn’t involve him) to take on ad advisory position going forward. He said he wasn’t interested.
By the time our last event in 2009 rolled around things had gotten much worse. Jason became what can only be described as unbalanced and dictatorial, ordering me and everyone else at TechCrunch around, demanding ridiculous things and vetoing decisions on a whim. When Jason really wanted something we found a way to make it work. Most of the time our ideas were simply dismissed out of hand.
At the end of the conference I remember Heather Harde, our CEO, saying to me “I’m getting sick of putting on a big conference for Jason Calacanis every year.”
We told Jason firmly that it would be our last event. He seemed to accept it, and even announced it. He later said he was joking, but at no time did we ever waver from our position that the event was over.
That’s when things turned really bad.
When Jason realized we were very serious about ending our relationship with him he began to spread rumors that I was abusing prescription medications. From an email he sent to a number of people, where he suggested an intervention: “His behavior is leading to multiple people to report to me that he is abusing drugs (prescription), that his personal life is getting very dark and that he is in the middle of another nervous breakdown (the second one in a year)…When–not if–he crashes we don’t want to be among the folks who say “we all knew that was going to happen.” We want to be the friends who said “We saw it coming and we did everything we could to help Mike.” Hopefully our intervention results in a soft landing instead of complete self-immolation.”
Heather’s comment in an email to me: “I have heard a lot of crazy Mike Arrington concerns in the past, but never has anyone ever suggested drug or alcohol abuse. It’s insanity.”
I rarely drink at all any more and until the last couple of months I never took any prescription drugs except antibiotics a few times. Funnily enough the only time I’ve ever “abused” prescription drugs was one time in France a year before that when Jason himself gave me a provigil, telling me it was good for jetlag. It was. I’ve certainly never had a nervous breakdown.
This was just Jason’s sick way of threatening us by spreading these rumors. I wrote to him “As far as I can tell, your current position is that we are either going to do the conference together or you are going to start spreading rumors about me having an alcohol and drug problem. You can probably guess what my answer is going to be.”
Things were up and down after that. We tried one last time to work with him, offering him 10% of profits of future events for an advisory position. A soft landing, if you will.
On March 1 we announced TechCrunch Disrupt in New York, including the format (less launches, more conversations).
He got angry over that, and demanded we finally dissolve the TechCrunch50 entity. His attorney drafted an agreement, we negotiated parts of it and signed it.
Heather/Mike,
After much consideration, I’ve decided to accept that fact that TechCrunch no longer wants to partner with me on the TechCrunch50 conference.
As such, we need to take the steps to shut down the 20 LLC entity in which we share ownership. We also need to decide what to do with the assets of the company (i.e. the sponsor lists and relationships, the good will with the judges and speakers, the intellectual property associate with the company, etc).
Perhaps the easiest thing to do is just shut down the entity and distribute the assets equally to each partner?
This sounds like the best idea, especially since–in my opinion–you’ve already started a competing conference that is clearly (again in my mind) leveraging the IP and goodwill we’ve built over the past three years. I’m assuming that perhaps you will use the good will we’ve built up to sell tickets to some of the same attendees, land the same sponsors and perhaps even use some of the same speakers/companies. Perhaps this has already occurred? Have you guys started talking to the TechCrunch50 sponsors about your Disrupt event? Right now you’re using the Wizehive software, demo pit concept and same prize money for Distrupt (among many other things). It’s obvious to me and many others that Disrupt is TechCrunch50 with a different name and slightly different format.
Our joint customers, press people and our partners are asking me to comment on “techcrunch stealing the conference” from me. I haven’t engaged the press out of respect for the good work we did together over the past three years. However, the market is very confused and I’m going to need to respond.
From my perspective it’s unnecessary for us to get in a public and/or legal fight. Better we go our separate ways–life is too short, no?
My attorney Joey Tran is cced above and can handle shutting down the company, doing a joint release of the IP to both of us and getting us both moved on from the tension of the past six months.
This will also put you guys in the clear with regard to your use of the IP in Disrupt, which right now I’m obviously not happy about. In fact, many folks asked me last night if the Disrupt conference was the rebranded TechCrunch50. Very frustrating as you might imagine!
Let’s do this quickly, as I would like to start a new conference myself and address the media. It’s been fun being partners for three years and I don’t regret for a minute bringing you guys the idea for TechCrunch50. We did some great work together!
In fact, I’m really looking forward to a long, spirited rivalry with you both in the years to come.
Let the competition being!
all the best,
Jason
We signed a dissolution agreement and a mutual release of claims, and everything was fine for a while. Jason asked to speak at Disrupt, we accepted. And later when there were (false) rumors of an acquisition, he said he was cheering us on.
In June:
Thu Jun 17 17:34:55, Think TechCrunch will sell for $20-40M. 3-6x topline revenue would be range. It’s an amazing brand with an amazing leader in @arrington
And September:
Tue Sep 28 02:41:16, And if @arrington does sell I’m happy for him. He lives an unhealthy lifestyle, doesn’t sleep, and abuses heather–he’s a trainwreck.
Confused? Me too. Which is why we ended all communication with him months ago. He’s just bad energy, then good energy, then bad energy, depending on his mood.
Now, though, he’s threatening to sue us. Despite the fact that we mutually agreed to dissolve TechCrunch50, release each other of any claims and move on.
A few last thoughts.
1. We didn’t kill TechCrunch50, Jason did. He was a terror to work with. He couldn’t keep his own staff around from year to year, and he wouldn’t put enough resources into the event to justify the economics he was getting. Working with him overall was a nightmare, and by the third year we just gave up. Until then, and even after, I tried desperately to make it work somehow.
2. I don’t know where Jason got it into his head that we couldn’t do events unless we partnered with him, or that the format of a conference is somehow proprietary. He certainly did events without us, and we didn’t complain. Way back when we first talked about doing the event, I don’t remember Jason saying anything like “Hey Mike, let’s do an event together. Only, if you do you can never stop or do any other events that involve companies launching, even though I can. And if you do stop, or do a different event, or ever sell TechCrunch, I’m going to call you a sociopath, spread rumors that you do drugs and then sue you.”
3. The spreading of rumors around drug abuse were reprehensible and absurd.
4. His “I love you, I hate you” routine doesn’t show a balanced mind. I don’t even know what to do with “I’ve got nothing bad to say about @arrington. He’s my friend, he treated me like garbage–but that’s business. He will regret it long-term.”
5. We formally and mutually dissolved TechCrunch50 a month and a half after we announced TechCrunch Disrupt. He certainly knew exactly what the format of the new event was.
6. We didn’t start any acquisition discussions with AOL until May 2010, and we didn’t even get to signing an NDA with them (when the real discussions start) until August 2010. We certainly had no immediate plans to sell TechCrunch when we were dissolving TechCrunch50. And when false rumors surfaced later that we were selling, he cheered us on publicly.
7. If Jason wanted stock in TechCrunch he should have asked for it at some point, or taken our offer in 2008.
8. If he sues us, we’ll fight, and he’ll lose. And we are certainly going to explore a countersuit for defamation.
9. TechCrunch Disrupt without Jason has been a smashing success with higher revenue, higher attendance and much better speakers than TechCrunch50. The show is about the audience and the startups. It used to be mostly about Jason.
10. And now, of course, the circus begins.
PS – for our newer readers, I know this is way inside baseball. But we have a longstanding policy of posting every legal threat (and there have been some doozies).
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