[Jason Calacanis, left – Michael Arrington, right]
Jason Calacanis, the founder of Mahalo.com and co-founder of Weblogs, Inc. has filed a lawsuit against his former TechCrunch50 conference partner Michael Arrington. Arrington recently sold his blog TechCrunch to AOL for an estimated $25-$40 million and Aol gained ownership of the conference as part of the deal. Before the acquisition Arrington kicked out Calacanis from TechCrunch50 and rebranded it as TechCrunch Disrupt. Below is a post that Arrington wrote and a post that Calacanis wrote about the situation so you can get both perspectives.
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.
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,
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.
“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”
“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).
Note: I just sent this to the JasonNation.com email list (which you can sign up for on the top right of this blog, or at www.jasonnation.com. I?m reposting it here since I?m getting a lot of press calls. If anyone wants to interview me on this issue I will be at the Web 2.0 conference later today at the Palace Hotel and more than happy to discuss.
As many of you know, I have filed a law suit against Mike Arrington, my former partner on the hugely successful, but now defunct, TechCrunch50 conference. This was a difficult decision for me, as I?ve never had to take legal action against anyone.
I created the idea for the TechCrunch50 conference, and pitched Mike to do it. Mike and I created an LLC that TechCrunch and I each owned half of, and for three years we produced the conference together. Aol purchased the conference as part of their deal for Techcrunch, but I never got paid for my half.
The conference took a lof of time. I poured my heart into helping the 140 companies prepare to launch on stage (and many more in the Demo Pit?I didn?t forget you!). And I?m glad I did, it was one of the most rewarding experiences in my life.
Now, things can change, and a business partnership isn?t a lifetime vow. So when things unraveled with Mike I figured we?d work it out like partners, and walk away as friends.
Ending up in court for the first time after over fifteen years as a CEO and founder? When there?s so many ways to part amicably?
Mike took TechCrunch50 and re-branded it as TechCrunch Disrupt, and a valuable property I created and owned half of became part of a sale to Aol. When I work on a business and create lots of value, it?s just simple fairness that I would be recognized when it is sold.
After suggesting a bunch of compromises to Mike, and using mutual friends to try and settle this privately, I?ve I realized I was left with only one choice.
The worst part of all of this, beyond my friendship with Mike imploding, is that I haven?t been able to host my beloved conference in over a year. That?s dozens and dozens of companies that I could be working with to launch on stage, before they go on to change the world like Mint, Powerset, FitBit, Yammer and countless other startups did at TechCrunch50.
Part of being an entrepreneur is being a relentless, and delusional, optimist, so even now I?m still hoping we can resolve this fairly, amicably, and in private, and go back to creating great companies.
I?ve made some mistakes, and I?ve learned some lessons through this process and I thought I?d share them with you.
Now, I?m not going to get into the details of ?the case,? as there is little upside in a public discussion of a legal matter. I?m also not going to get into a mud-slinging match with Mike. Frankly I cringe at some of the shots I took at him when I was frustrated about the conference being stolen. That was kids stuff, and I regret it and would take them all back if I could. You live and learn. I?m sure Mike will regret the unfair slams he took at me recently on TechCrunch.
As for the lessons, there are many I plan to share, but for this email I?ll just focus on one: Insist upon a detailed contract.
For over a year I tried to get Mike to do a contract for the TechCrunch50 conference, but other than forming the LLC he would never take the time to do this. As such, we had a bona-fide legal relationship as partners, but we didn?t have an agreement that spelled out all the details of what happened if we broke up.
Mike told me over dinner that he didn?t like to sign contracts, and didn?t do so with his Crunchpad partners or me, because it gave him an advantage since a) nothing was documented and b) he?s a lawyer. I should have known better ? but I guess that?s why it?s a ?lesson.?
While Mike and I sort out our issues legally, I plan on focusing on the two things I do best: innovating and executing.
As many of you have heard, I?m in the process of planning out a bigger, better and more start-up-centric ?LAUNCH conference,? which will take place in the same venue as TechCrunch50 in San Francisco on February 23rd and 24th next year.
Here are the innovative aspects of the competition, which will feature around 50 startups:
1. Dramatically lower ticket prices
LAUNCH will be the most affordable, high-end technology event in the world. Bootstrapped startups (i.e. ones with less than $1M in investment and less than 10 staff) will be able to attend LAUNCH for only $400 (essentially our cost). Everyone else (lawyers, VC, angels, more-established companies) will pay only $1,000.
Compare that to the $4-7,000 price tags of the excellent, but certainly elite, conferences like TED, The D Conference (by the Wall Street Journal) and Web 2.0.
When I was starting out I couldn?t afford to attend any conferences, but everyone can afford $400 for two days. SXSW Interactive has proven it by charging $450-750 (depending on when you buy), with stunning results. Thousands of internet folks, from designers to coders to founders, attend and contribute because price isn?t an issue.
The $400 tickets mean folks might be on their own for lunch, and we may not have fancy gift bags, but we will have a much more accessible show with more people who do actual work at startups. (And who knows, some hero companies might just step up and sponsor the two lunches!)
I want to keep leveling the playing field, and fighting for the little guy.
In fact, that was my original motivation for creating TC50: to stop the payola virus where startups paid $18,500 to get on stage. Open Angel Forum is another effort to empower the entrepreneur, and with eight cities and 17 events in year one?and 30% of companies getting funded?I think we?re off to a great start!
2. LAUNCH 1.0 and LAUNCH 2.0 competitions
I noticed at other demo and launch-style conferences, that founders at existing companies were frustrated because they couldn?t participated.
So, as I move forward with LAUNCH we will have two competitions occurring on the same stage: 1.0 for new companies and 2.0 for existing companies with epic new products. This means folks like Twitter, Mint or Zynga could launch something new (i.e. the new version of Twitter, a new game from Zynga), but they won?t take away from the generally less-funded startups competing in the 1.0 competition.
3. The Angel Grand Jury
We?re inviting 12 high-profile angel investors to form the $1M angel grand jury. This jury will mentor and coach the companies before and after the event, and potentially invest in the companies presenting at the end of each day?live on stage!
Each angel will commit on the spot (pending due diligence and negotiating deal terms) to investing between $50-250k in the companies they love most at LAUNCH.
At the end of each day, the Jury will host a round table where they talk about the companies that presented that day, and which ones they were most interested in investing in?and why. This 75 minute session at the end of each day will set the stage for these great companies to not only launch, but close their next round of funding!
Think about how revolutionary this will be for a moment: not only do companies not have to pay to get on stage, and not only will they get free mentoring, but they might also get funded ON THE SPOT!!!
4. All Profits to the Startups
Instead of raking the proceeds from the event, I?ve decided that I will personally invest profits from the event into the startups. Of course, those startups don?t have to take the money, but I?m long on the startups we?ve chosen and mentored in the past, and I?d love to see my angel portfolio grow by a dozen or two LAUNCH startups each year.
My entire motivation is to help founders grow their business, their skills and, ultimately, kick ass and take names. I?m in it for the long term, not to make a quick buck from the conference.
So, there will be THREE possible ways to get funded at LAUNCH:
a) The Grand Jury of Angels
b) From me personally
c) From the hundreds of investors in the audience
5. No Boring Panels, No Immature Distractions
One of the big problems at conferences today is that nascent companies are put up against huge successful ones. So, you?ve got the CEO of a promising new startup against the CEOs of Yahoo or Aol.
Or worse yet, manufactured stories like ?angel gate? sucking all air out of the room (how tacky).
Which story do you think the press will write about: angel gate, the CEO of public company or a three person startup? Exactly, they?re going for the story that will get picked up the most, and that?s the one with the ticker symbol or the supposed Justice Department and FBI investigation.
I?ve always take myself, and my company, out of the conversation when running events. The event is dedicated to the company?s that are launching. 100% of the attention should be focused on them, not the conference host.
6. Rolling Admissions
Our team will start meeting with people who want to premier at LAUNCH immediately, and with a very light application process. This means if your product is more developed and you deserve to get accepted early we can do that.
If your product is new, but no one has seen it and it has no press and you want to show it to me now, well, you know how to do that: email@example.com. I will actually take the time to meet with you, look at your product and give you founder-to-founder feedback.
My goal is to give you honest and blunt advice in as much time as I can space?please use me!
I?ve gone from seriously bummed about the demise of TC50, to infuriated (and a little hot headed, which I regret) and now inspired. I?m stoked about preparing for the first LAUNCH event over the next 100 days, and I?m hoping you guys can all make it!
Conference details can be found at www.launch.is, and if you signup this week with the code JasonNation you?ll get 10% off any ticket.
It is your giri to be at the event, and it is mine to make sure it is an amazing?perhaps even life changing?experience for you.
What we do in life echos in eternity!