This the story of a black faux-leather chair, the kind you can buy at Walmart for $99, that ended up costing me five grand.
Very early in the days of Distil, my partner Steve and I hooked up with this lawyer / advisor. We’ll call him Bill (not just a pseudonym. I’ve honestly forgotten his name) Steve had worked with Bill before when Steve was getting his consulting business off the ground. We would meet Bill at the pub or hockey rink and bounce ideas off of him. He helped us with the incorporation papers and similar routine filings.
As the plans around Distil started to firm up, it became clear Bill wanted to be more than an advisor. He wanted to be part of the company. Steve and I kicked the idea around a bit. It wasn’t obvious where he would fit in. He didn’t have deep connections with our target customers. He wasn’t technical. We didn’t need a lawyer in staff. So we tried him out for the junk drawer job in the startup — CEO.
So he started moving some stuff into our office, including the aforementioned faux-leather chair He made some introductions to local business men that might want to be early investors. But That was the extent of his involvement, just getting the meeting he felt was enough. No follow through after the meeting and definitely no ability to close. Steve and I realized he wouldn’t be a good fit and told him so.
He was understandably upset but behaved professionally. We asked if he would like to pick up his things, including the chair. He said, we could keep the chair. A few days later he sent a respectful email saying he was disappointed but moving on from this incident “without prejudice”. These words would come back to haunt us shortly.
Flash forward a year. We are closing our seed round of $750K. Everyone is excited, things are moving forward, it is a dream come true. During due diligence our lawyer discovered the email from Bill and asked us about it. Not to worry, he never worked for us, he never signed any papers, we were just trialling it to see how it would work out, water under the bridge.
Only our investor’s lawyer didn’t think so. Those words “without prejudice” are lawyer speak for “I’m not going to do anything now, but I retain my right to sue you at any time in the future for any amount”. They wouldn’t do the deal unless we got Bill to sign off any claims against us.
We were scared. If Bill were to find out that his signature stood in the way of us closing $750K, what would he ask for? Steve volunteered to to go talk to Bill.
Later that day Steve called. “Bill will sign the papers if we pay him $5000”. I was looking at that damn faux-leather chair. “We have no choice. Do the deal” I said (or something like that). Damn. That chair just cost us five grand I remember thinking.
I kept that chair for the life of Distil. It reminded me that the littlest things can cost you big.