ArsDigita CEO & VCs Sue Philip Greenspun

RM writes "ArsDigita, its CEO Allan Shaheen and the venture capitalists who took over ArsDigita Corp., the company that had everything to be the coolest company on earth, are sueing Philip Greenspun and two other co-founders of ArsDigita (Eve Anderson and Tracy Adams). The lawsuit was mentioned in this post to Philip Greenspun's site. Since the VCs took over ArsDigita, many of their best developers and staff have left the company or been fired, and now they are sueing their own co-founders, who gave the company its vision (which seems to be going down the tubes) and the profitability it always had. Sad, really sad."

Re:Ars Disadvantages - Don't be silly

[by Anonymous Coward]

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Re:Misinformation, and what's really going on

[by Anonymous Coward]

More uniformed stupidity. Philip is a very competent PR guy, a semi-competent engineer and a completely incompetent manager, whatever you want to believe. His appeal is mainly to brain-dead types such as yourself, who want to worship a stong personality. The same sort of person who joins a cult, which is what AD resembled when Philip was here. Writing a book that claims you know something about scalability does not in fact mean you know anything about scalability. Taking a bunch of money from free-spending dot-coms during the bubble and using it to hire a couple hundred people doesn't constitute "building a company." Not only haven't the best engineers quit AD, but NO COMPETENT ENGINEER has ever quit, other than Philip's lackey, Jin. If you took a poll around here, you'd find it about 180-2 in favor of the current management over Philip.

Re:What this seems to be about

[by Anonymous Coward]

It would be pretty hard to "leave Philip alone" when he's attempted to rearrange the board in direct contradiction to what he agreed to in exchange for $35 million. The sureness of opinion in this thread is pretty amazing considering the lack of knowledge. Philip complained that the process of pushing him out of the company seems to have begun "before the ink was dry" on the VC check. Might this perhaps be related to the fact that, before the ink was dry on the VC check, he announced he was going to spend $3 million of it on a house on Cape Cod? Of the 200+ AD employees, I know of only three that were upset when he was finally pushed out: his girlfriend Eve and his close friends/lackeys Tracy and Jin. The relief throughout the rest of the company was palpable. He may have some interesting ideas, but as a manager, the man is a walking disaster. Worse yet, he's a walking disaster who somehow seems to have gotten the impression he's God's gift to management, related to the fact that he think's he's God's gift to just about everything. Aside from spending money like a drunken sailor, Philip's ego destroyed his relationship with just about everyone at the company, manager and engineer alike. He was personally insulting to me personally, as well as everyone else at one time or another. The agreement with the VC's was that Philip would assume a role as visionary and strategist as chairman and AD would hire an experienced executive to run the company as CEO. This is what happened, but Philip found himself completely unable to let go. He interfered in the operation of the company and created confusion and frustration for everyone. After six months of this, he simply had to go.

Getting VC was a mistake

[deanc (2214)]

This is how I understand the situation, from what I've heard -- ArsDigita was profitable before they had a bunch of large VC companies come in. The decided to raise a lot of capital so that they would be able to hire much more staff and take on a lot more clients. The problem is that after they did this, after the dot-com slowdown, the new clients never materialized, and ArsDigita was left with having sold off part of their company and an overgrown staff that wasn't producing revenue, which is why they had to lay people off.

In addition, people have said that ArsDigita University (the free computer science school) had been established with money that the venture capitalists had given ArsDigita. Needless to say, they were probably a bit upset by this.

So, the question on my mind was this-- if ArsDigita was always profitable, why did they raise all that VC and over-expand? Were they getting greedy or what?

-Dean

Consulting is not profitable

[sheldon (2322)]

"Consulting is a very profitable business"

Maybe you haven't noticed, but we are now in the New New Economy.

Consulting was profitable for Y2K, and it's scaled back considerably since then.

At least in my city, Minneapolis, every since consulting company has been laying off people. Norstan, Born, Ranier, etc. etc. etc.

Even the large global companies are laying off, the most recent I saw was Price Waterhouse Coopers.

I can see that...

[sheldon (2322)]

I became familiar with Philip Greenspun several years ago when he posted a story to rec.autos.misc about his suing a Ford dealership over some purchase of his.

He's got an ego, he definately has an attitude. He strikes me as someone who enjoys getting attention on the Internet, but not as someone whom I would like to work for or with.

Re:Consulting is not profitable

[sheldon (2322)]

Ok, you obviously don't understand supply and demand and how it relates to revenues and profits.

Because of the lack of demand in the consulting business, in order to compete the consulting companies are having to lower their billable rates.

Profits are way down because of this.

Anyway, it seems clear that you've either not been a consultant, having worked with a consultant... Or are an Arthur Anderson employee who has been brainwashed. :)

What you described is what consultant companies say they are, not what they actually are.

What this seems to be about

[thenerd (3254)]

Like others, I've been wondering what this is about. I've read a bit of the documentation referred to on Philip's site, and it seems to be that ArsDigita and the VC's are suing Philip, Eve Andersson, and Tracy Adams because they think that a 'stockholders agreement' has been violated.

They think that the way this has been violated is because Philip, Eve, and Tracy have (according to this new money grubbing bunch of VC's), been claiming that they (or perhaps others) are working for the company as an officer or director, and that there are two sets of individuals that say that they run the company.

Why Arsdigita can't just give up and leave poor Philip and friends alone after completely screwing up everything is beyond me.

If it weren't for lawyers, we wouldn't need more lawyers.

thenerd.

Wow

[stripes (3681)]

Hopefully he comes out Ok. I mean I have never met him, but anyone that makes something as cool as photo.net [photo.net] is allright in my book. Plus he seems pretty cool from what I can tell by reading his tutorials and such...

Re:Misinformation, and what's really going on

[rho (6063)]

I've been a fan of Philip's writing for several years now, starting with Travel's with Samantha, and I'd like to stand up for his side a bit.

From what I've read from Philip, he'll be the first to agree with you about his not being a capable SW engineering god, SW architect or manager. He is, however, a guy who had a vision on how the Web could benefit people and worked to make that vision a reality in photo.net, with the assistance of his (more competant and qualified, he'll readily admit I think, friends). He took that core and built a company doing what no other dot-com was doing -- return a real profit.

Now there's a power struggle at the top. This is a side effect of bad planning, fast growth, and being a beautiful woman (i.e. a company with lots of revenue and real profits), and unavoidable in business. What did the Japanese say? Business is war? Very true -- business, like war, is a great asshole magnet, and as the dust flies around everybody loses sight of who is the asshole and who isn't. Wildly pointing fingers results in nothing.

I don't claim to know Philip intimately, I can only talk to the impressions I get from his writings and from the handful of emails I've traded with him. I think I can understand his desire to regain control of what he still sees as "his" company -- I've watched the aD web site degenerate over time from a honest, informative site to an overblown, marketeered, PR-driven blandness that I don't visit anymore (I go straight to developers.arsdigita.com [arsdigita.com] now) Philip wants things to be the same as they were in the beginning (which, unfortunately, they can never be once you accept that check from outside investors), and he's going to give it the old college try.

While you might find his writings a lot of "hand-waving", I think you (and the "capable software engineers" you mention) might need to get out in the air more often. To my mind, one of the biggest problems we have is the fact that software engineers are running things, either covertly or not-so-covertly, and to have someone with an ability to bridge that gap between management and techs is *extremely* valuable. I'm sure aD has plenty of "software engineers***" -- have you got any usibility experts on staff? Interaction designers? Someone who cares more about the end user than the server? Until you have that, you're a programming shop, and no force on earth is capable of "managing" a crowd of programmers. At best you can get all of their heads pointed in the right direction

*** Software engineers... pah! My dad is an electrical engineer (>5V). My girlfriend's dad is a civil engineer. I've got a cousin in aerospace engineering, an uncle with a PhD in electrical engineering(<=5V), and a good friend in mechanical engineering. They have codes, rules, guidelines to keep their stuff running, powered, in the air or out of the muck, and ultimately their stuff either works or it doesn't.
Software engineer... you're a fucking programmer, so get over it or accept (financial) responsibility when my word processor crashes.
"Beware by whom you are called sane."

Re:SE: Will you pay for Quality?

[rho (6063)]

Would you be willing to pay for the serious design, engineering and testing practices that would make your word processor reliable?

God YES! I would! The thing is, I'm paying NOW for crappy quality (well, sort of -- I pay for Photoshop and Illustrator, which are really pretty good, but MS Office 98 implodes all the time) -- why should anybody go to that extra effort?

So we'll just call ourselves "Software Engineers" and pretend we do engineering things, and we get paid the same regardless.

And above and beyond the lack of "crashiness", a REAL "software engineer" is held responsible for appropriateness of design, i.e. if you're a bridge builder and the client wants a narrow, graceful bridge that's unsafe and you provide it, and the thing sinks into the bay, the bridge builder is held accountable because HE SHOULD KNOW BETTER.

I don't know any programmers willing to take that responsibility on.
"Beware by whom you are called sane."

Re:Misinformation, and what's really going on

[rho (6063)]

Oh yeah, well screw you. My daddy is a choo-choo train engineer and could beat the crap out of your whole damn family.

Apropos of nothing, when I was a wee lad, that's what I thought my dad did.

But even your example is a good one for me. If a train engineer operated like a "software engineer", every time a train derailed because he was drunk on the job, he'd blame Microsoft and wouldn't be held accountable.

Programmers call themselves "software engineers" because they are trying to ascribe to themselves qualities that do not exist -- i.e. standards and practices and such that work to guarantee quality, and a professional image overall. A "programmer" is that nerdy guy you knew in high school who got his head flushed twice a week.

I don't think you want to see how much I'm going to charge you for your new Professionally Engineered Word Processor!

Software isn't like a building. You only build a building once, but software costs are spread over a HUGE number of people. It costs you $1,000,000 to make properly engineered software? Fine -- I just need 100,000 people to pay $20, and you make a millon dollars profit.

I just don't like people who ride on the coat tails of REAL engineers for pure marketing reasons. I won't let you claim to be a "software engineer" any more than I'll let a garbage man be a "sanitation engineer".
"Beware by whom you are called sane."

Here's Phil's Website

[peter303 (12292)]

I first saw Phil [photo.net] on the net at his popular "Bill Gates Wealth" website. Besides website development he does a fair amount with photography and travelogues.

Re:Misinformation, and what's really going on

[doom (14564)]

In fact, the best developers have stayed because Philip (and his complete disdain for software engineering, design, QA, scalability testing, etc.) no longer exert an influence here. Philip is smart, articulate, and knowledgable about many things, bu the is not a software engineering god, nor is he an expert software architect, nor is he a capable manager.

Well, as long as you're talking, why not say something? Some examples would be appreciated: it's difficult to imagine anyone who can be both "smart" and have a complete disdain for:

• software engineering
• design
• QA
• scalability testing

If you don't feel like you can talk about internal ArsDigita business (even though you've already started) how about pointing out some of the flaws in Greenspun's writing? In another post you asserted that they were mere "handwaving"... how about pointing out one or two of the places that are lacking?

Re:What this seems to be about

[doom (14564)]

Philip: Do you use emacs of vi?

Ha. They should've asked you that before they hired you.

Re:Misinformation, and what's really going on

[doom (14564)]

CaptainCap jumps in where wuliao fears to tread:

I'll say something. Really, there is so little to this guy. In that management article [arsdigita.com] there is a paragraph: "Your business success will depend on the extent to which programmers essentially live at your office. For this to be a common choice, your office had better be nicer than the average programmer's home. There are two ways to achieve this result. One is to hire programmers who live in extremely shabby apartments. The other is to create a nice office. Microsoft understands this. In the early 1990s they did radio spots with John Cleese as a spokesman. One of the main points of the ad was to ridicule the cheap open-plan offices in which programmers were traditionally housed and promote the fact that at Microsoft each developer gets a plush personal office." The remark about shabby apartments are pretty snotty. Oh, it was humor.

Ding!

If there is anything right about this paragraph it is the idea that personal offices are good. I'm in an organization with individual offices and I feel there is no substitute for the ways it improves our productivity.

Um... so you mean you agree with the main thesis of the paragraph you just quoted?

Then Phil gets into various dimensions of improving the office and, guess what, that's the last mention of personal offices. He talks about Aeron chairs, and spreading desks apart, and pin ball machines.

Horrors.

Anyone who works in their own office will tell you that those other things are nothing compared to their own office. This is major league hand waving to me.

Well, I like my hardwall. I don't care much that I'm not sitting in an Aeron... but I often hear the other geeks around here talking about getting on ebay and trying to score some dot.boomed Aerons cheap. Some people seem to think they're important.

I can't figure out why this is such a big deal with you guys... "my god, he recommends buying Aerons! You see, what a spendthrift!".

It is followed by more nothing attempts to keep the programmers shackled to their job.

Well, what he appears to be doing is trying to justify to managers, from a managers perspective, why he thinks they should treat they're engineers really well. This doesn't strike me as being all that nefarious, nor does it seem so grossly unfounded as to shrug it off as "handwaving". It's not like people management is an exact science... don't expect too many differential equations when you're reading management text books.

Looking at the rest of the article, there are actually a number of things in it that really should be obvious, common sense, but really aren't always attended to. The place where I'm working right now, the landlord turns off the HVAC at 6pm sharp. By 7pm or so it's getting so hot and stuffy I can't breath. This being a moderne office building, there ain't no windows I can open. You would think it would be in their interests to make it easy for me to hang out until midnight, but somehow they can't get their act together on the simple stuff like this.

Anyway, I'll skip the rest of your rant... you may have some points in there, but it looks to me like there's a lot of hand-waving going on about Philips hand-waving...

Like look at what wuliao was saying originally:

I work at aD, and I've been here since the beginning a few years ago. The amount of misinformation on this staggers me, and the amount of blind Philip worship makes me ill. The posts by Philip represent one side of the story (his), but are far from being the complete story.

What actually staggers me is the amount of anti-Greenspun vitriol that doesn't seem to have any solid foundation behind it, at least not that anyone can put into words. What is it that inspires this kind of empty, free floating disgust? You'd think we were talking about Harlan Ellsion.

summary of why they're being sued

[sethg (15187)]

While waiting for the official complaint (96 pages, or a 4-MB PDF), I found the following summary on one of the aD bulletin boards. I haven't waded through the whole complaint yet, so I can't confirm the accuracy of the summary, but based on the first few pages, it looks about right.

You can read the complaint (the description of the lawsuit) at

Guan Yang's site. [unicast.org] Since it's a 4 MB PDF, mostly full of scans of things like the ArsDigita by-laws, allow me to summarize. Note that I'm not a lawyer and might get things wrong.

philg = Philip Greenspun
jsc = Jin Choi
eveander = Eve Andersson
teadams = Tracy Adams
allen = Allen Shaheen
ernb = Ernest Blackwelder

philg, jsc, and the VCs all signed a stockholders agreement in March, 2000, which stated that the ArsDigita by-laws cannot be changed without the consent of the VCs.

The by-laws at the time of the agreement stated that only the Board of Directors (not the stockholders) can elect/remove company officers.

The stockholders agreement also says that everyone signing the agreement must vote to elect the CEO and two other senior company officers to the Board, and that the other two directors must be acceptable to the VCs. There are five directors in total.

On April 5, 2001, philg and jsc (who in combination own a majority of ArsDigita stock) signed an "action of stockholders by written consent", known in the complaint as the Contested Consent.

The Contested Consent amends the by-laws of ArsDigita, such that the stockholders directly elect the company officers. It demotes allen to President, appoints philg CEO, and appoints eveander and teadams as Executive VPs. It removes allen and ernb from the Board and elects teadams and eveander to the Board.

So basically, in exchange for capital, the VCs made philg and jsc give up control of the company. Now philg and jsc and trying to take back control, so the VCs are suing. Why are they suing philg, teadams, and eveander, but not jsc? I don't know.

-- Rob Mayoff, April 19, 2001

--

News.com story; who's the chairman?

[Lumpish Scholar (17107)]

http://news.cnet.com/news/0-1003-202-5522429.html [cnet.com]

"ArsDigita, an e-commerce company in the midst of layoffs and a major product overhaul, is bucking the trend of comrades selling open-source software.... The company laid off 29 employees in the last week, and the company's founder and former chairman, Philip Greenspun, has left to pursue other interests ..."

Note that the story quotes a current executive as saying Greenspun's departure was voluntary; Greenspun says, "last fall ... my services as a full-time employee of ArsDigita Corporation became unwanted."

This page at the ArsDigita site [arsdigita.com] still lists Greenspun as chairman. I guess it's too much for a Web content company to correctly list its chairman in its own Web content?-)

Re:Lesson learned.

[the eric conspiracy (20178)]

It would seem to me that a "monolithic conglomerate" is an oxymoron.

Ars Boot-Camp

[acomj (20611)]

I took the 2 week boot camp this year (they didn't seem to offer longer ones anymore). It was free and although they didn't "teach" much per-say, you learned alot and there were people floating around to ask questions. All the material for the courses is on the web.

The problem is that most people dropped out after the first week with only 7 or so continuing. The equipment used was excellent, flat panels, aerochairs.

They also have an open source version of the ACS which is the product that allows them to put together web sites quickly using reusable components. The problem is that ACS is written in TCL which is easy enough to learn but with CPAN and PHP-PEAR others have already built reusable components so it seems Ars doesn't have
the advantage that it had before. I notice they were porting there product to servlets/JSP on there web site.

With the general slowdown on the internet, they don't stand to make as much money as expected. A lot of times when companies underperform they get sued. I don't know the details so I won't comment except that investors used to know investing involed risk, not mater what people predicted for the company...

I wish Philip and crew the best of luck.

Sad...

[abelsson (21706)]

aD was the kind of company that gave me a "i'd do anything to work there, it seems like an awesome place" feeling when i discovered them a year or so ago. They really got what was needed for a good programmer to be productive.

Then VCs got hold of the company and look at it now.. they simply dont understand what made the company successful.

I'm sorry Philip. :(

-henrik

This sounds familiar....

[emc3 (22477)]

Hmm.... Venture capitalists suing company founders.... Didn't that account for a few chapters in Cryptonomicon?
--
Ernest MacDougal Campbell III / NIC Handle: EMC3

More info here

[scrosland (23631)]

There is more information here [unicast.org], including some of the court materials.

Re:$1m ain't much.

[Malcontent (40834)]

Even if you spent a billion the costs even out when you consider how many copies of MS word are bought every couple of years.

Misinformation, and what's really going on

[wuliao (75540)]

I work at aD, and I've been here since the beginning a few years ago. The amount of misinformation on this staggers me, and the amount of blind Philip worship makes me ill. The posts by Philip represent one side of the story (his), but are far from being the complete story. The claim by RM that "the best developers" have left aD is flagrantly false. In fact, the best developers have stayed because Philip (and his complete disdain for software engineering, design, QA, scalability testing, etc.) no longer exert an influence here. Philip is smart, articulate, and knowledgable about many things, bu the is not a software engineering god, nor is he an expert software architect, nor is he a capable manager.

Bad predictions

[beta21 (88000)]

I love these two paragraphs on an article when they hired Allen Shaheen, "ArsDigita is positioned to become the world leader in open-source community-based solutions," Shaheen said. "This potential is underscored by its growth in the last year by going from $1 million to $20 million in revenue while remaining profitable. I look forward to working with Philip and the ArsDigita organization to scale the business rapidly." Greenspun said, "Allen brings tremendous experience at managing and accelerating the growth of a company like ours. His early work in open systems, his redefining and restructuring the professional services industry over the past 15 years, and his recent Internet startup experience all make him the perfect person to hand over the CEO responsibilities and allow me to spend more time on engineering and education." Here is the article [internet.com]

Mirror of discussion post

[fhwang (90412)]

Temporary mirror up here [fhwang.net].

Re:Misinformation, and what's really going on

[Arker (91948)]

I don't think you want to see how much I'm going to charge you for your new Professionally Engineered Word Processor!

You won't be charging me anything, because I already have a word processor that doesn't crash (and is extremely powerful) and serves my needs perfectly.

Tell me again why RMS can write EMACS and give it away for free but the commercial world claims it would take untold billions to write something like it?

"That old saw about the early bird just goes to show that the worm should have stayed in bed."

It's the damned market...

[alexhmit01 (104757)]

This anti-VC rhetoric on Slashdot is REALLY childish. In most cases, the VCs don't come in and take the shots, they usually provide a board member and try to guide the company, but if they wanted to run one, they'd start there own.

The problem here, there is a HUGE market downturn. The VCs try to get money out of each investment. If one looks like it is doing well (gonna IPO, etc.) they leave it alone. If one is not doing that well but they believe that they can extract money from it, they will try to get some money out.

In this case, the company has a lot of silly side projects. Greenspun was teaching at MIT, including a class that taught the ACS system. Additionally, his Arsdigita University was teaching ACS. With the products being Open Source, training hundreds of people how to be ACS consultants probably didn't make the VCs happy.

The company was run like it had the value of Microsoft with it's side projects. The VCs realized that aD didn't have the goal of maximizing revenue and minimizing costs. They had a goal of becoming famous.

I believe the VCs saw that wall street wasn't going to reward them, because they were running PROGRAMS designed to DESTROY their OWN competitive advantage. Think about it, as a consulting company around a program you have released Open Source, you get hired because you know it best. With everyone learning it, that's not the case.

I've had potential clients approach me asking to hire me for ACS projects. I know others from MIT that get the same.

The VCs have a right to be pissed.

However, the VC takeover is unlikely to work. Completely reinventing a start-up isn't that bad, but aD might be a BIT too big for that.

Alex

So whats the future of photo.net?

[codemonkey_uk (105775)]

Whats in store for the biggest, ad free, free site on the web?

Photo.Net [photo.net] was Philip Greenspun's baby, and as far as I can tell, funded by him. What will happen to it now?

Will it:

• Continue as is?
• Close down?
• Start running Ads?
• Become a pay-site?
• Something else...

Thad [kuro5hin.org]

English...

[Richy_T (111409)]

ArsDigita, its CEO Allan Shaheen and the venture capitalists who took over ArsDigita Corp., [...] are sueing Philip Greenspun and two other co-founders of ArsDigita [...]

So the VCs are suing the cofounders. Clear enough.

Since the VCs took over ArsDigita, many of their best developers and staff have left the company or been fired, and now they are sueing their own co-founders, who gave the company its vision

So the developers and staff are suing the co-founders? Rather, I think someone needs to learn how to use English [amazon.com] before they hurt someone.

Rich

Re:profits?

[StandardDeviant (122674)]

arsDigita, not arstechnica. aD was actually quite profitable from my understanding (well, certaintly not an IBM or GM or MSFT in terms of absolute dollars but fairly impressive for a small design shop nonetheless).

I think the numbers mentioned by PG were 10K in initial investment, building into a company with annual revenues in the $millions. I don't know what their profit margin was but it was probably pretty good (the customer is buying all the bandwidth and machinery, all you have to pay are salaries, and maybe the occasional Ferrari ;-).

I wish I knew more about the case. It's still a shame to see this happen to PG and Co. though, I think a lot of people have learned very cool things becuase of their efforts to disseminate what they've learned.

--
News for geeks in Austin: www.geekaustin.org [geekaustin.org]

Re:News.com story; who's the chairman?

[qwerty823 (126234)]

This page at the ArsDigita [arsdigita.com] site still lists Greenspun as chairman. I guess it's too much for a Web content company to correctly list its chairman in its own Web content?-)

I guess one of the 29 people they laid off was the guy that updates their website. :-)

Not strage at all

[a_n_d_e_r_s (136412)]

Ars Digita has left their own roots and are reinventing itself. No more open source and selling conculting hours, now they are going to sell software.

Consulting is a very profitable business, now they ae leaving it's roots and a transoforming the comapny to become 'the next Microsoft'. Not strange that the employees are leaving. A business whos most valueable assest are the people behinf it, can't expect to be able to change direction and management and still expect to retain all skilled workers.

It happens when people with no clue try and make profit with something they do not anything about. That lawyers get's involved is no strange either since that is the way many people do business.

I feel sad for Ars Digita who made such a blunder selecting which VC to do business with.

I'm not shedding any tears for Phillip

[blackdefiance (142579)]

I had an email/phone exchange with Phil G last year after flaming aD here on /. He basically admitted that every premise he founded the company was wrong (he might have used "incorrect" or "under reevaluation"), and that he had brought in outside management and capital purely because he wasn't personally qualified to run such a large organizaton.

Phillip seems like an outstanding guy, he has accomplished a lot of laudable stuff, and I think his motivations are relatively pure, but I'd hardly say that this is a case of evil vc's vs. the good engineers. He's been made very wealthy by this whole deal, and legal tug of wars with VCs are to be expected if you're trying to make power plays. Maybe there's more going on than that, who knows.

My personal experiences with arsDigita, which have been repeatedly confirmed by friends, indicate that they can really have their heads up their collective ass sometimes. Probably less so than most "internet solutions" companies, but I still don't think I'd hire them or want to work there.

Re:Why?

[rmello (160951)]

I have only read bits and pieces of the PDF files that describe the suit (they are available here [unicast.org]). It looks like Shaheen and the VCs want to take over the stock of Philip, Eve and Tracy, the co-founders of the company who are being sued.

It also looks like they (co-founders) tried to get the company back unsuccessfully.

Shaheen has only posted to the ArsDigita developer community twice in over a year at aD. If you compare this to the contributions Philip, Eve and Tracy have given, this is a joke. Of course that is only a tiny measure, but still. Many of the recent aD posts to the news are with false notices that Greenspun left the company. Not true.

Re:Misinformation, and what's really going on

[rmello (160951)]

You've been there "since the beginning" eh? What's your name then?

I can see Philip not being a super manager, with his strong style, but that's where other people (like Tracy and Eve) could come in and fill in the gaps. Philip had a vision for web applications, for aD's software and for aD as a company, and that was the icing on aD's cake.

I can't say if Shaheen and VCs coming into the company was good or bad, or if this is all due to overgrowth in short time, but some things in aD have turned better while many others have turned worse.

Funny. On the original post I read "some of the best developers" not "the best developers". I know of several excellent developers that are still at aD, but many indeed have left. Just search the web/db bboard.

Re:What this seems to be about

[StudMuffin (167171)]

Well, I'll tell you what - I am a former aD employee, and I'm coming out of the closet. I am NOT any of the AC's above, but I can say this as fact:

Philip was an asshole to me every single time I spoke to him. And I was fairly high up in the food chain, as a level 3 engineer (there were four levels, and Eve/Jin/Tracy/a couple of others were L4's). I was also a Technical Sales Manager - the first engineer brought into the sales group to try to coordinate the process of bringing in new business and keeping the out of control developers (led by Philip) at bay while we tried to sort out what was going on.

My second day at the company, I met Philip for the first time. I was really looking forward to it. The conversation went something like this:

Philip: Who are you?
Me: My name's Hans, I just started. I wanted to say that...
Philip: Are you a programmer or a system administrator?
Me: I do both, but I prefer...
Philip: You are wearing a cell phone on your belt. You're a sysadmin.
Me: Well, not really. I...
Philip: Do you use emacs of vi?
Me (proudly): vi (it *is* the better editor)
Philip: You're a sysadmin. You just don't know it.
Me: Well, anyway, I wanted to say that I really enjoyed your book and I am looking forward to working here.
Philip:

Well, it really didn't matter WHAT Philip said, since he had already dismissed me and walked away.

At least Alex hung around and got a tummy rub.

Over the next few months, I attempted to build up an office in the midwest (Ann Arbor). I also worked to get new business and add a technical perspective to the sales efforts and keep promises to clients in line. Every time I came back to Cambridge, I either was pummeled by Philiip who couldn't give me the time of day but reveled in being insulting, or heard tails from the aD staff about his latest loose-cannon move.

Philip was OUT OF CONTROL. Spending money like water, planning koi ponds, and having doorways enlarged to allow his ego to pass through. The company was headed towards bankruptcy if his spending continued at the helm. Allen and his pack decided that it was time to curb those expenses. For god's sake, there were 40 $3000 flat panels, aeron chairs and workstations sitting in a nearly empty office in Atlanta (for example) that a) didn't have developers to work them and b) didn't have the client base to support hiring the developers to work them. There is one basic premise of business that, from my perspective, Philip decided to ignore. You have to earn more than you spend.

I finally decided to leave when Allen and Ern (rightfully, in hindsight) decided to close the Ann Arbor office that I was tasked to open, staff, and build up. I returned to a research position at the University of Michigan, where I am today. I was given the option to continue with Ars Digita in my current role, but with a new baby I didn't want to travel that much, so I declined.

I was constantly aghast at the over-the-top spending that aD did. The modest Ann Arbor office (which never had a chance to get established) worked with $20 chairs from office max, used 17" monitors and $5 steelcase desks from the University of Michigan property disposition. And you know what? We could have gotten as much work done as if we had the expensive stuff. My thinking was that we would push for this if we ever made a profit for the company, not before.

That ideal wasn't perpetuated by Philip, who was going around the world talking at conferences and opening offices. I *think* the last straw was when he sent an email to the company talking about how great Australia was, and that we were opening an office in Sydney. It was total anarchy, and Philip was simply out of control.

The board and VC's did the right thing to cut him out of a management position. They also did the right thing to try to keep his ... umm... "charisma" in a public facing position - let's be honest, much of the public opinion of arsDigita comes from Philips 18 charisma. But Sun Tzu had it right in the art of war: Leave an enemy behind, and he will rise to strike you from behind...

- Hans

Re:Consulting is not profitable

[MrBogus (173033)]

Right -- The web consulting business was going at a 100mph and then hit the wall and is effectively going about 10mph right now and slowly gearing up. As you mention, there's been massive layoffs, and some former big name places like MarchFirst are effectively dead.

Everyone's making this out to be a personality issue, but I wonder to what extent it's just market conditions...

VC Morality

[Alien54 (180860)]

the first impression sounds like the typical stereo-typical short term short sighted planning for the VCs in trying to maximize the money return back to their wallets, regardless of the long term prospects. This is a first impression, of course, YMMV.

But this is probably the same kind of thinking that led VCs, in San Francisco to treat the remaining employees at one company so badly that they basically walked out, screwing the VCs.

Without more info it is hard to know where to point the finger, but I know where I'm placing my bets.

Check out the Vinny the Vampire [eplugz.com] comic strip

Re:News.com story; who's the chairman?

[SubtleNuance (184325)]

comrades selling open-source software

Its really nice that they are trying to pull this "opensource==godless communism" crap - very subtle; very nice. Simply by saying "comrades" in America you rake up this whole 'evil-godless-communist' rabble in the mindless sheeple. Wonderfull how the author pulls this simple word-association trick... this will pre-dispose conditioned sheeple to react negatively to 'open source'. This is what happens with over-loaded words are hyped by the media to produce mass response - clear, measurable, specific response. effective.

Why cant America give up McCarthy-ism?

Sorry - slightly offtopic, my politics are aligned to the left - so I have become a little sensitive/aware of these types of manipulations.

Re:It's the damned market...

[SubtleNuance (184325)]

the goal of maximizing revenue and minimizing costs. They had a goal of becoming famous.

In a more enlightened culture this would be the correct mode of operation. Maximizing revenue is NOT a 'honourable' and 'noble' goal. It makes people rich - but does it make people wealthy? No.

Remember Maslow's Heirarchy of Needs. Being 'famous' is equivelent to being respected by ones peers*, a much more honourable goal than simply stuffing your driveway full of SUVs and gold faucets for your sinks.

So, in the end, VCs are mindless, childish twits hell bent on chasing the 'dreams' sold to them by their McLives advertised for $1.299,00 at the McHappyShoppingCenter.

Fuck VCs (and the rest of the unsustainable-economy advocates.)

*Except in the US Capitalist-Consumer 'la-la-land' where even fame has become a product.

Re:Misinformation, and what's really going on

[dstone (191334)]

My dad is an electrical engineer (>5V). My girlfriend's dad is a civil engineer. I've got a cousin in aerospace engineering, an uncle with a PhD in electrical engineering(<=5V), and a good friend in mechanical engineering

Oh yeah, well screw you. My daddy is a choo-choo train engineer and could beat the crap out of your whole damn family.

Joking aside, re/ software engineers at ArsDigita... you're right -- some engineers pay a lot of professional fees and insurance and put up with a lot of beurocracy to put "engineer" on their business card. And other "engineers" don't. Software engineers are not, nor do they claim to be Professional Engineers. That's a special designation (requiring examination and fees) that they could be sued for using. Much like a Medical Doctor. I can call myself a Rug Doctor or Transmission Doctor or Cheese Doctor. The public is smart enought to know the difference!

Software engineer... you're a fucking programmer, so get over it or accept (financial) responsibility when my word processor crashes.

I don't think you want to see how much I'm going to charge you for your new Professionally Engineered Word Processor! Just like a new bridge or airplane, that kind of software engineering is available for a big price and time premium (ask industries that need it like aerospace, medical systems, or the military, not desktop typists).

Re:summary of why they're being sued

[milo_Gwalthny (203233)]

This is a good summary. Note that the shareholder's agreement is as vanilla as they come - worth looking at if you are ever going to raise VC because it's what you will be asked to sign.

If you plan on raising money from VCs, you should be very aware of what you are doing: you are taking on partners. Not bankers, not investors, not people who are going to sit in their offices and let you run the company however you please, but partners. They have the right to have a say in the business. If you do not want this, do not take their money. Or negotiate your terms up-front. If you want to remain as CEO, put that in the shareholder's agreement, or get an employment contract. If the VCs won't agree to it, get different VCs. Once something is done, it's too late to fix it; creating a lawsuit like this will almost certainly drain the life out of any small company. Taking someone's money is serious stuff. Get a lawyer.

Re:Getting VC was a mistake

[milo_Gwalthny (203233)]

VCs are generally motivated by two things after they make an investment: making the best possible return, and keeping an excellent reputation. VC is a repeated game: maximizing the return on any given round but ruining your chances in future rounds is a bad strategy. The reason reputation is important is that the best potential investees usually have several alternative sources of funds. As a VC, unless your reputation is sterling, you won't be invited to invest. Being relegated to the lower-tier deals makes investing much riskier.

Greylock and General Atlantic are not vulture investors. They are two of the three most respected venture capital firms on the east coast (I would say Patricof is the third) and both are, IMHO, in the top ten in the country. They have also been around for as long as pretty much anyone and are staffed with real professionals (that is to say, they're not Benchmark - a hype-driven latecomer.)

I can't imagine that these two firms would risk annoying their other current and future portfolio companies with a baseless lawsuit.

[full disclosure: I used to be a hardware developer, but now I'm a venture investor, although not with any of the firms mentioned in this post.]

Wow, even sort of on topic!!

[update() (217397)]

I just came across this and said, "I've got to this on Slashdot." It won't make a story submission so I'll just jam it in the Mandrake article and take the -1 (Offtopic)s. But here it's vaguely relevant!

Bull & Lifshitz, LLP Announces Class Periods for Class Action Complaints - ARBA, KEI, RHAT, VNTR [yahoo.com]

Getting targeted by these scumbag shareholder class action attorneys is bad enough. But Red Hat is being chased by a firm called Bull and Lifshitz? Talk about adding insult to injury.

Unsettling MOTD at my ISP.

Re:Getting VC was a mistake

[scruntime (444745)]

Greedy? Not necessarily. More like 'over ambitious' perhaps. The founders of aD always said that they hoped to build a company that was as important in web applications as SAP was in ERD (over 10 years or so). I think they saw a way of accelerating this. PG and the others were always very sceptical of VCs (we don't need VCs, we have revenue they always used to say) but in the heady days of late 99 early 2000 even they got caught up in the hype. Saw a chance to get Big and Important more quickly (while remaining 100% Open Source, and fully committed to all the other stuff, training, pro-bono work etc.), took it, and then I think almost immediately regretted it. I guess they thought they could control the beast as long as they still had a majority shareholding between them. Looks like, at the end of the day, the shareholder agreements they signed may have done for them. Long spoons all round ... Still there is the option that PG, the founders, and all the best programmers could quit, set up aD2 (or whichever venture most gets their juices going) and give the VCs the proverbial finger. Might lose their stock in aD but that's not looking like such a big loss right now, and I'd reckon they'd be on better legal ground this way than by trying to retake control of aD. At least a couple of the big clients would be tempted to go with them. Phil Greenspun == Jerry MacGuire?

AD seemed childish to me

[47PHA60 (444748)]

ArsDigita is around the corner from my old house. I applied for a job there 8 months ago, told they were looking for experienced UNIX/Oracle developers/admins with a focus on security. I got a tour from a developer who gave me details about their hoped-for IPO (violating 2 SEC regulations), major contracts under negotiation, and details of their network (in)security. Hm. I was scheduled for a phone interview 2 days later, which the interviewer forgot, then called me 30 minutes late from his car and asked 3 vague, stupid questions (like "so you can program in C++, huh?"), while talking to the person next to him about the location of their next meeting. He also did not have a job description of the position for which I was interviewing.

Three months after I forgot about it I got a FedEx box with an AD cap and shirt, and a letter written in nearly incomprehensible english explaining that they did not need UNIX nor security staff (yeah, that's what they thought). The letter went on to apologize for the company's lack of professionalism, then made excuses for same ("we're really young, and growing fast"). I would never get to use the Playstations in the nap room, nor look at the fish tanks, nor get my own $1000 Herman Miller office chair. But, I could wear the gear and advertise for them. Sheesh.

The current regime at AD seems to be falling back on the 'safest' business model it can find. Too bad about that, but I have 10 years business experience as well as 6 years technical, and if I were to invest in that company, I would have required management to grow up in order to keep the venture sustainable. I really do not think the company that I saw 8 months ago could have lasted.

aD, from an ArsDigitan

[wandernotlost (444769)]

I feel like I should step in and give some picture of what it's like on the inside, coming from the position of a developer that has been excited about ArsDigita for years, but decided to join only recently.

I started working for aD about a month ago as a developer. I decided to come to work for aD, despite the fact that Philip (with whom I shared an office 3 years ago at MIT, and who sparked my original interest in aD at that time) is no longer a participating member of the company. I admire Philip for his accomplishments in building aD, and for the excitement that he has incited in myself and others for interesting uses of the web. I also think that it is kind of insane that the founder of a company can be kicked out of his own company. I can't comment on why Philip isn't here anymore (because I have no personal experience with the matter - no one has tried to restrict my speech about the company in any way), but nothing that I've heard from others that work here suggests that it is any particular tragedy that he's gone. What I can say, however, is that ArsDigita is still an awesome place to work. Everyone whom I have come into contact with here is astoundingly competent, and most believe very strongly in the ideals that I think this company is all about. For the first time in my life, I feel that I am completely surrounded by people who are as good (better) at what I do as I am.

I came to ArsDigita because I believe very strongly in free software, and great software in general. I am of the RMS breed of free software zealots that believe that the GPL is the only way to fly. Naturally, I have been skeptical during my first few weeks here, feeling out what aD's commitment to free software is really like, now that there have been some big changes in the company. What I have seen thus far is that everyone that I have come into contact with is committed to the freeness of ACS. Even the big bad executives seem to understand and believe that keeping ACS free is not just a token gesture toward the community or marketing bonus, but a core part of the way we do business. They also understand that aD as a company, as wonderful and amazing as it is, is still a company that must have revenue to succeed. Building that revenue, in a tougher economy, while remaining committed to the ideals that Philip has written about is the challenge that we now face. This challenge is the reason that ArsDigita exists, and I feel comfortable saying that it will continue to be the reason for our existence in the future (until we figure it all out, of course, then we'll move on to the next challenge).

ArsDigita may not be a crazy little startup anymore, running out of an apartment, with everyone working 80 hour weeks. Philip may not be around anymore, publishing lots of information to get noticed on the web. The company, however, is still here, still strong, and all about building and giving away the best software, publishing great educational materials on the web, and building the best web sites out there. Philip's not here anymore, but there's a whole swarm of people who came here because they believed in a lot of what he was saying, and who will work their asses off to make sure that ArsDigita remains as great as it ever was.

Re:Misinformation, and what's really going on

[Joe Shipman (444875)]

Keep in mind that ArsDigita was highly profitable when Philip was CEO. All of the things that looked liked extravagance (beach house retreat for programmers, ArsDigita University, Ferrari prize for recruiting) could actually have been paid for from 1999 profits. ArsDigita had $20 million in revenue and a fat profit when the venture capitalists came in.

The ironic thing is that most VC deals from the past few years were for companies struggling to figure out how to make money. The VCs would go in and try to turn the company into something with a sustainable business and profits. Most of the time they weren't creative enough and failed, losing their investors $millions. In the handful of cases where they succeeded, they built things sort of like ArsDigita with Philip as CEO: $20 million in revenue, happy customers, profit. What is ironic is that the VCs turned ArsDigita from what they were always desperately trying to build themselves (a company with revenue and profits) into the kind of company that has historically lost them all their money (a company with an optimistic spreadsheet and revenue forecasts from not-yet-existing products).

Don't assume that merely because a VC made money in the go-go years of the 1990s that the VC therefore has any special knowledge of business.