Kadoink, a text messaging marketing startup based in San Francisco, has been seized by creditor Hercules Technology Growth Capital after failing to maintain the financial requirements of a $2.5 million line of credit. CEO Scott Cahill says that there is still a “substantial amount of cash remaining” that is being returned to Hercules, and that they are looking for a strategic buyer to keep the service alive.
The company has announced just $5 million in funding from Sutter Hill Ventures, but they may have burned through substantially more than that. There was rumored to be a previous angel round of nearly $2 million, and the founders took $3 million or so off the table in 2008. Sutter Hill may also have bridged the company an additional $2 million Along with the venture debt, the company may have raised as much as $14 million in capital. At this point, all equity holders other than the cashed-out founders are wiped out.
The startup provided text messaging based marketing services on behalf of brands, similar to competitor Mozes. We’ve added it to the deadpool.
That’s too much money… Bad for the company and the investors…
Too much is a relative term in this case I believe… fact that the founders cashed-out is an interesting one, means they no longer had any direct interest in the company. A huge red flag.
Jon
http://WoodMarvels.com – Create Unique Memories
Dumb name. Niche industry. Inexperienced founders. Clumsy VC partners.
Recipe for disaster.
Create idea that generates revenue.
Grow slowly expanding as earnings allow.
Say no to lazy VCs run by trustfund Timmies from Stanford.
Partner carefully.
Celebrate quietly.
You’re welcome, Pinheads.
Amen
Too much is a relative term in this case I believe… fact that the founders cashed-out is an interesting one, means they no longer had any direct interest in the company. A huge red flag.
wow, thats not a good thing. You would think people would be a little smarter then some of the dumb things they do.
Just sounds like a mess with a lot of money involved
“Scott Cahill says that there is still a “substantial amount of cash remaining””
Look under his mattress. They always put it there.
SMS.AC tried this a few years back and it didnt work out for them. They are now ‘FanBox’. 80108 did this also but didnt work out and they went WAP via GO2media . MOZES(artists), 4INFO(media), CELLYSPACE(mms), and a few others have been providing similar servcies for years but have managed to differentiate themselves. These VC’s were fools and didn’t do their due dilligence.
Let’s hope they didn’t smoke up all the xXx $ gUaP $ xXx
This is why it’s not always a great idea to allow founders to take a big chunk off the table early on. The incentives can get misaligned.
Yeah this has been happening a lot to the Web2.0 companies.
I can understand a mini cash out to ease the founders’ nerves to the tune of hundreds of thousands to perhaps allow the founders to replay their HELOCs or Credit Cards… but 3M???
At 3M the founders no longer have any incentive to continue to build the startup since they’ve technically hit their exit and are now just “managers” of the company.
2nd company is 2 days–same problem. First Nick Grouf company now this.
Since when is it Ok to cash out founders before there is a real product? Dumb shit followup investors.
If the current market hasn’t been enough of a reason for people to consider taking out their investments..this certainly contributes..
Kadoink! That’s the sound of the most annoying business model ever landing in the crapper.
How frequently do founders sell their own equity as part of an A or B round?
How on earth does the BOD let the founders take more than 20% of the raised capital off the table?
Doomed from the name.
I wonder if ANY due diligence went on during the calculation of how much money should go in. Broadtexter has operated with minimal cash…and created/supported a user base that eclipses Kadoink. I wish the founders well over there.
Broadtexter Founder
Andy, the original Kadoink business model was not based on SMS alone, but was a synergy between telephony and SMS. Even so, that amount of money should have lasted forever had good management skills been utilized. They kept the original application at service.kadoink.com though its not very functional at the moment.
The truth is Rat Pointer, that you copied this idea from another company that you continually harrassed during their early stages. You are the most un-original engineer ever. First you copy an Online CRM idea, then Text Message Marketing???? Don’t you have any original ideas?
Charming… I do not know who you are, or who do you think I am (I assure you – I am not Mr. Stone)… Or why do you feel attacked that you have to defend your little sandbox with such ferocity. This was a civilized posting with some discussion until you started what some might seem as slanderous exchanges…
I’m just curious – have you had any original ideas?
You’re right Rat… Maybe that was a little harsh. i just don’t understand why you feel the need to defend the founders. The ones who went to the board to kick out the CEO, but failed and supposedly collected 1.5 million dollars in a payout. Is that the right thing to do for the founders or the board?
Mr Liar,
You are answering your own question… Read back what you wrote out loud and see if it makes sense then. Its very naive of you to think and respond like you do. Naive like a cuddly toy.
The founders, who by definition, founded a company, felt it being steered the wrong way. Obviously you do not know the full story, and it is not my place to tell it to you. Lets say that they had reason (and proof) to believe they have been intentionally mislead by 3rd parties to hire a particular captain to steer their ship.
I’ll continue with a ships and pirates analogy as it makes things simple: The captain decided to change the destination of the ship, in hunt of some personal treasure or his own moby dick. The founders, who worked hard to actually build the ship the captain was steering did not agree to their new course and attempted to depose the captain by civilized means. They tried to reason with him and when they saw reason will not do they attempted to go to the funders of the enterprise. The funders, perhaps, thought the captain’s fictitious treasure was worth hunting and told the founders to walk the plank. At this point, I would understand any sea man who will attempt to defend his ship to the death. Any man or woman who will not stand and fight lack a moral fiber in my book. Those who took a back seat in the battle in order to wait and see who the winner is, eventually got what they deserved – a sunk ship. That whole mutiny happened about over year ago if memory serves. Since then the ship was steered to its new destination by the captain and his MANY executive sea man. So many executive sea man were there that sometimes it seemed like there’s nobody to scrub the decks… So claiming any of this mutiny had any effect on the health of the ship itself is a foolish thing. The mutiny left the ship untouched. Its crew however was beyond repair, and ultimately caused the ship’s demise.
Again, there are many parts to this story that will not be told here. I was observing it from a vantage point at the side, and was able to see clearly the story unfolds from both sides. Maybe one day I’ll tell all, but I for one, do not want to hurt anybody by slander. I see it a very harsh sin to speak badly on other people in public particularly in a time where they probably understand their own mistakes better in hindsight and hopefully regret their actions and have learned from them. Your words about Mr stone before were harsh to the point of unjust personal attack on his character. Its a shame you can’t retract them and I do think an apology in the same public forum is in order. But that’s up to you and your own conscious. Hope you sleep well at night.
The founders left because they thought the company is being steered towards its destruction by the CEO (backed by the Board). Ultimately they were correct but this doesn’t help anybody now. This is a classic case of incompetent management, bad leadership and very bad technical and business decision making on all levels. The founders were lucky to have left in time. Watching your creation fall into mismanagement is a terrible thing.
Everyone,
Rat Pointer is Eric Stone, one of the founders of Kadoink. His behavior was so outragious during is stay in the company that he was asked to leave…he did things like taking the source code, turning off the bug database. In short, he did his best to flame the company on his way out as he is in this thread. The shame of it is that he did not have the “Stones” to use his real name here but prefers to stay in the closet. It makes me wonder what else he is doing in the closet. Eric went on to work at Shattered Reality…a soon to be failed startup. Now…he has nothing better to do than to react to a failure that he significantly contributed to.
Sweet, but wrong. Rat pointer is not Eric Stone. Rat pointer is an observer pointing a rat. Rat pointer did not feel the need to name names, or descend to childish mannerisms which is a shame to see mr x files do.
What occured in Kadoink during the time the founders left was shameful. I was in the opinion that the CEO was taking the investors for a ride but that’s my personal view. I know the founders tried to fight to keep THEIR company under THEIR control, and they fought hard yet failed, and that is sad. What would you have done had it happened to you? I also know that the founders did their best not to harm to the company and keep the dispute in house in order to maintain its share value.
Shame how it all ended up as. I completely agree with Moron Alert above. He’s hitting it bang on the dollar.
THETRUTHISOUTTHERE, another observation rat pointer is making is that you yourself have failed to identify using your own name, which suggest, by your analogy, a lack of ’stones’.
You are a whiner.
Rat Pointer is exactly right when he describes what happened. read what he wrote and add in that the VCs never did anything to help the original founders and you have the story.
Peter,
Rat Pointer is Eric Stone…co-founder of Kadoink and the matermind of its disaster…I should also mention that he has a legal impediment to spewing crap like he did above…which is is violating. What an ass.
Ka-Poof!
Patting my back as I told a recruiter less than a year ago to NEVER bring me any opportunities like Kadoink (after meeting with them) ever again!! Kudos to ‘moron alert’ above… you hit the pinhead on the head!
Too bad – before they fired half their staff and hired a bunch of semi-retired executives from big telco industry they had some good ideas.
Whatever the truth, this is a really terrible story.
My guess though is that the truth is nearer to what the founders are saying, having been thru a similar situation. It’s amazing the incompetent CEOs that investors can push into a company. Founders usually just get forced out, with nothing, kudos to these guys if they managed to get something for their efforts.
Sadly, a promising company is dead.
Kadoink.com is now showing a Parked by GoDaddy page, tip from http://www.exec....com/c/r/130/2/
Looking for strategic buyer? Give me a F-ing break!
Whoever is thinking of buying this dead body of a company, should think again. You’re better off buying a new sports car, a lap dance or a bar of chocolate. All of which will give you more satisfaction, a better sense of accomplishment and a much much higher return for your investment.
God Bless!
Scott
Interesting story here….why a VC would choose a middle-aged CEO from a 2nd rate Wine company over founders is the most asinine thing about it…if I’m reading this right.
A wine company CEO? For a tech startup? Is this right?
Is it my imagination or has Scott Cahill had absolutely 0 exits and successes?
Since when do VC’s bet on losers like this?
Bet on a 0 exit, glorified sales guy as CEO.
My guess is that guy is flipping burgers today.
Some of you seem to be in the know, so maybe you can suggest where I can track down the money Kadoink owes me…I’m a freelancer that Kadoink didn’t pay for a month’s worth of work when they were “seized” (work was for month before they went belly up). I’m now tracking down whom I need to go after. Any ideas?Founders? Venture Capitalists? Scott Cahill, CEO? Shabber Jaffer, CFO? John Karsner, CTO? Mark Robinson, VP Prod. Management? Roland Deal, VP Marketing? Bob LaFrance, VP Business Development? Will anyone take responsibility?
Where does the buck stop when the buck stops?
You are fucked Bucko. Kadoink sold their assets yesterday and they are going to bankrupt the company.
You should have sued them, dumbass. Too late.
Bucko, all the names you mentioned are in LinkedIn. You won’t get anything out of them though but you can still give them a piece of your mind.