Mochi Media, the fast growing Flash game advertising network and payments platform that we covered last week, is in the midst of an internal battle over the fate of the company.
The company is mulling over an acquisition offer that would give investors Accel Partners and Shasta Ventures their original investments of around $14 million back, but not much more. Founders and other employees wouldn’t make much from the sale.
Normally this is an easy offer to turn down. The company is doing well and has “plenty” of money left in the bank, sources say. The founders obviously would want to continue to grow the business and hope for a good outcome.
But for some reason at least one investor, Ping Li from Accel, wants to close the deal and take his original investments off the table. He has been pressuring the founders and management team to accept the terms offered, multiple sources say.
That’s left the founders frustrated, who apparently turned down an offer from Time Warner to acquire the company for $65 million or so a year ago. Li convinced the founders not to take that deal, sources say, and instead raise more money to go for a “home run.” Now, a year later, Li wants to sell the company for a small fraction of that $65 million.
Generally venture capitalists like to keep their money on the table when startups are doing well and aren’t in danger of folding, as is the case with Mochi Media. No one we’ve spoken with can explain why Li would want to force this deal on the company.
Li is a somewhat controversial venture capitalist – he was one of (or the) architect behind the extraordinary undoing of a $17 million round of financing for BitTorrent last year – we questioned whether Li violated his fiduciary duty to the company in closing that deal at the time.
Seeing venture capitalists square off against entrepreneurs is never fun. And as ugly as this situation has become, I don’t want to unfairly single out Ping Li. He’s got plenty of people that he’s invested in that say glowing things about him. For example, I spoke with Dennis Fong of Raptr this evening, and he says Li is a model investor.
This situation is more of an example of a trend that we’re seeing, where the goals of investors and entrepreneurs veer off in separate directions. It’s also a red flag for entrepreneurs in general – sometimes the needs of a venture fund can lead that fund to make bad decisions on behalf of their companies. Be prepared for that, protect yourself in contracts as much as possible and choose your investors wisely.
Zuck is smart…that’s why he won’t let VC’s take a controlling interest.
Very true. And that is why Facebook is quite safe. I don’t know what is going to be the fate of Mochi Media, but as Michael points out, this is clearly an ugly situation – The company could have as well closed the deal with Time Warner than do this one for a fraction of $65 million.
i think peter theil pulls the triggers at fazebook.
smart is creating something that cannot be easily replicated.
fazebook has become a white pages circus act. users dont go there to conduct business. interesting story.
Blame the russians
yeah, total tubular bro. People don’t watch the Super Bowl to conduct business either or watch TV in general for business, but I understand these non-business things to be successful.
let them? not many people have the skill or the opportunity to not “let” them take controlling interest…
Zuck is smart…these sort of situations are exactly why he hasn’t allowed a VC to come in and take away controlling interest.
he be genius
Let this be a painful lesson to you founders out there.
“Seeing venture capitalists square off against entrepreneurs is never fun.”
Maybe it’s a bit of a misunderstanding.
I’m surprised mike didnt go hard on Li like he does on everyone else especially when they are working at facebook.
He tried to display a certain level of balance that is uncommon whenever he has something critical to say of facebook.
mike probably went easy on ping because he’s in awe of jim breyer:
http://www.tech...silicon-valley/
i’ve heard about Ping Li from a few sources in the valley and most people think he has pretty low character. So Li when you read this you’re getting a bad rep i suggest you check yourself the valley is a small place and you aint no Don Valentine or Perkins
i’m raising money in a month actually and when i go to accell i’m going to request that you’re never let in any of the meetings cause this is the 4th time i’ve heard your name in negative light. other 3 times were in private convo’s
He is reading alright but the question is.
Does he care?
yah i mean why would he care what the valley’s saying since he’s got all those home runs with bittorrent and alike… oh wait.
something tells me a vc shouldn’t develop a rep of being a difficult to manage until after he’s made his bones.
There are good vc’s out there they have good reps and they get the quality deals. only fools go to a vc cause of the vc name its about the partner and the name.
listen up li, ping; dis guy aints suck’n no cocks. especially chaiknee.
@HardyHar You can’t expect to do a deal with a VC firm if you go in hostile to one of the partners. The moment you ask that Li is not in a meeting, you’ve just removed the possibility that they will invest. And in that case, you are just feeding them competitive info or wasting your time. Either get over the Li issue or cancel the meeting.
Sad to hear, I will echo ‘protect your self with contracts’ comment.
Hey Ping, welcome to entrepreneurial shitlist.
I pitty the fool that even wastes their time talking to Mr. Li, let alone taking a deal from him. With Bittorrent and now with Mochi you have two proof points that show that Mr Li has a pretty bad judgement and doesn’t give a damn about entrepreneurs.
that is not what i’m hearing in general about him from other founders he has invested in.
Mike, that’s because they’re afraid of him and have to live with him while he’s still at Accel.
Do you think any entrepreneur would air their grievances with any VC publicly and admit to it? Of course not.
Actions speak louder than words.
bit-torrent is run by a retards.
they gave like 50 million to retards instead of investing in !@#$!#$ which is alive and doing well.
show me da money; !@#$@!#$ hasn’t gotten VC investment; and will probably never will.
its the culture at Accel, borne out by the string of legal tangles with founders who got screwed by them. the usual sleight-of-hand is to sweeten the pot for one of them to get the paperwork through.
if you check out the case law, you will find that accel wrote the book. and lost every time.
Remind me to not let VC’s invest in my companies…
Do you any other option ?
Hmmmm …. not sure I will apply to Accel now for funding. Might try other firms instead.
like u have a choice?
What, all roads lead through Accel?? Entrepreneurs have a large set of choices for funding – and they’re wise to exercise them. My one meeting with Accel was unusual- this junior partner who had just joined out of college was talking down to the senior partner (a woman) saying she wasn’t very intelligent — during the meeting. It was uncomfortable for all.
Uh… Accel has junior partners just joining out of college?
yeah; i met an MBA from stanford; he was a ‘tard. he just joined accel; never really had a job; talked shit though.
BTW is raptr doing well?
I have a feeling there are some very nice things about Li over on TheFunded. . . =P
In my opinion this is a good example why revenue form the beginning is so importent. If your earn at least part of the money you need to grow from revenue you need less outside money – that leads to less influence of investors. So my advice to entrepreneurs is – when you develope your business model find some source of revenue right from the start. The souce can be temporary.
MochiMedia does make money they are an ad-network. They needed money to take the next large step in expansion. For any company that wants to grow quickly a large capital investment is usually the best way to go!
Another train wreck. This is exactly why founders hate dealing with VC’s.
Been there done that! Only way I let VC’s in going forward is taking money off the table.
I’ve never met this chap Li and never care to. Way to give your entire industry a black eye, yet again.
anybody said freindster?
Mochi is the gold standard for the flash games business. They are changing the way the industry monetizes and shapes up the free2play gaming landscape. I am sure Li has some internal pressures and Mochi being a positive outcome is facing the brunt.
It would be best to get Accel bought out in a secondary round and let Mochi fly…
yeah, kids arn’t stupid; and you need stupid kids to continue play’n games in a hard eco; i think the gam’n generation is now in their 20s; but brokw, cause dey play too many game. the new school is like iphone bitch; an flash game tard (flash programmers are loosers) crowd in dying too with AJX fck-ups 2.0; adobe is closing offices dude.
how common is this right now in the valley? are VCs trying to clean out their portfolios? Seems like an ugly result of the VC business model, which hurts the working folk who need nothing but stability right now to live through, or even thrive in the recession. those companies that power through usually end up huge winners in the recovery.
This is just speculation, but with the economy Accel may be feeling pressure from the LPs to either safe guard their investments (taking money off the table) or to allow redemptions which would mean they would need to find a way to get liquid fast. The same thing is now happening in the broader PE sector.
i vote this.
MA: When you ask founders about their VC or their board member, do you really think you’re going to get an honest answer? how does it serve them to say anything but the nicest things (on the record)?
Also is there anyone who measures VC effectiveness based on operating experience? I remember in school and college thinking that professors who never worked in teh real world were terrible teachers/coaches/etc. Seems like a metric that the Funded should track if it wasn’t such a rant rag.
Let’s think a bit…
It’s *easy* to understand ==> This has only 2 possible explanations:
1) The VC company is in so bad shape that it absolutely needs quick money back, event at 1/1 parity from investment, which VC *never* do, espacially for a funded company that’s doing more than ok!
They need it to pay the rent, phones, Internet and the sexy assistants salaries.
2) The Ping Li guy wants to start a new life, and it’s the only way for the VC company to refund his shares or due immédiatly.
In either case, they walk on the face of Mochi media.
Classic case of a VC not being an entrepreneur and not understanding the natural process of a company. Having been through this before I would never let a non-entrepreneur VC on my board. They have to “get it”. Too many VC’s really don’t know what they are doing.
Has anybody considered that Ping Li is perhaps the smart one here, and he sees that despite the lofty $65M valuation of over a year ago, the market has changed, and the offer that gets them their $14M back is now considered to be a good one? I don’t know the guy, and am not a VC, but seriously, how much revenue does Mochi Media make? And how sustainable it is? I thought that with the exception of Twitter, the “well, we’re a cool service” excuse for high valuations went out the window already.
Well, I don’t think it is smart. M&A can recover. If it does then they should probably wait to see if they can get a better offer especially if they keep growing.
This seems like a case of Ping being incredibly selfish. He is the one who advised the guys to turn down a 65m offer and now is begging to them to accept a 14m deal because the economy went south? I would be PISSED if i were a founder of Mochi. He sounds like a typical MBA VC douche with zero balls.
I guess its easy to bitch and moan when it isn’t your millions at risk.
I have VCs contacting me left and right, good article here that will help my thinking a lot.
Scary, but when you do take VC haven’t you already decided to exit at the notion of such $65 million deal?If you don’t have a bidding war at hand when the offer is rendered, you take the offer, split the pie and move on…
Why take VC then?
If VCs are contacting you for the non-sense str3em site, then I feel sorry for the VC industry.
Some people seem to be interested in the successor to DVD and Blu-ray i guess.
the internet?
You wanted to say “piracy”, but no, I think part of the appeal is that we will end that
Jason, Ping might be right now but was obviously wrong in the Time Warner situation so his credibility is suspect when it comes down to making serious decisions.
The truth is that no one can know the right answer unless you are on the inside of this company.
you’re right hindsight is 20×20 i would of probably held on for better too…
Interesting that everyone assumes that this is the whole story. It is bad form for the entrepreneur to use the press to kill a deal he doesn’t want. It may be the best deal he can get for the next several years. Is the company profitable? Bleeding money? I don’t know Ping Li but I ran a company for years with Accel as a backer (Jim Breyer). As an entrepreneur, I found the firm to be supportive through the boom and the bust and Breyer is as smart and helpful as they come. If you don’t want to deal with VC’s, stop whining and stop burning cash.
Even if there is a lot more to it…why should founders consent to a sale of a company when the preference is going to eat all the proceeds. Essentially, turning down this deal by any means is the equivalent of buying themselves a free call option on the upside. For the founders, if they are able to kill the deal, there is no downside. If they sell, they get nothing. If the company fails from this point to $0, they get nothing. Why not kill it and retain some possibility of upside. What is the benefit of accepting. Don’t say reputation. Reputation means nothing. Cash rules everything. You could be an asshole entrepreneur or VC with cash, and everybody will clamor for your attention. Just worry about the cash.
It’s called fiduciary duty…as executives at the company, they are required to do what’s best for shareholders…
Anyone else think this isn’t a balanced story? Where could this have come from?
1. The VCs? Clearly not in their interest to have a story like this out there.
2. The acquiring company? Clearly not in their interest.
3. Only leaves the founders with this much knowledge of what’s going on. And lots of people know that Jameson has a relationship with Arrington.
Smacks of desperation from a founder without a great grip on reality here. Think Jameson will ever be able to raise money from another VC?
i’ve met jameson. he’s a great guy and one of the best product minds in the business. he’ll spring a few more great companies in his life.
anyone who has met jameson and the other mochi people would know that leaking this to the press is totally out of character for them.
i suspect a non-accel shareholder who isnt going to make as much as he hoped on this acquisition.
Very strange, there has to be some information missing from this equation.
I wonder if the suitor has any ties to the VC.
very good question
Kind of an odd situation. All you hear about is how well Mochi is doing as a company and how they are transforming the industry.
I’ve heard the “we had an offer for $XXM from YY” a zillion times. It ain’t real until the sigs are on paper. Who knows how real that $65M was? Betcha it wasn’t.
Ping’s not listed in the “9 VCs You Don’t Wanna Meet” http://tinyurl.com/5hbw3c
I have three thoughts:
1) If you’re selling the company at a 4-9x multiple of sales, the buyer is still paying a premium
2) Sales volume is more important than VC money raised. Companies that sell more do better than companies that have less sales.
3) the company is 2 years old and the founder has not yet experienced TRUE hardship (mutiny, not meeting payroll, back-to-back quarters with no growth, death of a board member). Dealing w/a VC wanting to sell is not that bad
Look if a VC wanted to get back his money, how about you find another investor to invest at the same valuation and take over Accel’s stake?
If Mochi is going as strong as the founders imply, I’m sure a Sequoia would be happy to take over Accel’s stake at the existing valuation.
That way, Accel gets back its money, and the company can be sold at a later date for a much higher valuation.
I smell a big honking rat here…
I think Ping Li fits 3-4 of those descriptions:
1) Mr. Armchair. He’s a Friday afternoon Chairman. He knows exactly what he’d do as board member of facebook, Google, MySpace.,YouTube. Too bad his portfolio company’s don’t get the same enthusiastic coverage.
9) Mr. Regurgitator. At HBS, he did well by parroting and that talent has served him well. Once, he culled the wrong case study resulting in a buy rec on BioPay and wallah! Exit-a-mundo! He’s so lucky that in ’08 he’ll be reverse-justifying his funds success.
10) Mr. Imitator. Read the GSB case study about a young vc getting 20% of a company for nothing (an urban myth) and has been trying to replicate it ever since.
The Mochi guys and I must be living in parallel universes in which up is down and black is white. I run an Accel portfolio company, GlobalGrind.com, and we’ve had nothing but consistent support and input, the only pressure has been to focus and execute, which you’d want from a good VC, and i would say Accel are one of the best. Have worked with Ping and he’s super smart and focused. I work with Hip Hop mogul Russell Simmons, who has no fear of anyone and plenty of alternative funding sources, so if we say Accel are the best partners a start-up could hope to have, it’s because that’s how we feel.
My guess, as someone who’s been on both sides of start-up finance, is that there’s probably more to the Mochi story than what reads like a pretty one-sided article.
You sound like the guy who has Russell Simmons behind him so of course you can deal with the Accel type folks, you have your lawyers and your own money and your own place in the market. For us entrepreneurs who are just trying to make our way in this forest, what do you say to us?
Thanks for the feedback. I think you may have missed the key distinction i was trying to make: Russell and I have started or been involved with dozens of businesses that have succeeded, from Def Jam to Phat Farm to Mute Records, to Def Comedy Jam to Def Jam Games, Domino Records, countless films and other start-ups. We have worked with Universal Records, HBO, Electronic Arts, Syncom Funds (BET Investors) – the absolute best in every field. And it is our experience, as entrepreneurs, that Accel is, simply, the best of the best in Silicon Valley, and we know many of the best players. The have incredible people, an incredible network, really great insight, patience during difficult periods and the willingness to build really substantial businesses. Our position is unequivocal – you just couldn’t do better than Accel. Your business may or may not work out the way you hoped, that’s the nature of being an entrepreneur – but you could not find more engaged, smarter, more partnership oriented investors.
In every venture we have been involved with there was a ton of people telling us we could never make it – in comedy, records, fashion, online. Accel is the opposite, they back you all the way as long as you execute and keep focus.
Blah blah name dropping. Damn your posts are annoying! You’re an attention whore.
You’re listing all these names and companies and yet your name doesn’t show up anywhere on the web. You’re just a wannabee.
As for Accel, you’re showing how clueless you are by conflating the whole firm with a partner. Clearly, the partner in question is a bad apple spoiling the batch.
Hi Everyone,
I have known Ping for many years and he is a great guy – hard working, honest, and whip smart.
I would work with Ping any day of the week.
He deserves much better than the comments of above.
Will Price
CEO, Widgetbox
Will… maybe you’d have a different opinion if he was on your board and things were going south at widget box. from the sound of the story mochi wasn’t doing too bad. I’ve seen situations where things get really bad.. like b rounds not being raised and the vc’s still treat everyone with a good amount of respect and come to mutual decisions with the founders. It isn’t how they treat you when things are going well, which from what i’ve read widgetbox is doing decent, its how they treat you when everything goes south. Everyone wants to be your buddy when you’re on top it takes real character to stay positive when things are really bad.
But this is a public story no one really knows what happened there but i do know this… this isn’t the first time i’ve heard about Ping Money actin funny so…
big difference between dating a chick and trying to live with her. When one of those vc pirate hookers is on your board you’re living with them…
It’s all fun and games when the going’s good. It’s when the shit hit’s the fan that you start seeing the true colors. Having heard second hand about some of the shit that went down in BitTorrent’s board room, Accel in general and Ping in particular is what we would call “sunshine investors” – you’re f’d if you have a rainy day
Any one that know Ping Li will agree with Will Price.
All the rest of the comments are from people like Arignton – ‘they only think they know something’.
Will Price is a former VC with a full 1.8 yrs of operational experience. I am not sure his opinion about another VC with even less operational experience is relevant.
Where is Shasta on this? Looking at who is involved it is a Jr. Partner – not a founding partner. This is a classic where a smaller VC firm gets dragged by the larger VC firm and doesn’t want to cross them. Finally, if they are doing well, then I’m sure another VC would hop in… This is a by product of our crappy economy and limited sales. It sucks to be an entrepreneur.
ping-lee did the bit-torrent deal too… millions wasted there; probably running for cover; goin’ broke; or wants to get back to china an retire
Accel in general and Ping in particular are excellent to work with. They do push hard on teams to transition from power point pitches to execution – if they write a check. While entrepreneurs and their investors will often have disagreements, using TechCrunch or other outlets to air such a pissing match – and making the story so blatantly one-sided – is weak sauce.
Huh? Have you looked up Accel on TheFunded?
#1 thing about Accel is that they push founders out and replace the CEO with their own!
take the money – rinse repeat
Flash games, offer is on the table, how many swings do you have left with this one to hit it out of the park?
why would anyone want to sell off a growing company to just recover the money invested ? he obviously has some ulterior motives running counter to the interests of the Mochi team.
He wants to cover his behind for his missteps elsehwere…
Once again, a commenter assuming Mochi is doing so well. Why? Because TC says so. But what are their revenues?
Exemplary VCs and board members bring far more to the table than capital… they play an active role in fostering a company’s vision and strategic direction… but most importantly, they’re extremely patient and committed to stick by you over the long-term. This is precisely what Accel brings to the table and why we’re so appreciative and honored to have them as an investor and serve on our board.
Anyone would be crazy to take Ping Li on their board. You would think after the Bittorrent fiasco that he would have learned how to manage his relations with his portfolio companies. As the old saying goes “fool me once shame on you fool me twice shame on me.”
The guy’s still wet behind the ears. He’s never run anything in his life. He doesn’t know sh*t about running a company. That’s his problem.
Accel needs to get rid of him.
if the original TC article is correct, and mochi does in fact have a lot of money in the bank from its series B, then why the hell would anyone want to sell?
This is an excellent article. Important news, important takeaway, and somewhat fair and balanced. But Li and Accel are pretty darn good at what they do and, as an entrepreneur, I would take them on board any day. Keep in mind that Li and other investors have access to financial and operational company info that we don’t have and that last year was quite literally a very different world. If the offer is taken, it isn’t because Li steamrolled everyone at Accel and Shasta — it’s because he’s looking at spreadsheets that aren’t telling the same story the founders are telling.
then he should sell his position to the founders
I agree with Chris Larsen. I don’t know Ping Li, but –in my experience — Accel, specifically Jim Breyer, is a very smart and engaged investor focused on building long-term value.
How about the simple possibility that SOMEone has made one too many trips to Macau recently…
I just was talking to someone 2 days ago who singled out Ping Li as the stupidest most vicious VC out there. That is after Carol Sands!
The story does indicate how much the situation has changed in 1 year’s time.