Greg Walsh

A blog since 2002

Getting Scammed by a Startup

Tuesday August 30, 2016

Estimated Reading Time: 3 minutes

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Reading Penny Kim's Article I Got Scammed By A Silicon Valley Startup today on medium, I was reminded of my own experience with 'Startup' culture and the business death spiral.

First of all, I've wrote about this 11 years ago. It was a pretty terrible experience that was definitely similar to Kim's experience with an unknown statup.

She wrote:

Between July 21 and Aug 8 we would be told, every day, that our paychecks were coming. The first few days we were told that physical checks were on UPS trucks. They never came. Days after that we were told that the UPS checks were cancelled because they must be lost and Michael would be personally wiring each of us the money. He asked us to write down our bank accounts and routing numbers. Every day, he would be at the bank moving assets around, wiring funds and promising delivery dates that never came.

I remember this situation vividly in several companies I worked out. The first one had massive cashflow problems because the owner of the company was 19 (yes, I was so hip, I worked for a teenager) and had no idea how to spec or manage projects once seed funding ran out. We were told every day that we would be paid soon. I had just bought a house - thank you sub prime mortgages - and had a car payment. I made the mortgage payments but the car payment became late and I was awoken everyday by the lease company to see if they were getting paid. I never got my last $2k of money and, honestly, I've come to understand how things got there and harbor no ill will. The money was well worth the lessons I got from the experience. Unfortunately, those lessons really weren't parsed until after my next job.

When the first company ran out of money, I was persuaded by the owner of a company we were sub-contracting to come work for him. He had heard we were having money problems and promised me a raise and an awesome title - technology guru. He also told me in no uncertain terms that he was ready to become a silent partner and wanted me to take over the company. He appreciated my age (26) and experience and thought I would make a good replacement...he trusted me to take over his baby. Having had respected this company for years in Baltimore, I was easily flattered into working there. Of course, the promise of being paid didn't hurt either. After several months of being there, he hired a business development person and gave him the same story about turning the company over to him. It was harsh, but, I was still making games for big clients and we were subbing to National Geographic. I also got to build an interactive for the Smithsonian that was up for over ten years. These were the kinds of things I liked to do and it was fine. One thing I never paid too much attention to was the fact that we never had Direct Deposit and instead received checks on Friday afternoons after 5...conveniently after the bank it was drawn on was closed. I would always go to my bank's ATM and deposit the check.

One week, I had wanted the money in hand for something and I found a branch of the bank open late and went to cash the check. The teller had to call the manager over and he told me that he would cash the check but I needed to tell my company that they needed to have money in the bank if they were writing checks. My ~$1000 check bounced. The company had no money in the bank. This became a regular thing until payday switched to Mondays (if that). Much like the article, we would be relieved and giddy when we did get paid. I heard later that the insurance premiums weren't being paid and my co-workers were having medical bill issues. Not long after all of this, the company was 'sold' to a guy with a company in DC. It was a tech company and I felt like my skills were redundant with what he had lined up. My instints were right and two of us had our hours and pay slashed. He told us that meant we couldn't file for unemployment because he wasn't letting us go. A few days later, I quit in what I had hoped would be remembered as a Jerry Maguire-like moment but was probably more like Chunk in Goonies. All I really wanted was my Aeron chair as severance and didn't get it. What I did get was a final check written on the new owner's mom's checkbook. So that happened.

All of this can make you think that most startups are terrible. I'm not so sure. During all of my troubles, the owners of R2i (a start up themselves who shared space with us) went out of their way to help me out. In fact, the side work they got me is what got me through that rough patch. Their interest in me as a professional is more indicative of the Baltimore startup culture that I hear about. I just happen to walk into two bad ones right after another.

Full Article: I Got Scammed By A Silicon Valley Startup

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