Why was this not discovered in due diligence with YC and VCs? Or did Kyle never mention this former cofounder in their fundraising discussions?
I understand Cruise raised over $17M of capital through two rounds, plus the accelerator. In theory that is three stages of due diligence from well-regarded firms in silicon valley who either missed this deal-breaker or gave the wrong advice.
According to sama's post he was named as a cofounder on the company's YC application so clearly they knew about him. As for why they didn't get an agreement to waive or buy out any claim he might have early on, well...
I understand that Y Combinator keeps recordings of YC interviews so that they can go back and analyze their decisions for failed investments or anti-portfolio companies. This would be a very good time for them to go back and review that interview, and I wonder if it will be brought up in court.
I do due diligence for a living (for PE and VC) and you'd be surprised how little diligence is done in VC and when it's done, how much is often missed. Especially in VC when the model is a portfolio approach it's usually not worth the burden.
Right, and I don't mean to 'victim blame.' Mostly, I put this here as a harbinger for other folks who may find themselves in a similar situation in the future.
