Bad Outcome

General Subscribe to Fully Vested on SimpleCast, or wherever you listen to podcasts. IMPORTANT DISCLAIMERS: Neither of us are lawyers, and we don't play them on the internet. We have not personally reviewed the evidence which led the DOJ to make its decision to file charges against Outcome Health. The following discussion is based on our reading and personal interpretation of news reports, press releases, and other publicly available documents. In late October, Outcome Health paid out $70M to victims of its fraud scheme to settle charges. https://www.justice.gov/opa/pr/outcome-health-agrees-pay-70-million-resolve-fraud-investigation In late November, the DoJ filed felony fraud charges against former executives and employees https://www.justice.gov/usao-ndil/pr/former-executives-and-employees-health-technology-company-outcome-health-charged-1 It's important to note that these are two distinct incidents. - The first, settled, case involves the company selling advertising inventory that didn't actually exist. - The second involves the repercussions from those allegedly intentional misstatements... that Outcome had inflated its revenue numbers it reported to investors and banks it was negotiating a loan agreement with. Really good reporting from John Pletz at Crain's Chicago Business:https://webcache.googleusercontent.com/search?q=cache:JEosP5VJexwJ:https://www.chicagobusiness.com/technology/everything-about-outcome-saga-has-been-over-top-latest-twist-particularly-jarring+&cd=1&hl=en&ct=clnk&gl=us Pletz, quoting Howard Tullman: "Regardless of the outcome or the accuracy of the allegations, it's such a black eye for the tech community and the city. It's like our version of Theranos. I think it's really sad and unfortunate." Takeaway from the Pletz piece: "Failure is one thing, fraud another" - Startups fail all the time. - Failure does not necessarily mean a shutdown. It could simply be a failure to meet growth targets. - As much as failing sucks" Big questions about Shah and Aggarwal's status in the Chicago startup ecosystem: Shah, Aggarwal, Purdy, and Jim Demas (who, curiously, isn't named in any of the lawsuits) were founding partners of Jumpstart Ventures, which made dozens of startup investments. Some of those investments include Chicago unicorn SMS Assist, Built In, Base CRM, and YCharts. Rishi Shah told Crain's Chicago Business, back in 2014, that JumpStart "It's more of a personal investment vehicle than anything else, We don't have (limited) partners or a particular mandate." That same article states that JumpStart made LP investments in funds including Avia, the Firestarter Fund angel group, and Chicago Ventures. http://webcache.googleusercontent.com/search?q=cache:eQCw3w8oHRwJ:https://www.chicagobusiness.com/article/20140318/BLOGS11/140319735/contextmedia-founders-rishi-shah-shrada-agarwal-investing-in-more-startups&hl=en&gl=us&strip=1&vwsrc=0 Private company protection Legal is a necessary but insufficient standard Additional Reading: Outcome Health Lays Off More Employees (John Pletz for Crain's Chicago Business) About The Co-Hosts -Jason D. Rowley is a data journalist for Crunchbase News, volunteers with the Python Software Foundation as an organizer of Startup Row at PyCon US, and sends occasional newsletters from Rowley.Report. -Graham C. Peck is a Venture Partner with Cultivation Capital and additionally helps companies build technology development teams in partnership with Brightgrove and other technology development organizations.