The [Brief] Story of the Freeze-out

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Time to give a little bit of context for how I got frozen out.  Three founders: Moshe Pritsker, Nikita Bernstein, and Klaus Korak. Moshe has the idea.  Nikita joins to build.  Klaus joins to fund after initial traction.

First briefly about each founder, and then what had happened.

Moshe – linear in his thinking, driven to an extreme, hard management style, transactional, seeks military-style top-down management.  His drive was essential for the company during the startup phase.  The trouble is, in his singular pursuit of “the goal”, he is often unaware of “the context”.  If Moshe sees apple trees, he zeroes in on ONE apple and keeps biting at it until it is eaten – core, and stem, and worm, and all.  There might be lower-hanging, riper, tastier apples, but they are not a priority.  We are certainly not going after pears.  Oranges?  Stop talking, start working if you know what’s best for you…

Me (Nikita) – more context-driven, relational, sometimes unfocused, generally seeking decentralized soft influence-driven management, focus on systems.  My trouble has generally been of the “bite off more than I can chew” sort.  That is, I would see apple trees and would go about building a factory to build machines to systematically harvest any fruit from any tree, bush, or shrub.  The resulting machine should also be able to iron, read horoscopes, and cook coffee.  This could lead to no apples being harvested for a while…

Klaus – I don’t understand Klaus.  He has some strange notion about what it means to be a businessman, which focuses on very traditional interpretations of money, power, and “protection of one’s interests”.  Not my cup o’ tea – I’ll leave it at that.

So how did we get to this pickle?

Moshe (CEO) and I  (CTO) effectively ran the business.  Moshe engaged in hard management pushing everyone into a hierarchical system to work for us.  I engaged in soft-management independent of reporting hierarchy pulling everyone to work with us. And this worked – we built a business.  Which is not to say that it was smooth sailing, but we balanced each other out.

In 2011, however, when JoVE became profitable, for some reason Moshe and I lost that balance. I took a number of steps in an effort to regain it.

First attempt: I attempted to phase out of day-to-day operations shifting roles into a monitor-and-advise director/partner role.

That failed, as Moshe preempted the phase-out attempting to quickly remove my influence altogether.  Not sure why.  (Affidavit of Nikita Bernstein Re: There Was No Reignation)

Second attempt: I tried to re-engage Klaus in order to restore our Board of Directors to a functional state. At the time, there was a coworking conference in Berlin and I was considering investing more time into www.WorkWithMe.org, and so I decided to try to meet up with Klaus along the way.  My goal was to get him to understand that the company needs its board.  The idea was to hit his assumed goal of constructively re-engaging with the company (and make amends for trying to screw us over earlier), while giving Moshe the freedom to operate and execute in his role as a CEO with major disagreements addressed by the board of directors.  This would pressure and support Moshe to ensure that he is aware of context and possibly force Moshe to get a complementary and experienced COO to help him run and grow the company.

That failed, because Moshe and Klaus colluded to freeze me out.  I think this was for two reasons:

  1. Klaus wanted gain a power position against Moshe.
  2. Moshe wanted to eliminate the possibility of losing control.

Turning the system from three-body to two-body by way of freeze-out, nominally, achieved these goals for both parties.  However, if I am right about the goals, it was a terrible decision for several reasons:

  1. Elimination of Nikita adversely affected JoVE from a financial perspective hurting all shareholders.
  2. Klaus lost an operational ally – while I would not take any action that would be against Moshe’s interests, Klaus could overpower Moshe on important issues if he was able to persuade me that they are in everyone’s best interests.
  3. Moshe’s fear of loss of control was wrong – he should know me well enough to know that I would not compromise ethics to get ahead.  Being overpowered on operational issues should have been constructive.

Trouble is, no matter how wrong reason 3 was, Moshe didn’t see it that way, so possibly my attempt to involve Klaus may have been a misstep.  I really should have skipped to the third attempt, which is:

Third attempt: I decided to try to bring some external wisdom to the table – someone whom all involved (especially Moshe) would respect and find alignment with.  So I found investors who were a) experienced in scaling businesses and b) interested in JoVE.  I attempted to arrange a partial purchase of a bit of every founding partner thereby giving us all a bit of much-desired liquidity, while bringing in a smart participant to add to the board.  The board could have been expanded to five or seven people, tension would have resolved, Moshe and I could retain more than 50%, company should have grown rapidly and aggressively, and so everyone would be happy.

That failed, because Moshe refused to communicate with the lawyer who was helping put together the deal. Not sure what the logic was there, unless Moshe saw it as a means of securing >50% of the venture for himself removing me from the system.  Or this was the beginning of war against me by way of attrition.

And then? I decided to demand access to books and records of the Corporation as is required by law (156D Section 16, Wiki-law: Partner Fiduciary Duty).  The response was BS – Moshe hired an expensive lawyer who’s only purpose was to push the freeze-out.

So I filed with court to gain access and it’s been fascinating.  Enough for this post.  More later.  If you have any questions, feel free to post in the comment section. Anonymous posts are welcome.  You can also ask me questions on http://ask.fm/NikitaBernstein.

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