In the excellent book, Do More Faster, David Cohen warns us to Beware of the Angel Investors Who Aren’t. David lays down some examples drawn from his own experience: The Gig-Flow Investor, the Bait & Switch and the Term Driver. I highly recommend that you read the article (and book) for yourself, he has some great advice on how to spot and protect yourself as an entrepreneur from these unscrupulous types.
Drawn from my own personal experience I’d like to add one more type to the list; The Bat-Shit Crazy Sociopath.
I don’t mean a Sherlock-esque ‘High Functioning Sociopath’, I’m talking about living in an alternate universe compulsive liar type sociopath. I’m not entirely sure about anonymity in this post, as people who know me well enough have heard this story before, so to play it safe I’ll refer to the Bat Shit Crazy Sociopath as Fredo.
During 2012 myself and my cofounder Martin Rue were working on our bootstrapped startup, Twocial, a social media marketing tool. Things were going well, we’d already garnered some initial users and even courted some investor interest. We still had day jobs but those around us knew we were spending every available hour on the startup. So when one of my new colleagues, a senior exec (not) named Fredo showed some interest then I was only too happy to talk about it.
Nothing I write here will express how charismatic Fredo is; he came from Europe fresh from being part of the founding team of his country’s Google office, serial entrepreneur, ex coder who still codes in his spare time, the dev teams loved him and other business areas actually listened to him - all at the young age of ‘early thirties’.
In Fredo I found a kindred spirit, someone who I could talk endlessly about startups, products and the like. Stories of him meeting Sergey Brin and Guy Kawasaki were fascinating, his story of sharing the proceeds of his first exit with each of his staff were equally mesmerising. All I’d talk to Martin about was how amazing Fredo was and how he has to meet him. He even found the same people irritating in the company as I did.
Fredo eventually offered to make an intro to the two Angel Investors who had shown faith in him way back when, I couldn’t believe it. Soon enough an email came through from Fredo cc’ing me into an intro with Matthias Schmelz and Jason Wals.
Matthias according to Fredo was an eccentric German millionaire who was married into the country of Fredo’s origin. Jason was a high flying exec having worked at Kodak, New Line Cinema, Sony and MGM (his Linked In profile here and Twitter here) and a partner in a VC fund in the San Francisco Bay Area. And here they were emailing me! After a number of emails back and forth they expressed huge interest in our project and wanted to take it a step further. With Fredo being the intermediary, things were going incredibly well.
Martin by this point had met Fredo and was amazed at how well things had turned out for us. I just want to reiterate at this point that both me and Martin are very analytical and cynics, despite our reservations everything checked out and we were on cloud 9. We’d even by now hustled some invites to attend the Dublin Web Summit as participants of the START 100 event – where a group of the world’s most exciting startups are invited to network and exhibit to investors. Fredo and his two Angels had given us a huge confidence boost.
This is where things got a bit weird
Fredo had invited me and Martin out for coffee when he revealed that despite the fact we hadn’t met him yet (and missed a number of Skypes) Jason wanted to make a $400,000 investment into Twocial, we’d need to incorporate in Delware (yadda yadda) and the equity stake in return for this would be confirmed later on. Wait, what? $400,000 and an equity stake tbc? Me and Martin were perplexed, but hey when that term sheet arrived then we’d have the answers we needed.
We waited a little longer, and Fredo became increasingly harder to get a hold of. I’d changed jobs in this time so I no longer saw him every day in the office. Calls went unanswered and emails to Jason and Matthias went without reply. This made us stop and this time we weren’t in the Fredo reality distortion field. Fredo invited me to his apartment where I met his wife and played lego with his little son, he said all we need to get this process started was to incorporate in Delaware, US and all he needed were mine and Martin’s passports. What?! I left that evening and rang Martin, we both called bullshit and said we should meet up and piece together the little nuggets of suspicion that we’d picked up.
This is where things took a sinister turn
I’d received a tip off from a mutual friend of Fredo and mine who said nothing more than I should dig a little deeper in his credentials, that Fredo was not who we thought he was. In true Buzzfeed style – me and Martin did and you won’t believe what we discovered.
Fredo has an impressive following on Twitter, yet there is no solid proof of his involvement with Google. Simple Google searches would render zero leads. When looking for a connection between Matthias Schmelz and Fredo, we didn’t find any. Now this next part is embarrassing, but the emails from Matthias and Jason? Gmail accounts. My only defence is that it is common practice for senior execs to not share their work email addresses but will have throwaway accounts. Tentative I know.
Despite having serious doubts of Fredo’s credibility, he can’t have lied about something so major because my old company offered him a senior role… and surely they checked his references? In any case everyone at my old workplace was firmly under his spell.
So our efforts turned to Matthias Schmelz, this eccentric millionaire surely has an impressive profile. Nope, all of his online presence was PR for his book The Millionaire Maker which at $995 a copy was a little fad-ish. So eventually we decided to write Matthias off as a waste of time.
Next up, Jason. Jason Wals the exec, the VC the amazing guy who believed in great ideas. Any executive with his profile has an impressive profile, photos, recommendations, etc. The only photo available of him was a low res black and white headshot. The only photo. A friend of ours has a contact out in San Francisco offered to run some due diligence on Jason Wals. Turns out that nobody has heard of him, in fact there is no evidence that the guy exists. But I have emails, right? He has a Linked In profile!
This is where things go totally Bat Shit Crazy
The time since Fredo asked for our passports there has been zero contact. We now know that Matthias isn’t who we thought he was and there is no evidence that Fredo even knows him. We’ve run a due diligence against Jason using contacts in the SF Bay Area and there is less evidence of him existing than a fart in the wind.
We take a step back and take a look at Jason’s VC fund website for some contact details, (www.craigwals.com – at the time of writing the domain has expired) and all we see is a jpeg logo. Next up we run a whois check on the domain and we find that the domain is registered to Jason’s gmail address – okay. However the physical address given is Wilshire Boulevard, Los Angeles, California 90095 – which is a UCLA Medical Building.
One more piece of information remained, which was the phone number associated with the domain, it looked suspiciously familiar. A quick cross check on my phone confirmed that this was Fredo’s number, Bingo! What we did know by now was that Jason was a fictitious character. There was absolutely no evidence of his existence. What we’d deduced was that Fredo was Jason. Fredo was Jason! This is crazy because Fredo will often be having discussions with Jason on Twitter.
We asked a 3rd party to take a look at the language patterns and tone of the emails from Fredo and Jason – they were suspiciously similar.
Our friend who had tipped us off met with me and I was told that Fredo had run similar confidence scams with others – although not posing as investors but as women with fake Facebook profiles, as someone who has links with the film making industry etc. Our friend had confronted Fredo who reacted angrily and played the “I’m a quirky and charming European, you’ve got to love me for it” This was the confirmation we needed that Fredo was indeed a total fraud.
At this point I wish I had a conclusion to the story. Fredo made some cursory attempts to get in touch via email “I miss you guys! How is everything going?” but we moved on. I wish we had some closure as to why he did this. Does he need medical attention? Seeing as this whole episode lasted approx. 8 months and he didn’t once ask for money, what did he hope to gain? After much deliberation we decided that his behaviour was sociopathic – there was no rhyme nor reason. One thing we did know was that we wanted to move on and share our story with others. We contemplated confronting him but what would we gain from it we didn’t know.
We didn’t lose any money, didn’t give out any personal details and didn’t get involved in anything illegal. What we did do is waste time and we got a great story of how we were social engineered to trust beyond our usual limits.
We gave a talk at the Bootstrap Business Club meetup group, many of those in the audience know Fredo and were amazed, but didn’t know what to do with this information. I’m sure reading this you are thinking that you’d have done x or y early on, the only answer I can give you is that you can’t overstate the power of a skilled sociopath social engineer when you’re looking for funding.
Fredo continues to work at my previous employer and has had continued success in his career, he hasn’t been in touch for a long time.
We continue to be puzzled by and share the story of our encounter with the Bat Shit Crazy Sociopath.