Must Have the Precious

How did Smeagol become Gollum?

For those of you who don't know, Gollum is a major character in Lord of the Rings. As a young adult named Smeagol, his relative finds the One Ring, an artifact of great power that can corrupt those who wield it. Smeagol demands the Ring from his relative, then kills him to take it. Initially he uses the power of the ring for personal benefit, thieving and antagonizing his family until eventually he is expelled from his community, spending most of the rest of his life in a dark cave, miserable but he had his "Precious". He becomes "Gollum", and Smeagol is forgotten. Eventually he loses "Precious", and starts the events leading to "The Lord of the Rings".

Part of the story of The Lord of the Rings is how the quest for this object cost Smeagol everything, and turned him into a vile creature, despised by all who know him. He uses any tactic to get what he wants, be it pretending to be someone's friend while plotting to kill them, lying, stealing, and justifies any action, no matter how vile, in that the Ring is rightfully his and it is his "destiny" to have it.

A briefer summary: Other people create/find something of great value, Smeagol takes it by force, proclaims it as his, treats even the closest to him so badly he is shunned, justifies horrible behaviour upon this lie, and ultimately is responsible for the destruction of that great value that others created.

This, of course, has nothing to do with uBeam, so here's where I segue. Far in the past, before I became involved in uBeam, there were two co-founders, Meredith Perry and Nora Dweck. Few have heard of Nora, but she's an important part of the creation of uBeam. My information is not first hand, it comes from court documents and speaking to key players outside my role in the company, so take what you will from what I say here.

Perry and Dweck ended up in an ugly fight - one ugly enough to reach court. The complaint can be found here and here. For those who don't enjoy reading court documents, let me summarize it for you:

Dweck sued Perry for "breach of fiduciary duty, breach of contract, and fraud" following the initial founding of uBeam. They were both students at UPenn at the same time, and were roommates in 2010 and 2011. They both regularly swapped ideas for companies and inventions, and at one point Perry suggested 'wireless power using ultrasound' and the two brainstormed and collaborated to create 'uBeam'. Until May 2011, they publicly discussed the concept and presented themselves as equal partners in this endeavour.

In April 2011 they entered and won the "PennVention" competition with uBeam, which had required significant preparation not just on the technical side, but on the business side for marketing and sales as well. When they accepted this award, and several other prizes, they did so as partners and equals. Realising that they needed IP protection, Dweck engaged (and presumably paid for, since her family was quite wealthy) an IP attorney to prepare patent applications. Perry agreed with Dweck that the IP would be jointly owned, and that she would make sure the IP was transferred to a jointly owned company they would create. Dweck let Perry take care of that aspect while she spent her time getting a website, logo, and business cards done for them. Then came "All Things Digital".

"All Things D" is where it gets interesting. It's an invitation only conference on tech and business associated with the Wall Street Journal. You can get great access to potential funding and publicity there. Perry and Dweck presented a demo that wowed the non-technical audience, but proved nothing to anyone with any understanding of electrical engineering, and you can see a blow by blow account of that here. Still it was enough to garner more interest and apparently a uBeam product by the fall of 2011 (what year is it now?) and things took off from there. Reading them talking here, it's almost sad knowing what comes next.

The pair is trying to raise $3 million to get the product ready for release. “We’re in conversations with a few different companies,” Dweck said. “The future’s kind of bright.”

Now just days before this conference Perry had sent Dweck a company Operating Agreement, not a final one but "just to have something for D", and that "we'll do the real one later". Pressed for time, Dweck signed - and shockingly the document was an 80/20 split in Perry's favour. (Why did she sign you say? Well, she's 21 and doing cool stuff with a friend, why would she be concerned that her friend wouldn't do right by her?).

After All Things D, uBeam gets lots of publicity and people tell Perry that "it's a billion dollar company" and Dweck begins to be excluded from things. Suddenly, Dweck can't get company information, files, reports, and Perry is saying it's all hers. Not just the unfavorable 80/20 split, but 100/0. Perry threaten to dissolve uBeam if Dweck persisted in demanding information (the "shoot the hostage" tactic). It all descends from there, with Dweck as a company owner and officer demanding an investigation into Perry's wrongdoing, and the awesome response from Perry that she had investigated herself and found no wrongdoing.

And then the lawyers are involved, and a court case begins. Dweck sues Perry for 50% of the company. In the end it is settled out of court with Dweck rumoured to get 20% of the company, the title of co-founder, and a gag order to not talk publicly about the resolution. 

There was no court finding for the public to see, no judgement as to who was right. But I can tell you this - having worked with Perry for years, I believe Dweck, and in my opinion she describes the Perry I unfortunately came to know very well.

A briefer summary of the court docs: Multiple people create/find something of possible great value, Perry proclaims the company as hers, and alienates someone once a friend to the point of going to court. 

So back to the original question. How did Smeagol become Gollum? 

In my opinion Smeagol never existed, he was always Gollum, just with a thin veneer of civility. The Precious just showed him for who he really was.

The Big Lie

All this was inspired by the principle—which is quite true within itself—that in the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation. For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying.

Adolf Hitler, Mein Kampf, vol. I, ch. X

And yes, I know, Godwin may be invoked. Doesn't make it less true.

For further clarification - "The Big Lie" is like "The 100th Idiot", a single short phrase to convey a particular meaning that I'll likely be using a lot. In the context of startups it means "Getting enough people to believe a "story" in order to keep the money flowing." The simple rules are:

• If you're going to lie, lie big. Lie so big it's almost unbelievable.
• Repeat that lie as often as you can. Work to get many others to repeat it.
• Stick with that lie, no matter what, no matter how ridiculous, even when it's proven to be a lie.

Do We Have a Deal?

So it seems I was wrong about Energous, they announced a deal. I retract everything I said about them, because clearly based on what they say in their press release, there must be something to their technology.

"Energous ... today announced a partnership agreement with a market-leading specialty battery company in the hearing devices and wearables market. The company has signed a joint development and licensing agreement with Energous and anticipates shipping WattUp receiver technology as well as a Miniature WattUp transmitter.

In order to preserve competitive advantages, the partner has requested confidentiality. "

A Joint Development Agreement as well as a Licensing Agreement? That proves they are a legitimate company that will have products.

Well, no.

A JDA is basically an agreement between two parties that says "We'll try to develop something. What you develop is yours, what we develop is ours, and what we develop together we share." That's it. Doesn't guarantee a product, and it's all still at a research phase. More importantly, there's no requirement for funds committed from either party - other than the time to write it, a JDA is 'free'. I've worked with companies where they almost seemed to collect JDAs - drawers full of them and never a product, or a dollar of revenue, from a single one.

A licensing agreement is a little different - usually it says "One of us has some Intellectual Property. We agree not to sue you if you have a product with it in a specific field of use, a specific region of the world, for a specific period of time." In return the other side usually does something in return - license back some of their technology, pay some cash, pay a % of everything they sell with this IP, or sometimes nothing at all. You want this in place before you put a lot of work into a product, or even know if it's ultimately viable, as you need to know upfront the costs and business impacts.

In other words, licensing agreements are no guarantee of a product or revenue. What is valuable for revenue is when a legitimate company announces "We are releasing a product with Acme Corp technology and paying a license fee." Now this may happen with Energous and this unnamed battery company, but I doubt it. Notice this other company has not necessarily committed funds, or even sullied their name, with this technology. If they were certain it was going somewhere, they'd be announcing their exclusive benefits over their competitors in a press release themselves.

Even when you get an actual product, the licensor might just have gotten lucky and bamboozled a legitimate company into releasing a loser. Witness Theranos, with their tests being performed in Walgreens, and used to help justify the $9 billion valuation - yet now it's looking like those calling Theranos a con game are right, and Walgreens are now realising their mistake and ending the deal.

So in my opinion, Energous get what they want - the veneer of legitimacy to keep the money flowing.

Interestingly, their press release doesn't say what technology was licensed and who the licensor was. The way it's worded, it could be that the battery company is licensing their battery tech to Energous, even though you would think it's the other way around. If devious, Energous could pay the battery company, say $50,000, and include onerous confidentiality clauses in the contract, then announce the agreements, making it seem like it was an agreement in their favour - and never lie and get into trouble with the SEC.

Why do that? Well a 2% bump in stock value of a $170m market cap company is $3.4 million. Do that once a month for a year, and you've added around $45m to the cap, which some shareholders will take a nice cut of. And the $50k that was spent to make the deal, along with the lawyers fees? All from the company funds (paid for by other investors). (Looking at the ticker for WATT, Energous climbed about 2% after this announcement)

For some, it's about just doing what it takes to make it look like they're a legitimate company on the verge of releasing products. Just keep the party going as long as possible. Sometimes it's a real product and all above board. Some do it because they are simply trying to get as much money for themselves as they can, while they can, and they know it's a con. Some do it because they truly believe (rightly or wrongly) that the product is viable, but they just need more time and money to get it working, and when they prove everyone wrong it will all be justified.

But, hey, at least Energous have announced a JDA/licensing deal. Where are uBeam's announcements on that front?

Those Other Guys, Pt II

So back to Energous. Where we left them was that we had, through the use of physics, mathematics, and reasoning, completely demolished their claims and proven that what they are saying is unachievable - that is they are either idiots, or liars (or maybe I'm the idiot!). That's where we'd be in a sane world, but it got complicated and so you just switched off, maybe you heard 'blah blah' or sounds like the Peanuts' teacher, but overall you just didn't care. 

So let's take a look at the business side of Energous instead. You can find lots of information out by looking at their S-1 or their 10-K/Q, because they're now a public company - more on that later.

Energous was formed in late 2012 by an MIT graduate with lots of experience in wireless communications. His parents even invested $10,000 to get him started. Normal startup so far, but then it gets weird. Just three months later, an investment bank, MDB Holdings, come in and start advising and investing. Barely a year after that, they then file for an IPO - that is, selling shares to the public. A company with no product, no revenue, nothing at all, is filing for an IPO. They do have great publicity and a great story, however, and are talking about world changing products coming later that year. Who wouldn't want to get in?!

In March 2014, 18 months after forming, it sells $24 million of shares. That $10,000 his parents put in is now worth $26 million. Nice return. The company is worth well over $100,000,000 - remember, no product, no revenue. But you know someone's making money in all these transactions.

And now the SEC is involved - there are major penalties for lying in any statements from a public company, so they must be being honest, right?

Since then, two years on, and there's still no product, in fact they are backtracking and pushing dates further out, and drastically cutting performance specs on their product. But they've added lots of big names as boardmembers and advisors! These smart advisors and big name board members wouldn't join unless there's something there!

And recently, they admit that they still haven't demonstrated a commercial level product, even in their lab. Uh-oh, they must be collapsing and in terrible trouble.

Well, no. The CEO now makes $2 million per year - for a company under 4 years old, with no product, and no sales. The VP Engineering and VP Sales/Marketing each make $1.5 million.

That's $5 million per year in salary for three people, once again for a company with no product and no revenue. So let me summarise:

• Come up with a really good story for a product people just have to have
• Just make it believable enough, and for people to want to believe, for the skeptics to be ignored
• Create massive hype in the media to boost interest
• Announce fantastic products somewhere out in the future
• Never quite directly answer the critic's questions over the practicality, always dodge and claim 'proprietary'
• When eventually it gets to that time you need to show product or demos, get in some 'big names' instead and make them public to make outsiders think it's all still great
• Keep it going long enough someone eventually buys you and cash out

Remember I said earlier that in my opinion those behind the company are idiots or liars? Well, they made $5 million in one year from it. Which do you think they are?

Here's the genius of Energous. Normally a startup cycle works with the early investors trying to get it to the point where there is a product revenue, or more likely a buyout where they cash in. It usually takes several rounds of financing, with lots of dilution along the way, along with a big chance of failure. Energous bypassed that and went straight to IPO, and got their money out at the beginning. No risky and long slog to return - just jump straight there. It looks to me like they gamed the system, and did so brilliantly.

Now they had better hope they didn't lie in anything the SEC related, but otherwise, they're laughing. They don't even need to make a product to earn more money from this, each, than most people earn in a lifetime of 9 to 5.

But, hey, there has to be something there. People wouldn't just make stuff up to make money, that never happens. And if they did, it would be a one-off, an aberration. There couldn't possibly be other hyped technology companies following that bullet point list from above, could there?

The 100th Idiot

"100 idiots make idiotic plans, and carry them out. All but one justly fail. The hundredth idiot whose plans succeeded through pure luck, is immediately convinced he's a genius."

Iain M. Banks, Matter

I'll be using the term "100th Idiot" a lot, I expect, best you know where it comes from. And reading Iain Banks books is worthwhile in itself.

Scrappy Dog

A genius/founder/media-darling/CEO took to the stage at the Tribeca Film Festival yesterday to talk about how the massive negative publicity her company had garnered, the growing list of scientific luminaries questioning the viability and safety of her company's technology based on well understood and proven physics, and the lack of a single public demonstration or validation point despite years of promises, was proof she is right after all! And for once, this isn't Elizabeth Holmes, but Meredith Perry of uBeam.

"If an idea is polarizing, it might just mean that you're on the right track." Perry proclaims in a new article (signup needed). 

Or some may say it might just mean that you are utterly wrong and those who have spent their lives working on this type of thing really do know better. After all, isn't that what "polarizing" means?

Here's the definition of "polarizing":

 to cause (people, opinions, etc.) to separate into opposing groups

and also

 to cause (something) to have positive and negative charges

There aren't groups here. There is a single person, Meredith Perry, who stands up in public and proclaims this will happen and is viable. Yes she has raised money, and "used 30 of the world's leading ultrasonic engineers, physicists, and electrical engineers", but we never hear them answering the questions. It's a single voice. Sticking with the "polarity" theme, let's call that the negative side. 

On the positive side, you have multiple people with decades of experience in ultrasound devices, electronics, and safety independently presenting well founded data saying (effectively) "While in theory it may be possible in limited cases, the safety, efficiency, and economics of it mean it is not even remotely practical.".

So here's the 'polarization':

• Negative - one person with no training in a highly complex technical field, making extraordinary claims, with nothing but their word that it works made to the public
• Positive - a wide array of people from multiple industries, academia, and location, with hundreds of years' relevant experience between them, with no personal financial stake in the outcome, presenting well researched information that there are major concerns and questions

It's another example of lazy journalism. There is a person, and then a group. One has infinite perseverance, one has publicly presented, well researched data. This is not polarization - this is Homer Simpson vs Drederick Tatum,  They are not equal. Journalists - just because it goes beyond the complexity of 2+2=4, stop trying to present it as an even "He said, she said" fight when the preponderance of scientific evidence is on one side.

And now she speaks for the poor, downtrodden, unrecognized geniuses out there that experts get together in their smoke filled back rooms to oppress:

"How many brilliant, game-changing ideas out there thought up by laypeople, teenagers, store clerks have been squashed by experts that said, 'That can't work'?" 

The 'oppressed' thing may work when you're fresh out of college, it gets old 7 years and $25,000,000 later.

You know, we all love the idea of an underdog who's a scrappy little fighter and in the end proves the big dog wrong. It makes for a great film. But here in the real world, most of the time that scrappy little dog is just plain wrong.

Schrödinger's CEO

Schrödinger's CEO
[shroh:ding:erz siːiːˈəʊ]
noun

A CEO who is apparently both simultaneously a genius inventor of a technology and single handedly responsible for building a business based upon it, yet also completely unaware and has no knowledge of major technological, safety, and business flaws in her company despite it being common knowledge to lay members of the public for years. See Elizabeth Holmes ...