A Software Startup's Horror Story

Beware of VCs bearing gifts, or this could happen to you

May 15, 2008

3 Min Read
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Ever hear of Sanovi Inc.? We hadn't either, until a few folks contacted us to say the disaster recovery software supplier based in Bangalore, India and Chelmsford, Mass., had shut up shop in the U.S.

Nothing unusual in that. Startups come and go all the time. But this story is a cautionary tale we pass along to anyone interested in joining a new venture.

Sanovi was like most other new tech companies: Founded in 2003, it scored a very modest amount of venture capital (about $6 million) three years ago and had lined up GlassHouse Technologies and India's Wipro as resellers of services based on its software. Press reports in India quoted founders boasting of fresh R&S funding there.

Several months ago, people familiar with Sanovi say the startup went into high gear in the U.S., hiring several top executives, adding to the engineering team, and revamping its Website. The most recent hires started less than six weeks ago.

A new CEO, David Sung, took the helm. It's not clear whether this is the same former managing partner with HIG Ventures who also helped out at Scentric. Calls to Sanovi's Mr. Sung went unanswered, though I left a message and will update this blog if anything materializes."The employees were led to believe there was new funding, that they were ready to attack the next hole in the systems management infrastructure, namely, managing disaster recovery," says a source. There was talk that Sanovi would be the next BladeLogic (the data center automation firm recently sold to BMC for $800 million).

You get the picture. All systems were go.

Then the bomb fell. Early this week, the entire team was reportedly herded into a conference room and told that the U.S. operation they'd been planning was terminated. Sanovi was closing its U.S. shop. End of story. No explanation, no future plans -- and allegedly no specific severance arrangements.

Calls to one of Sanovi's founders, Lakshman Narayanaswamy, went unanswered, and voicemail said his message box is full. Srinivas Pothapragada, another co-founder, left last year.

Sanovi's newly redesigned Website has allegedly been tweaked to excise any mention of employees who may no longer be there. Calls to other employees formerly known to be on staff went unanswered.This is a chilling tale without confirmation, but it's not the first time we've heard of this happening. Startups are risky businesses, even in segments as hot as DR management. Be ready before joining up. Get a contract for employment if possible. Read the fine print, and make sure promised funding is actually in the coffers. Most importantly, if you're really ready to gamble on a promising startup, get some sort of financial, emotional, and employment parachute in line -- just in case.Have a comment on this story? Please click "Discuss" below. If you'd like to contact Byte and Switch's editors directly, send us a message.

  • BMC Software Inc. (NYSE: BMC)

  • GlassHouse Technologies Inc.

  • H.I.G. Ventures

  • Wipro Ltd.

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