XLOptics Part 1; Introduction, Pre Money Negotiations
This is the story of @XLOptics (@XLO) a very successful startup company that the VCs took over with the help from the law firm of @WilsonSonsini (www.WSGR.com) that was supposed to represent the company. VCs brought their own CEO, fired the original founders. While out of the company, both Behzad Razavi (#1 circuit designer in the world) and I tried to bring new investors to XLO. The reason was obvious. Both Behzad and I were the majority share holders of the company. When @AlexHern the VC couldn't handle, manage and run the company, they drove XLO to bankruptcy. Their CEO assigned ALL of the company Intellectual Properties (IPs), product samples, designs, etc ... to the VC who assumed all of them (all of patents, product samples, and designs) for $25,000. @AlexHern (Major Investor), @RahimAmidi and @SaeedAmidi of @Amidzad Ventures (Minor Investors) needed someone to blame for their shortcomings and failure of @XLOptics. So they blamed me, the founding CEO, for their own failures. They stained my reputation, and discredited me among the Hi Tech community, entrepreneurs, Stanford community and VCs in Silicon Valley. I suffered a heart attack when transferring power from myself to their puppet CEO during the transition time, and after I learned that the offer letter I had signed and hired the new CEO with, did have the $10 MM investment clause in it but someone had added the word "option of" in front of it. In other words, we were deceived by Alexander F. Hern and Amidi who had promised us that the new CEO would bring $10 MM with him to the company. Mostafa Ronaghi witnessed my heart attack. The scars of the heart attack still exist on my heart tissues. I had raised $9 MM for XLO, but had spent about $2 MM of it, when the new CEO took over. I never saw a financial statement by XLO afterwards, so I never learned what happened to the rest of the money. Rahim Amidi, Saeed Amidi and @PejmanNozad were building up their reputation at the expense of destroying mine while recalling their XLO experience in parties and meetings. They never took responsibility for imposing their own CEO on XLO. I can prove it all.
The bankruptcy of XLO was a great news for @Infinera, and @InPhi that went public 7 and 10 years later, with $3.5 Billion and $1.2 Billion exits, respectively.
After the VCs drove the company to bankruptcy, I was left alone to deal with the creditors of XLOptics for 3 years. Then the president of AT&T told me that OC768 had a great Market potential, referring to XLO's product line. Mostafa Ronaghi witnessed that conversation. So as I was getting ready to revamp the company and become a second Steve Jobs, someone reported me to FBI. The allegation was that Behzad Imani was to transfer and sell the products of XLO to Iranians who were under sanctions. Later Alex said and confirmed that Amidi's designated CEO of XLO, repeatedly wrote to Alex that Behzad was selling the company products and IPs to others. My co-founders and I dealt with FBI for 3 1/2 years while being under exhaustive investigations. I stood by my troops and Behzad Razavi during those difficult years when we were being investigated. After FBI gave us a clean bill of health, IRS entered into the scene because the VC along with their puppet CFO had filed for some Mickey Mouse tax returns. They had changed the name of the company from XLOptics to Transpectrum, but filed for company tax returns under XLOptics, Inc! They never had informed the Government, nor the State of Delaware, that @BehzadImani was no longer the CEO of XLOptics while they were looting the company. So the liabilities of XLO did remain with me. IRS next moved to audit my personal tax returns. I was busy with IRS for a good 2 years. Then when I thought the nightmare was over, another issue came up. The company had mismanaged the 401K plans of my coworkers, employees of XLO. I had to deal with it, clean the issues up for another 1 1/2 to 2 years.
During times, most VCs turned me down. Let me give you an example: Long before Uber come into the scene I led a team of software engineers who implemented the backbone of Uber software (2004-2007), and then filed for a patent on it for "brokering the service business" in September 2007 just a few months after Steve Jobs introduced Apple iPhone. My patent title was: Broker Service Provision (USPTO Application # 11899728 filed: Sept 07, 2007). The patent office never granted me the patent. The excuse was that I had submitted color pictures to illustrate the patent mechanisms. All I had to do was to resubmit the patent with black and white images. But I was so busy with FBI and IRS that I never had the chance to respond to USPTO. Two events ensued: Someone by the name of Hamid Reza came to my house in Aug 2008. I told him that I was super busy with IRS and that a financial melt-down was around the corner; But also told him about how our software that was brokering the service business, such as Taxi business, worked. Our starting target niche market was Airport Shuttle business to and from Airports in the top 50 metropolitan areas. I told Hamid Reza to take it over and raise "the go to market" money for it. I was super busy with IRS. In 2016, I learned that Hamid Reza turned out to be a guest (or temporary roommate) of Shervin Pishevar during those decisive months of 2008. Shervin Pishevar, a VC, went on an invested the seed money in Uber in 2009 and then brought along other VCs (Bench Mark Venture Capital) to Uber. The rest is history. I could neither raise money for my surface plasmon, nor for my energy optimization patents, that should be the crown jewel of Iranian community for years to come.
I can prove all of the above.
In Summer of 2009, I ran into Saeed Amidi and Kayvan Baroumand at an Stanford event. My "brokering the service business software" was ready to go. I told Saeed about it. But Saeed Amidi turned me down saying: "We were NOT happy with XLOptics"! To every VC firm I went, my reputation preceded me, as someone who had raised, and then consumed $10 MM without delivering a product. One day in 2010, Mostafa Ronaghi told me to leave Silicon Valley because there was no way for me to raise capital anymore. He compared my situation to someone he knew in Europe. Yet some other day later (Aug 2010), I met with Hossein Nikoo, cousin of Mostafa Ronaghi, my friend for 40 years. He asked me what I had done with $10 MM?! I was baffled. Yet, in 2013, my own cousin in Iran asked me what I had done with $10 MM and why I had ripped off $10 MM from the VCs. After a F-50 conference in San Francisco, someone asked me what I had done with $10 MM as if I had stolen $10 MM money from the VCs. I even heard rumors about me as far away as in Canada. I was speechless. Because, out of the $9 MM I had raised for XLO, I had spent less than $2 MM when Amidi's CEO took over. I never learned what had happened to the rest of the money ($9 MM - $2 MM).
Meanwhile, Amidi went on and told Stanford students, whom I had supported and brought to Stanford from Iran, that Amidis (Saeed Amidi and Rahim Amidi) would not get in ANY DEAL that @Imani was involved in. This writing is my first step to set the record straight.
XLOptics Pre Money Negotiations:
I started XLOptics, as a design and manufacturer of optical components for the Communication and Telecom Industry. Our sector, the Telecom sector, was HOT, very HOT, very very HOT. To illustrate the point: Almost every week I received a telephone call from various VCs trying to pitch themselves to me, asking me to raise money from their VC fund. I never ever called a VC, solicited funds from or pitched XLO in front of any VC. I swear to God, I never called a VC not even once. It was the other way around. The VCs reached out to me all the time. Most VCs threw lavish parties (say in the top floor of the SF Fairmont Hotel, or in their VC firms, or in some Club house), or invited me over to breakfast, lunch or dinner begging me to raise money through them. A lady VC once told me what could she do to have my Sinatra eyes look at her term sheet? (I thanked her for her complements). Another lady VC once told me that every time she met me, she saw a $100 Million profit walk by her eyes. Kamran Elahian told me: "I like your name (Imani means faithful) but I love your company name even more because it had Optics in it". Another VC told me that her company did anything, ANYTHING the CEO wanted, for their CEOs!
Let me paint a picture of the startup landscape in Telecom sector then:
Every Communication Startup with a $10 MM VC investment, either would have been bought off within a year or two by a public company, or would have gone public within three to four years. The underlying belief, as declared by Goldman Sachs, was that the bandwidth demand was doubling each year thus the need was persistent and pertinent for Telecom components, sub-systems and systems. Therefore the Telecom sector was HOT, Sizzling HOT. Cisco used to buy every startup Comm company out there, would hire new university graduates right off the school and used to give them a brand new convertible sport car as hiring bonus. The market was that HOT!
Let me give you another example. On my way to OFC show in Anaheim, I sold 10,000 components at $40 per component for a total of $400K to the lady sitting next to me on a Southwest 737 airplane heading for the John Wayne airport in Orange county. She insisted that I put a promissory note with my signature on the back of a napkin. I did so. I told her I would deliver the components within six months. The market was that HOT!
I was friends, close friends, with Mr. Amir Amidi Sr. who looked up to me with respect.
He used to take refuge on to me for he, like myself, was from Southern Tehran but had some stains, some dark moments, in his past that he was trying to escape from and put behind him. He once told me that he wanted his sons to be like me, educated, mild manner and in Hi Tech. One bright sunny day in June of 2000, Y2K, he ran into me as Mr. Falahati and we were walking down on the University Ave in Palo Alto during lunch time. He shook my right hand and then with his left hand grabbed my right hand wrist, then he asked me for two favors: 1) that I would help him build a Mosque for him in Palo Alto, 2) that I would help his sons Rahim Amidi and Saeed Amidi enter into the VC and startup business. I promised him that I 'd oblige on both fronts for him. However, less than 3 weeks later, he passed away from a sudden heart attack. I was deeply saddened. But I kept and honored my promises to him.
A while later, Amir Amidi Jr approached me. Amir Jr. asked me to consider SVIC (Silicon Valley Internet Capital, www.svic.com) headed by Alexander F Hern (aka @AlexanderHern, aka Alex Hern) as an investor and Amidi brothers as the brokers. Recalling my promise to Mr. Amir Amidi Sr. I said: "why not?". I turned down all other VC offers, term sheets, because I wanted to help out the Iranian community, bring them into Hi Tech, and wanted to help out Amidi brothers (Rahim Amidi and Saeed Amidi) in particular per my friendship with their father.
SVIC recommended and I hired @JeffSaper of WSGR as company attorney. As part of pre money negotiations, we agreed that SVIC deposit the money in #WSGR escrow account on Thursday, then I would send out and email asking my co-founders to resign on Friday, send the proof to SVIC and then WSGR would release the money to XLO's company account by Friday at noon. Everything went on as planned and as agreed upon, but with one exception. WSGR DID NOT transfer the money to XLO's account. I thought they were probably busy and so WSGR would transfer the money on the following Monday. They never did. WSGR betrayed me. Let me explain:
By Monday evening I was under about $2 Million worth of obligations. Suddenly Alexander F Hern, Amidi along with their lawyers came to XLO's temporary Menlo Park office around 7 p.m. They accused me of having an extra marital affairs with a VC lady. I thought they were kidding me! So I laughed it up and tried to be silly about it: "I don't blame ladies who fall in love with me, what's not lovable about me?" I said with a smile. Secondly, I said : "I didn't know priesthood and celibacy was part of our pre money negotiations and part of the funding requirement!". I was fending off their aggressive comments. Finally I denied having any extra marital affair with any lady. Because I never did. I had my Bill Clinton moment: "I never had any relationship with that lady", with one exception. Bill was dishonest, but I was honest about it. Yet SVIC told @WSGR not to release the money. I called WSGR attorney who avoided me. Finally SVIC handed me some papers to sign. I thought it was an extortion but I did sign them because I was under $2 Million of obligations. I had to meet the payroll for ALL my co-founders who had trusted me and had resigned from their jobs and had joined XLO. WSGR withheld the money for another week until March 16th, when I was supposed to meet a payroll.
Alex also hired a young fellow, an ex-analyst from Goldman Sacks, by the name of Peter Buckhardt (Peter@SVIC) who suffered from lack of hygiene. He always smelled. I had to sit two chairs away from him at all times. He was a living definition of a Nerd who asked me technical questions only to observe how I would react, instead of being interested in the answers to the questions. He was definitely incompetent, but tried to impress me with a serious inquisitive face. He never did.
An extra ordinary event happened on or about the week of March 16 or in the following week. John Chambers, CEO of CISCO and the 800 lbs Guerrilla of our market, gathered most influential New York and Silicon Valley analysts and told them CISCO was halting on all purchase orders for three years (I am paraphrasing). As is the case with such important news, the info was kept away from us in the main street and circulated only among the top stock movers of the Wall Street for sometime before "we the people" learned about it. The top VC firms in Silicon Valley were obviously in the loop with the Hi Tech analysts, because out a sudden, I stopped receiving calls by the VCs who up until two months before, used to call me every week and were upset that I had signed a term sheet with a small SVIC $130 M VC fund!
Following John Chambers meeting with analysts, The Communication sector in NASDAQ started collapsing at the rate of about 2% to 5% per week after institutional investors started dumping their Telecom and Comm Stocks.
The attitude and behavior of @AlexanderHern suddenly changed. He suffered from buyers remorse. He felt he had paid too much money for XLO's stocks. He had an indecent proposal for me that I could not accept. So he started talking about replacing me by bringing his own Yes-Sir CEO, someone who would bend over for him.
Before I describe his indecent proposal to me, let me tell you another story. Alex said that @VinodKhosla (then of @KPCB) used to invite the CEO of his portfolio companies to his ocean side ranch, cook them some BBQ, and would tell them: "You can have a life style like mine (like Vinod's) and be my partner, if you just listen to me and do as I say". To this date, I couldn't verify Alex's claim and if what Alex was saying about Vinod Khosla was true or false. I believe Alex made up the story to justify his proposals to me. Alex didn't want a real CEO like myself. He needed and looked for someone who would become his accomplice.
In several occasions, Alex told me that he needed to assume the entire option pool (About 40% of XLO stocks that I had set aside for the CMOS team of Dr. Behzad Razavi and Dr. Ali Hajimiri) because the market valuations for startups were plummeting.
Moreover Alex, who had no formal education and had come from a very broken family, used to insist that @Wilsonsonsini (WSGR) was on his side and that if I joined forces with him and screwed up my co-founders for the benefit of him and his VC firm, he would protect me. He always said that founders and co-founders were financially deprived and could not fight him and bring an expensive law suit against him in a court of law. He always bragged about making $600 MM within a year. But I always thought of him as a "Hype master". He was a perfect pitch man or salesman for the Dot Com (Dot Gone) era for companies that had no revenue. He could sell a chicken instead of a turkey, if you know what I mean.
Alex was a small part of Inktomi when it went public. Then he had started YesMail and had sold it for $600 MM within a year at the height of the Dot Com (or better say Dot Gone) era.
I told Alex that in Silicon Valley it would take an average of 7 years for a company to experience a successful exit. But he insisted that he could beat the odds and could turn around a company, any company that he focused on, and sell it within a year or two.
I was happy and loved to see the upcoming recession then. Because I believed that the market challenges during a recession would separate the men from the boys.
As for myself, I had finished high school at the age of 14, and earned my Ph.D. when I was 23 years old. Then I had started my own self incubator (Silicon Valley did not have accelerators or incubators then). With $12,000 I had started a glass company that I later grew to about 800 full time and part time employees. We used to serve customers in all 48 States. I used the profits from my glass company to incubate and finance my own R&D, and several startups including XLOptics.
I was a soccer player, playing the forward position and scored beautiful goals. But I never ever celebrated after scoring goals because I always felt that I was doing my job, my duty, and what my team had trusted me with, and expected me, to do. Sometime in a game, even if we were 3 goals behind, I never lost my self confidence because I knew, I had faith in myself, that we could come back from a 0-3 deficit and win the game.
I knew one thing: I was born a leader and would die as a leader. I was/and still am full of self confidence... For example, I just ran for the president of Iran! I also took on the entire Democrat party establishment in 2016, and involuntarily exposed HER email scandals to FBI.
Not shying away from challenges, is a character of people of Southern Tehran where I come from. I walk, think, talk, and command with confidence.
XLOptics Part 2; Wrong Advice by WSGR! about Alex F Hern's Indecent Proposal.
https://www.dhirubhai.net/pulse/xloptics-part-2-wrong-advice-wsgr-alex-f-herns-indecent-behzad-imani
#XLOpticsStory @XLOptics Story
Part 1:
https://lnkd.in/fgvUisU
Part 2:
https://lnkd.in/fmRRpDn
Part 3:
https://lnkd.in/fz28rv7
Part 4:
https://lnkd.in/fNYvrbF
Part 5:
https://lnkd.in/fFmgc-9
Part 6:
https://lnkd.in/fVcx9X7
Part 7:
https://lnkd.in/fer4TXT