Investors are clearly eager to be part of the aggregator gold rush. This article shows some of the pitfalls of this excitement – when VCs act badly.
One of the UK’s leading Amazon aggregators, Heroes, has settled a lawsuit with a VC firm, Solid Capital, after alleging the investor fabricated documents to say the firm had invested in the company’s seed round.
Such disputes are rare but the case shows how competitive deals can sow tensions between VCs and founders.
In a document filed to the Commercial Court in London and seen by Sifted, Heroes claimed that, when confronted about the documents, Solid Capital made “inappropriate threats” to both the company and its investors. The Commercial Court handles high-value business disputes.
Heroes told Sifted that the case has been settled. “The dispute between us and Solid Capital has been settled. For our part, we are satisfied with the settlement but I cannot comment further,” a spokesperson said. Sifted has made repeated attempts to speak to Solid Capital but has received no reply.
London-based Heroes launched in 2020, part of Europe’s booming aggregator industry: businesses that buy up smaller Amazon sellers and grow their brands.
Amazon itself boomed during the pandemic and, off the back of that, there’s been huge investor appetite for aggregators — VCs poured $1.1bn into the sector in Europe in a single day last year.
Heroes has raised $265m so far, a mixture of debt and equity, making it the UK’s best-funded aggregator.
The legal disputes faced by startups are often between cofounders — for instance, a dispute over equity — rather than between themselves and investors. Founders say it’s because VC and tech are relationship-driven and disputes are better to solve informally before turning to legal means.
One notable exception was when US VC Benchmark sued former Uber CEO Travis Kalanick concerning his power over the board of directors in 2017 — though they later dropped the lawsuit.
The seed round
Heroes, cofounded by brothers Riccardo and Alessio Bruni, set out to raise a seed round in May 2020.
According to the court files, Solid Capital was one of the VC firms that Heroes approached about investment. Solid Capital decided it wanted to be part of the round. Solid Capital has offices in the Netherlands and Colombia, according to its website.
The document stated that Solid was then provided with an agreement to sign, which, should Heroes have accepted the investment, would then be countersigned by Heroes’ cofounders.
However, it was alleged transpired that the round was oversubscribed and “Solid Capital was not accepted as part of the investment round”, so Heroes did not countersign the agreement. (Sending a document to an investor to check the terms of a potential deal is routine practice for founders.)
“Therefore,” the document argues, “Solid Ventures had, and has, no right to any shares in Heroes.”
The document asserts that, after Heroes told Solid they weren’t going to be included in the round, Solid sent two “unsolicited” sums of money to Heroes’ bank account, £800k and then £1m — which Heroes says were returned to the VC.
Solid allegedly claimed it was entitled to be registered as a shareholder of Heroes in return for £1m in investment.
A ‘crudely fabricated’ agreement
Heroes claims that when Solid was informed that it wasn’t part of the round, the VC “made a series of wrongful allegations and threats” against the startup.
The VC produced two “crudely fabricated” versions of the agreement “purporting” to show Heroes as having signed it.
Heroes asserts that the signature pages were taken from a different agreement between different parties, and that “the fabrication is confirmed by the DocuSign records”.
“Heroes or Villains”
The court document filed by Heroes allege that Solid then sent an email to the company and some of its investors stating there were to be “nasty, long term and costly litigation procedures” and “nasty, public PR battles” and that Solid would “fight until the bitter end”.
It’s also alleged that Solid sent Heroes a drafted press release entitled “Heroes or Villains” and including “a large photo of the Brunis”. Sifted also saw a press release published by Solid in October — before Heroes’ round had officially closed — describing itself as an investor in the company.
The document also alleges that Solid sent a further email to Heroes, stating that should Solid not be allowed to purchase shares in Heroes by October 31 2021 there would be “nasty litigation and PR battles for the next few months/years”.