The simplest takeaway from the Adir Shiffman v Sleeping Duck lawsuit, which Shiffman lost, is that startup founders and investors should make sure any agreements they believe they have in place are formalised and legally binding. But we didn’t need a multi-million dollar lawsuit to discover that.
Nevertheless, the case also offered a fascinating insight into a corner of the early stage startup investing industry that receives far less attention and scrutiny in the media than conventional venture capital.
Shiffman is an example of what is known as a “lone wolf angel” — an individual who invests in startups alone, often with fairly aggressive deal terms and wanting more than just equity.
In this instance, a relatively modest $100,000 investment secured Shiffman 5% of Sleeping Duck with an option to acquire a further 5% — and, he alleged, also bought him a say in the day-to-day running of the company.
Additionally, the deal saw Shiffman paid $10,000 a month between July 2019 and the end of September 2021, as well as receive a $2,143,311 payout in share dividends. He currently owns 9.4% of the company (with an option to acquire a further 10,000 shares), but despite the loss, Shiffman told Capital Brief he doesn’t intend on changing his modus operandi when it comes to investing.
