Key Services Overview
“Corporate brand protection and the battle against online piracy is a growing business, and the leader in busting these new age crooks is NetEnforcers.”
–Steve Witt
VP of Marketing, Alpine Electronics
NetEnforcers became the leading solution for online brand protection, cyber fraud mitigation, and digital IP enforcement.
Engineering the Future of Incident Response
The idea for NEI originated during my time as an electrical engineer for an electronics company that had been plagued by grey market distribution. Grey market distribution is when an unauthorized person or entity sells your products online in a low-cost, unauthorized manner. NEI developed it’s business and reputation by working closely with several government agencies to stop illegal online activity. We detected this activity through a spider/crawler technology we developed, and the results were rendered on our browser-based platform, called HAL. Our technology was so effective that we eventually gained the support and cooperation of the FBI, DEA, and ICE, as we could detect crime faster than anyone else. As long-term clients, NEI eventually gained world-renowned brands like Apple, LG, Samsung, Sharp, Novartis, Eli Lilly, Sony, and others. One of our 2006 presentations on the HAL Platform can be found here. Through our success, NEI also became a registered Private Investigative Agency conducting undercover operations, investigations, and take-downs. By 2007, we had built a market-leading company serving a critical need in the world of online crime – and the business showed no signs of slowing down.
From Profitable Growth to a Painful Lesson in Timing
NetEnforcers, Inc. was a profitable, fast-growing 60-person company with a cutting-edge technology platform and a loyal client base. Encouraged by a trusted advisor to raise outside capital for expansion, we unexpectedly received multiple acquisition offers instead.
Ultimately, I chose to sell NEI to Intersections, Inc.,
a move influenced by my respect for their CEO and our shared vision of building a billion-dollar enterprise. The deal was finalized in late 2007 after a rigorous eight-month due diligence process.
Though the exit seemed ideal, the timing couldn’t have been worse. Within a year, the Great Recession hit, severely impacting Intersections and leading to efforts to unwind the acquisition. The experience taught me hard but invaluable lessons about deal timing, wealth management, and the risks of macroeconomic forces beyond your control.
Sale to Intersections, Inc.
After courting multiple acquisition offers (including one from Kleiner Perkins, the top-shelf venture capital firm), I decided to sell Net Enforcers to a technology company called Intersections, Inc. I decided to sell NEI to Intersections because I respected its CEO and looked up to him as a mentor. I also liked his idea of growing a combined billion-dollar enterprise together. I signed the Letter of Intent in March of 2007 and spent more than eight months in due diligence – Intersections spent more than a million dollars in legal fees during the course of the acquisition of Net Enforcers. The deal closed in November of that year.
An article on the acquisition can be found here.
Unlike the dot-com bust in 2001, the Great Recession had a much more significant and more widespread impact on the economy, and unfortunately, it caused me great personal pain as well.
Legal Escalation
In 2008, massive banks were going insolvent, enterprise corporations were losing billions in value, the housing market crashed, and no one knew if the end was near. Due to the insolvency of many of its banking customers, Intersections was impacted by a major reduction in revenue and ultimately had to abandon its growth-by-acquisition strategy altogether. This reduction caused an enormous strain between Intersections and I, as I came to the realization that I would never make my earn-out with these financial cutbacks and layoffs.
After multiple failed attempts to find a resolution related to my earn-out and the future of Net Enforcers, Intersections terminated my position as part of their cost-saving strategy. I never saw it coming, and I felt humiliated, embarrassed, angry, betrayed, and confused.
Faced with what to do next, I had difficulty deciding whether to walk away from a more than $6 million earn-out or find some other form of resolution. While I personally and professionally responded to the allegations within my termination letter with factual evidence, emails, documents, and materials, Intersections chose not to respond to my personal request for a sit-down meeting. Unfortunately, the situation felt disingenuous, and I did not think I should have to walk away from my earn-out especially knowing I hadn’t done anything wrong. Due to the lack of response from Intersections, I hired a law firm to find out why Intersections terminated and refused to meet and discuss an amicable resolution with me.
Polygraph and the Kitchen SInk
After sending an initial demand letter, Intersections agreed to a meeting. Unfortunately, Intersections was uninterested in settling with me and remained aggressive and unreasonable. Although after the meeting, both parties agreed not to file suit against one another, within an hour of its conclusion, Intersections filed their “kitchen sink” lawsuit anyway – we got played and were forced to countersue. Only then did I discover that Intersections had been known to be an aggressive and litigious corporation, having filed multiple suits in the past and their method of pressuring a favorable resolution with the courts.
So what’s a kitchen sink lawsuit? It’s when one side makes up claims regardless of basis and veracity in an attempt to create pressure, influence, and financial stress for the other side. This is done to force a settlement and ultimately seek a dismissal of your countersuit. You can read more about this legal strategy here. This stuff really does happen.
I was advised that during commercial litigation, I had to accept the ugly reality that even a baseless lawsuit can hurt a highly credible reputation. I needed to do everything in my power to clear my name. When I was at NEI, I had relationships with the FBI, DEA, ICE, and others and carefully planned to have agents testify on behalf of my character. I spent months collecting all the evidence I could find to win this case as I was now fighting not just for my earn-out but for what I valued the most: my name, personal integrity, and reputation. In those efforts, legal counsel advised that I take a polygraph, which I did and passed.
Legal Resolution
During the course of the litigation, my legal team discovered that following my termination, an outside financial firm was hired by Intersections to audit the acquisition of Net Enforcers and determine if NEI’s pre-acquisition financials were correctly stated. This was performed as an attempt by Intersections to find cause to eliminate my employment agreement, pay my severance, and award me my stock options. Further validating my personal integrity, the auditors concluded that NEI made no wrongdoing or inaccurate statements and no fraud had been committed during the acquisition.
So after months of aggressive legal action, which amounted to nothing more than tiresome and pointless fighting, Intersections and I finally agreed to find an amicable resolution. This was the same resolution I sought when all this started, but for whatever reason, it’s “sue first, ask questions later” with some people. We both agreed to attend a mediation and found a resolution after eight hours of debate. As a result, we dismissed each other’s lawsuits and went our separate ways.
Reflections: Lessons Learned
I still believe Intersections was a good company and delivered well for its shareholders. I still have a lot of respect for their leadership team, although I cannot say I agree with their resolution strategy. Upon reflection, I think that we were all put in a difficult position with the incomprehensible instability of the market, which left us both unsure of what the other would do, and a fight ultimately broke out. I believe that the economic crash caused our insecurities to escalate, and unfortunately, lawyers got paid to perpetuate a fight, and they did it well.
I certainly learned many lessons about litigation, selling your business, and defending your reputation. I firmly believe that the experience made me a better person, executive, and business leader. If someone was to ask me, “If you could go back, what would you do differently?” First, I would not have hired a law firm; instead, I would have found a way to get a sit down with the Founder/CEO. If we were still working together, we would have been chasing down that billion-dollar market valuation.
Following some much-needed time off and sheer boredom, I built again and put all these important lessons to work. I landed on a great idea, and in 2013, started CyberSponse, Inc. As a result, starting my next venture even landed me on HBO’s Last Week Tonight with John Oliver!
For more about my journey, patents, and ventures, connect with me on LinkedIn.
