Hi-Tech Hijack by Dov Nardimon

joined them, the future of the company was still unsure, so they gave me a substantial amount of options, since they weren’t worth much. Now they’re worth a fortune. But who knows—surprises can happen between now and the IPO.”
    “Sounds like you made the right call.”
    “Yes, but here’s the tricky part: rather than speeding up development by investing in more talented people like you, the company is spending its money on publicity. When someone asks Rafi, the founder and entrepreneur, what’s the logic behind pouring the rest of the money in public relations, he says it can take more than a year for a second development team’s work to come to fruition, while investing in meetings with analysts and PR experts has an immediate effect, which is what we need right now. The seed money that was raised by the first venture capital fund that invested in us is running out, and the fund guys are the ones pushing for the PR moves instead of actual progress. Rafi is a decent guy and a brilliant technologist, but he’s in a catch-22. He managed to bring in the fund people thanks to his genuine belief in the idea around which he built the company, and now he feels obliged to them and doesn’t feel comfortable pressuring them into putting in more money from their own pockets. And so principles and truths are pushed aside, and the race is on to raise more money from funds or by public offering with the help of analysts. Let’s just hope the money comes in before the whole thing blows up.”
    “I take it the analysts are a significant force in the hi-tech industry?”
    “They are, which is one of the worst things about this industry. Analysts are people who are meant to give out their conclusions about the performance of companies—either in the general press or in the statement papers of the various venture funds. An analyst is supposed to be someone who understands the industry he or she is writing about. Problem is, most of the analysts have no practical experience whatsoever. They’re usually business-school graduates, which gives them the illusion that learning how to analyze a balance sheet actually means they know how to run a company. Instead of working in the industry, they criticize it. You know that saying that every theatre critic is a frustrated, unsuccessful actor or director? That’s them exactly,” said Oded, summing up his dislike of analysts.
    “But the analysts, as superficial as their work may be, at least have an obligation to give objective assessments; they have a responsibility to the public investors.
    “Originally, yes, they started out with a commitment to the investors. But over the years, they watched longingly as their peers working for funds became richer and richer while they got left behind. So today, every serious analyst has a bypass route to one of the funds. It’s all done with the backup of lawyers and accountants, who ensure no connecting trail between the analyst and the fund can be traced. And that’s on top of the light greasing from the company itself.”
    “Something tells me you don’t mean the light greasing of guns as we used to do in the army.”
    “No, Eddie. By light greasing, I mean a well-disguised, indirect bribe. Here, let me give you an example. For our research and development, we needed live tissues from panda bears, so the company invited the analysts to a seminar about our work in the National Center for Panda Preservation—in China, of all places. As you know, pandas are rare and at risk of extinction, and the Chinese government was pressured by green organizations from around the world into establishing a center where the pandas are protected. They even manage to breed them sometimes, and pandas rarely breed in captivity.
    “The analysts’ tour included a two-week, all-expenses-paid trip to China, paid for by the preservation center that supposedly invited the analysts. Except the funding was done through the center’s international donations fund.