One of the UK’s leading Amazon aggregators, Heroes, has settled a lawsuit with venture capital firm Solid Capital after it alleged the investor fabricated documents to say the company had invested in the company’s seed cycle.
Such disputes are rare, but the case shows how competitive deals can sow tension between VCs and founders.
In a document Filed in the Commercial Court in London and seen by Sifted, Heroes claimed that when confronted about the documents, Solid Capital made “inappropriate threats” against both the company and its investors. The Commercial Court manages high-value commercial disputes.
Heroes told Sifted the matter was settled. “The dispute between us and Solid Capital has been resolved. For our part, we are happy with the settlement but I cannot comment further,” a spokesperson said. Sifted made several attempts to speak to Solid Capital but received no response.
London-based Heroes launched in 2020, part of Europe’s burgeoning industry of aggregators: companies that buy up small Amazon sellers and grow their brands.
Amazon itself boomed during the pandemic and following that there was a huge investor appetite for aggregators – VCs poured in 1.1 billion dollars in the sector in Europe in a single day last year.
Heroes has raised $265m so far, a mix of debt and equity, making it the UK’s best-funded aggregator.
Legal disputes that startups face are often between co-founders — for example, an equity dispute — rather than between themselves and investors. The founders say this is because VC and technology are relationship-oriented and disputes are best resolved informally before resorting to legal means.
A notable exception was when US VC Benchmark sued former Uber CEO Travis Kalanick over his power over the board in 2017 – although they later dropped the lawsuit.
The round of seeds
Heroes, co-founded by brothers Riccardo and Alessio Bruni, set out to raise a funding round in May 2020.
According to court records, Solid Capital was one of the venture capital firms Heroes approached about the investment. Solid Capital has decided 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 given an agreement to sign, which, if Heroes accepted the investment, would then be countersigned by the Heroes co-founders.
However, it was alleged 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 verify the terms of a potential deal is common practice for founders.)
“Therefore,” the document states, “Solid Ventures had, and has, no rights to any shares of Heroes.”
The document claims 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, £800,000 and then £1m of £ – which Heroes claim has been returned to CV.
Solid reportedly claimed he had the right to be registered as a shareholder in Heroes in return for an investment of £1million.
A “roughly manufactured” agreement
Heroes claims that when Solid was informed that it was not part of the round, the VC “made a series of unwarranted allegations and threats” against the startup.
The VC produced two “grossly fabricated” versions of the deal “purporting” to show that Heroes had signed it.
Heroes claims that the signature pages were extracted from a different agreement between different parties and that “the making is confirmed by DocuSign records”.
“Heroes or Villains”
The court document filed by Heroes alleges that Solid then emailed the company and some of its investors stating that there were to be “unpleasant, long-term and costly legal proceedings” and “relationship battles.” nasty and public public” and that Solid “would fight to the bitter end”.
It is also alleged that Solid sent Heroes a draft press release titled “Heroes or Villains” which included “a large photo of the Brunis”. Sifted also saw a press release issued by Solid in October – before the Heroes round officially closed – describing itself as an investor in the company.
The document also alleges that Solid sent another email to Heroes stating that Solid should not be allowed to buy Heroes stock until October. 31 In 2021, there would be “nasty litigation and PR battles for the next few months/years”.
Freya Pratty is Sifted’s reporter. She tweets from @FPratty