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How Boosted went bust

Kanye wanted a meeting.

When a small group of Boosted employees learned that the rapper-mogul had expressed an interest in the company’s electric skateboards in early 2019, they were pretty much in the dark about what had happened.

It didn’t matter whether it was about a partnership, an investment, an endorsement, or anything else. Meeting with Kanye West seemed absurd to him. However, at the time, Boosted was also working on a top-secret project with skateboarding legend Tony Hawk, which was revealed later. Was it really that far-fetched to think that the startup might be able to collaborate with Yeezy?

Apparently. As two former employees of Boosted tell The Verge, Kanye spent more time talking about his ultimately doomed vision for sustainable cities than he did discussing a concrete deal with the company during the meeting, which was one of two held throughout 2019. (Kanye did not respond to requests for comment.)

The carcass of Boosted is still attracting buzzards.

The company had outgrown its Kickstarter beginnings by the time of the Kanye meetings, and it was defining the market for electric longboards, which had emerged as part of a rideables craze in the mid-2010s. Although the brand was powerful, the startup was losing its way. It wasn’t just Kanye’s off-topic meetings that caused concern, though some employees believed they were symbolic in nature. Boosted had simply been overstretched. Using a shoestring budget, it had managed to introduce half a dozen models, each with a different configuration, in just six years time. The company was then hit hard by tariffs imposed by the Trump administration on goods manufactured in China, as well as a delayed electric scooter, and eventually ran out of money.

However, even though Boosted is no longer alive, the corpse of the beloved electric skateboard startup continues to attract attention. Their largest investor, the eponymous venture firm founded by billionaire Vinod Khosla, has spent the last year waging a pair of lawsuits against Lime in an attempt to overturn the scooter-sharing company’s purchase of Boosted’s intellectual property. Khosla is a surfer-fighting philanthropist who founded the Khosla Foundation.

Lawyers for Khosla Ventures claim Lime sabotaged a potential bailout of Boosted from Yamaha in late 2019 and then conspired with Boosted’s largest debt lender to rig the sale of the startup’s remains a few months later, according to the lawsuit. A member of Lime’s legal team has argued that the powerhouse firm is simply upset about a “failed business negotiation” that ultimately failed to save a “dying company.”

It is likely that the battle will last for several months. In the meantime, a trial is tentatively set for May 2022. The lawsuits, as well as interviews with six former Boosted employees, help to reveal in the most detail yet just how the category-defining electric skateboard startup came crashing down, and why seemingly nothing — not a partnership with Tony Hawk, the unwavering support of one of YouTube’s biggest stars, or even Kanye West — seemed to have been able to save it.

The situation wasn’t always so bleak at Boosted, though. It was one of the first Kickstarter success stories after transitioning out of a Stanford incubator in 2012, and it remains one of the company’s most successful projects to date. Few years later, Boosted’s electric longboard became the preferred mode of transportation for YouTube sensation Casey Neistat. The Boosted’s board appeared in almost every video he posted, whether it was hanging behind him on the wall of his studio or under his feet as he weaved through the traffic of New York City’s Central Park.

Boosted became so popular as a result of Neistat’s efforts that it was difficult for the startup to keep up with the influx of orders. Additionally, co-founder Sanjay Dastoor developed a cult following among the startup’s customers — not only because of the quality and popularity of the product, but also because he was so hands-on that, in 2016, he flew across the country to the home of a board owner to diagnose a battery failure.

Boosted was a Kickstarter success, but it took off in a big way after Casey Neistat got involved.

Dastoor, a Stanford alumnus, sold the company to Jeff Russakow in 2017, who took over as CEO. With the changing of the guard came the setting of new, much loftier objectives. “The company is doing magnificently well, and we are looking forward to an exciting roadmap that will include many new form factors of light vehicles and other interesting things,” he said at the time of the announcement. It is his goal to “be able to move more quickly on innovation” and release two major product releases of “some cool exciting announcement” per year — “an Apple-like cadence,” according to Russakow — in order to “be more competitive.”

CEO Sanjay Dastoor (left) and CTO John Ulmen (right) Boosted Board, a battery powered skate board on Wednesday, June 14th, 2017, in San Francisco, California.

Boosted rode the wave of success for a while, and in early 2018 introduced a second-generation board, as well as a mini board and a high-performance variant known as “Stealth,” which eventually became the company’s most popular product. In the following months, the startup raised nearly $80 million from investors including Khosla Ventures and others. This funding round, according to Russakow, was filled with “really supportive investors” who are “absolutely committed to the company’s vision,” according to an interview with The Verge in 2019. He used the money to take Boosted global, establishing the brand in more than 30 countries as a result of his efforts.

Boosted even began collaborating with Birdhouse, the skateboarding company founded by Tony Hawk, who is arguably the most well-known skateboarder on the planet. The company also discussed the possibility of developing a board for children and hired another professional skater, Andy Macdonald, to assist with the project. To some of Boosted’s employees, validation from two of skateboarding’s most revered figures felt like confirmation of what they (and their customers) had already realised: that the company’s electric longboards were a badass. “We’re really excited,” said one employee.

Boosted expanded internationally under the leadership of Jeff Russakow, but this required additional funding.

Moreover, by the end of 2019, Russakow’s efforts to expand the company appeared to be bearing fruit. According to two former employees who spoke with The Verge, it even piqued the interest of high-end bicycle manufacturer Specialized.

Boosted, on the other hand, required more funds. The company’s revenue in those new markets was being eaten away by the expansion, which was even eating away at the capital it had raised. To make matters worse, the company suffered a setback when then-President Donald Trump launched a trade war with China in December 2017. After moving its manufacturing to China in 2016, Russakow told The Verge in May 2019 that the company had the “financial ability” to absorb the tariff on its skateboards. However, it turns out that this was easier said than done, as the company discovered. In the end, Boosted applied for and was granted exemptions from the tariffs; however, refunds for these exemptions were still pending when the startup went bankrupt.

After being under immense pressure to maintain this rate of growth, which was coming not only from Russell but also from Khosla, former employees claim that Boosted was left feeling exhausted and demoralised. What caused the most confusion, however, was the Boosted Rev, the startup’s super-rugged, $1,600 electric scooter that debuted in the first few months of the year 2019.

Boosted announced the scooter just as its financial situation began to deteriorate, and the company was forced to postpone the launch almost immediately (in part because of an issue with the latch meant to keep it folded, but also because scaling up production was tricky). Khosla Ventures and Boosted’s other investors had just invested money in the company and didn’t want to add any more to their investment. As a result, in May of this year, Boosted quietly turned to a “venture debt” firm called Structural Capital for what it hoped would be temporary assistance. The terms of the deal were not particularly favourable to Boosted: the company was required to pledge all of its assets as collateral for a $18.5 million loan. Furthermore, if Boosted fails to make certain payments, Structural Capital may be able to seize control of certain aspects of the company.

Boosted used up the majority of the loan in a matter of months. As a result, Boosted’s executives found themselves in the position of having to raise additional funds just as the summer season, their busiest sales period, was coming to an end. Between now and the end of September, Boosted began delaying payments to some vendors and considering layoffs as a result of the situation.

In 2019, a desperate deal with a “venture debt” company turned out to be poisonous.

According to court documents, Khosla Ventures and another investor, Activate Capital Partners, made a small loan to Boosted in October to help keep the lights on while the company looked for a way out of its financial difficulties. However, it was insufficient to prevent Structural Capital from seizing control of the company’s cash reserves. Every expense was now the responsibility of the venture debt firm.

Employees quickly began to wonder how much longer Boosted would be in business. In addition, the company no longer had access to its inventory, had stopped spending money on advertising, and had absolutely no money to invest in the development of new products. Two former employees stated that they went on Thanksgiving break not knowing whether or not they would be able to find work elsewhere. When they returned, however, the sense of dread didn’t go away with them.

“We got stuck in this weird limbo land,” says a former employee of his or her situation. Others banded together to determine what other sacrifices could be made to save money, such as eliminating free snacks and lunches (which Boosted eventually did) or foregoing their company-subsidized Caltrain passes (which Boosted eventually did).

“We’ve gotten ourselves stuck in this strange limbo land.”

“The people at Boosted were fantastic,” this individual claims. “Everyone felt a strong sense of loyalty to John [Ulmen, Dastoor’s co-founder, who remained with the company until the end] and wanted to see him through to the end. The brand had a lot of untapped potential, and it was time to capitalise on it. As a result, everyone hung on a little longer than you might have expected.”

In the middle of December, a team within Boosted was given the incorrect impression by their manager that everyone would be laid off the following morning, which turned out to be incorrect. “Everyone is in a state of panic. Rumors begin to circulate. As the former employee points out, “people are making sure they have a backup of their information.” That was until the following day, when Russakow called the entire company together and squashed the idea.

By that point, word had spread throughout the company that something was wrong, but the majority of employees were clueless as to what it was. When employees began to accept positions at Lime, the confusion increased even further.

“We would expect to be laid off every Friday,” a former employee remarked in an interview. People would be surprised when their paychecks came in, according to the author.

Within a few weeks of the holiday season, Boosted’s executives huddled in their office, trying to devise a strategy for getting out from under a small mountain of debt — deciding who to fire and what to salvage in order to keep the company alive. A few days later, Russakow and his team received news that seemed like a Christmas miracle: Japanese conglomerate Yamaha was interested in purchasing the company.

It had already taken them most of December to reach an agreement with Lime, which would allow the scooter-sharing company to hire away a small group of Boosted employees as well as licence some of the intellectual property surrounding their new scooter in exchange for $30 million worth of Lime stock.

It is possible that Yamaha would have been acquired and that this would have changed everything.

That deal, however, would not save the entire company, and it was never completed. In contrast, a Yamaha acquisition would have been transformative in terms of the industry. Former employees told The Verge that it could have aided Russakow’s efforts to grow the startup and expand into new markets — moves that were supported by Khosla Ventures, which was looking for high returns on its investment.

A Yamaha partnership could have aided Boosted in expanding into new product categories while also shipping products that were already in development, such as an electric bike and new versions of its electric skateboards. Yamaha, on the other hand, changed its mind.

The failed Yamaha deal is at the heart of several lawsuits filed by Khosla Ventures, one of which was previously reported by The Washington Post. (“Manufacturer” is the term used to refer to the Japanese conglomerate in the lawsuits, rather than its name.) Yamaha’s withdrawal from the lawsuits, which were recently consolidated into a single case in San Francisco Superior Court, is unmistakably the fault of Lime, according to Khosla Ventures.

Boosted employees were poached, according to the venture firm’s lawyers, while negotiations with Yamaha were still ongoing — including the Boosted vice president who was coordinating interviews with the people Lime might hire as part of that deal. Lime has denied the allegations. Lime, according to Khosla’s attorneys, collaborated with Structural Capital to freeze the startup’s bank accounts and force it into liquidation, thereby preventing the Yamaha deal from going through as planned.

Jeff Russakow, CEO, Boosted Boards, on Auto/Tech + TalkRobot during day two of Collision 2019 at Enercare Center in Toronto, Canada.

One point of contention was that Lime “acted with malice by intending to cause injury to Boosted’s economic relationship with [Yamaha],” according to lawyers for Khosla Ventures. “Defendants engaged in wrongful, intentional acts designed to prevent [Khosla Ventures] and Boosted from consummating an alternative transaction,” according to the complaint.

Lime has been accused by Khosla Ventures of sabotaging the Yamaha deal.

Khosla Ventures claimed that all of this amounted to “sabotage” in a legal filing. Boosted was losing key team members as well as access to capital, effectively ending the Yamaha deal.

According to Khosla Ventures, there was an additional twist to the knife as well. Boosted had responded with a revised offer just days before the alleged conclusion of the case in January 2020: $15 million in company stock and an increase in the number of Boosted employees in exchange for the scooter intellectual property. This, according to Khosla’s team, is more proof that Lime was up to no good: it entered into negotiations with Boosted under false pretences in order to steal employees and other nonpublic information from a startup that was already on its way to failure.

Responses to requests for comment from Khosla Ventures and Structural Capital were not returned. A representative from Lime declined to comment.

In one of the filings, Khosla Ventures stated that it kept Boosted afloat through February with $2.4 million in bridge loans, but that the firm ultimately “decided not to fund Boosted any further” by the end of the month, according to another. The majority of the company’s employees were laid off shortly after.

In March 2020, Structural Capital began the process of foreclosing on the remaining assets of Boosted. Because the startup had used its assets as collateral, the venture debt firm ended up in control of all of Boosted’s assets, including its intellectual property. When the loan was made, Structural also had the right to liquidate those assets if Boosted violated any of the loan terms, which Khosla Ventures agreed to when the transaction was completed, according to court documents.

The auction for Structural has been scheduled for March 17th. In the beginning of the month, it sent out a notice, which was received by Khosla Ventures. Nonetheless, the San Francisco area was issued a shelter-in-place order just one day before the sale took place, in an effort to contain the spread of COVID-19 virus. Because of the public health order, Khosla says it was unable to participate in the sale at this time.

Lime claims that the lawsuit filed by Khosla Ventures contains “zero factual allegations.”

Despite this, the auction went ahead. Structural purchased the rights to the tariff refund that Boosted had been waiting for from the government, which had a value in excess of $5 million, for a total of $400,000 in cash. Lime was able to walk away with all of Boosted’s intellectual property and remaining assets in exchange for 62 million shares of the company’s stock. The proceeds of any sale were to be divided among Khosla Ventures, Structural, and Lime, according to the agreement. However, according to Khosla Ventures, Structural formed a new LLC and purchased some of the assets, a move intended to avoid the contractually mandated proceed split in question.

Lime fought back vigorously against the majority of Khosla’s allegations. The San Francisco lawsuit was heard in person on March 20, and one of Lime’s attorneys argued during a hearing there was no agreement that Lime would not solicit or hire employees. He also stated that there were “zero factual allegations” in Khosla’s complaint to support the claim that Yamaha withdrew as a result of Lime’s actions, according to the attorney.

This is, I believe, a truly… kind of… mind-bending complaint, in some ways, on your honor’s part… because… According to a transcript of the hearing, “[Khosla Ventures’] alleges that Boosted was planning to fire these employees; that Boosted was in financial distress; that it, you know, was defaulting under the loan security agreement; and that there was going to be this massive bloodletting,” Lime’s lawyer stated. He continued by saying that Khosla was attempting to assert that these employees were still valuable and that the company had the right to take legal action against Lime for hiring them away from Khosla. “It just doesn’t make any sense,” he stated emphatically.

“It is strange, I will grant you that,” judge Ethan P. Schulman said in response to the question. However, he stated that “adverse events occur in the world and give rise to lawsuit[s].”

Prior to the sale, the other shoe had finally dropped for Boosted employees in early March, when the building manager at the company’s San Francisco headquarters was served with an eviction notification. The company’s leadership instructed everyone to work from home, but only a few days later, they fired the entire workforce.

According to Russakow and Ulmen, on the company’s blog, “We understand that this news will come as a surprise to many of you, but unfortunately, developing, manufacturing, and maintaining electric vehicles is a highly capital-intensive endeavour, and over the last year and a half, our business has faced an additional unplanned challenge due to the high costs of the US-China tariff war.” In response to requests to be interviewed for this article, Russakow and Ulmen did not respond.

Casey Neistat attends “From YouTube Star to Media Company Co-founder” at Austin Convention Center on March 11th, 2017, in Austin, Texas.

The majority of Boosted employees who spoke with The Verge said they didn’t believe the company had made any obvious critical mistakes. It has been speculated that even the scooter could have been successful — particularly if Boosted had survived the first few months of the pandemic, when sales of bicycles and scooters skyrocketed. At the very least, extending the situation until the Paycheck Protection Program was fully operational in April 2020 could have bought some additional time.

The vast majority instead simply blame Khosla Ventures and acknowledge that Russakow’ aggressive product objectives were a reflection of the returns that the large venture capital firm desired on its investment in the company. It was in the pursuit of those objectives that Boosted found itself in over its head.

When Boosted went bankrupt, some of the company’s most ardent supporters held out hope that the company could be resurrected in the days and weeks that followed. It seemed like every few days, they would send out a tweet to Casey Neistat or Elon Musk pleading for help, as if the right person with the right money would be able to untangle the legal tangle that had been tied around the remains of Boosted.

Although it’s difficult to blame them, Boosted has consistently exceeded expectations throughout its early years. It was a successful Kickstarter project that grew into a legitimate corporation, and in the process, it was instrumental in the creation of an entirely new category of automobiles. However, by the time it came to an end, Boosted had transformed into something far more common: yet another Silicon Valley startup that struggled to meet the lofty goals set by the individuals who ended up in charge of the operation.

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