Startup Nightmares w/ Kristy McCann

Startup x VC Drama, Burger King, and a Side of RICO

If you thought human resources was all about trust-fall exercises and awkward anti-harassment PowerPoints, think again. This week on The Chad & Cheese Podcast, Joel Cheesman and Chad Sowash host Kristy McCann, former CHRO, founder of Skill Cycle, and current legal nightmare for predatory venture capitalists.  

What starts as a classic startup success story (bootstrapping an HR tech company, surviving a pandemic, and making the Inc. 5000 list) quickly devolves into a full-blown corporate thriller. Enter an "opportunity fund" that turned out to be an opportunity only for the investors specifically, the opportunity to hijack the cap table, force shady "pay-to-play" dilutions, and try to turn a custom coaching marketplace into an AI chatbot.  

Buckle up for a hilarious, jaw-dropping breakdown of:

• The 8-Hour Starvation Interrogation

• The "Loan-to-Own" Playbook

• Racketeering in HR Tech? 

It’s a hilarious, infuriating, and wildly educational cautionary tale for every founder who has ever considered taking a check from someone they didn't thoroughly vet first.  

"I survived COVID without government money... You wanna fuck with me? Fine. Discovery, baby! Let's go."— Kristy McCann  

Hit play, grab some popcorn, and double-check your cap table!  

PODCAST TRANSCRIPTION

Joel Cheesman (00:27.911)

Ohhh yeah. It's the podcast your goalkeeper warned you about. What's up, boys and girls? It's the Chad and Cheese podcast. I'm your co-host, Joel Cheesman. Joined as always, Chad Sowash is in the house as we welcome Christy McCann, founder and former chief executive officer at Skill Cycle. Christy, welcome to HR's Most Dangerous Podcast.

Chad Sowash (00:31.34)

Woohoo!

Chad Sowash (00:39.939)

Hey!

Kristy McCann (00:50.296)

Thank you for having me. Yeah, I'm thrilled to be here. It's just gonna be fun.

Joel Cheesman (00:55.099)

We're happy to have you. for our listeners that don't know you, give us a little bit of a Twitter bio. What makes Christy tick?

Chad Sowash (00:56.313)

We hope so.

Kristy McCann (01:01.376)

Yeah, so I'm a unique blend, needless to say. I'm former HR for twenty years. Then I started my own HR tech companies. and now I'm helping a bunch of other HR tech companies realize their dreams. And then I guess the the bow that ties it all together, besides being a, you know, CHRO, CEO, and founder, is that I'm also in litigation with a BIP ventures.

Chad Sowash (01:09.743)

Mmm.

Kristy McCann (01:28.652)

in regards to a hostile takeover of my company's skill cycle, which I created eight years ago, nine years ago.

Chad Sowash (01:35.425)

Now listeners, know, chat, you, you, our listeners know that Chad and cheese podcasts love us some startups. And, and that's why on today's show, we, we brought pretty much a founder's worst nightmare, finding out people that are writing the checks are actually looking to steal the keys and lock you out of your own damn house. That's why we brought Christie on the show. So Christie, thanks for showing up. We have lots of startups that listen to us.

Joel Cheesman (01:35.505)

That escalated quickly.

Chad Sowash (02:04.046)

Lots of obviously buyers too, but this is one aspect of a lot of the stories that we just don't see, but we know it goes on behind the scenes. I appreciate it if you could give us a short overview of the company. So skill cycle and then when and how did VC get involved and then let it all just roll.

Joel Cheesman (02:17.52)

Cautionary Tales of the Stars.

Kristy McCann (02:29.24)

Sure. So I started what was known as GoCoach. this was and then I'll talk about the skill cycle transition. So I put half a million dollars into GoCoach back in, you know, twenty eighteen, twenty nineteen, to essentially create a marketplace of coaches to basically upskill employees in their organization.

Chad Sowash (02:44.366)

Gotcha.

Joel Cheesman (02:52.4)

Was that self funded? Sorry. Was that self funded or how you had you raised money by that point?

Kristy McCann (02:56.598)

No, no, no. This was this is my money. I you know you mean so I I put in the 500K. I took at the time I was living in New York, took my husband across the street, got a really good bottle of whiskey and said, Hey, I'm gonna take some money out of my four hundred one K and I'm gonna start this company. I had been in HR for twenty years and one of the reasons that I I wanted to start an HR tech company is that I was just done with the terrible HR tech that was out there. Like it was just

So bad I spent more time ripping out systems than you know buying systems because they just didn't work. They made me look stupid, nobody used them, etc. So I knew that I could start part of the vision on my own, which was the coach marketplace and and LXP. And so bootstrapped that for a few years. and we really started the the Rev. and so I was super excited.

Chad Sowash (03:40.108)

Mm-hmm.

Kristy McCann (03:52.717)

started to attract investor attention attention back in twenty twenty one. And, you know, Brought has some really good investors, you know, out there, like Early Light, you know, I got angels in there, PS twenty seven, et cetera. And then this competition came up, you know, for this opportunity fund. And I saw it

I looked at it and I had already raised, you know, the amount for our C round, which was, you know, two point five. And a two point five was to realize the full vision of what became skill cycle, which was creating a new category in HR Tech of bringing performance management and learning together with AI. So we are ahead of the AI curve, but so that we're bringing the right things together. So that any type of performance, you know, that you're getting

Chad Sowash (04:40.141)

Mm-hmm.

Kristy McCann (04:43.084)

informal inform formally goes automatically into learning with our coaches, our mentors, and our content, right? So real-time development, real-time action, real-time engagement. so I couldn't do that on my own. I the one thing I didn't know how to do is code and I needed a lot more money to be able to establish that even though we were growing significantly. So going back to this opportunity fund, you know, there were some competition, some startup showdown, whatever. I had a

Chad Sowash (05:09.699)

Mm-hmm.

Kristy McCann (05:11.84)

apparently applied during the summer. And then after I had raised around, I got was informed that I was part of this. So I'm like, I'll do it for brand awareness and what have you. and it was a B I it was known as Panoramic Ventures at the time, which is supposed to be an opportunity fund for diverse founders like me. So I I went and I did it and long and behold, I won. And they you know, in winning they put in I think it was like a

Hundred and twenty five K safe. and I didn't, you know, it wasn't something I was interested in. I already closed the round and whatnot, but they came back to like, no, we'll actually oversubscrib round. I'm like, you know, like this could be cool, like I could build more product, add more people, etc. talked to my other investors. Nobody had really heard of them before, but we all kept on going back to like it's an opportunity fund, like this is a fund for

Chad Sowash (05:56.718)

Mm-hmm.

Kristy McCann (06:06.818)

people like me, like, you know what I mean? female, you know, neurodiversity. Yeah.

Joel Cheesman (06:10.32)

Christy, real quick, when when you before the competition, you said you raised two fo two point five. Give us an idea of how many employees? Were you profitable yet? Were you on the road to profitability? Kind of give us an idea of where you were before, and then we'll get into the after the investment.

Kristy McCann (06:23.36)

Yeah, so it was roughly I mean, I I wasn't paying myself, but it was me and then I wanna say I had about six contractors and I you know, an ed tech consultancy that I brought in that to help evolve the product. and then I had hundreds of coaches, right, that were all ten ninety nine within the marketplace. And so we I guess you could say on paper we were profitable because like

I wasn't paying myself and like, you know, I mean, I, you know, was paying the the consultants decent wages, and the contractors. I will say this, I survived COVID, without any government money, because you know, we didn't have formal payroll because everybody was contractors and I was able to survive COVID and grow substantially. We went

for I think it was like Forex growth that year of twenty twenty to twenty twenty one. That's why investors started to come in.

Joel Cheesman (07:20.688)

Okay. So totally bootstrapped, on the road to to profits, and then now you you get the money. Now start good keep going.

Chad Sowash (07:22.434)

Okay.

Kristy McCann (07:25.485)

Yeah.

Chad Sowash (07:28.194)

The Opportunity Fund.

Kristy McCann (07:30.144)

Yeah, opportunity fun. Interesting. interesting play and opportunity. so yeah, so they came in, oversubscribed it, you know, 'cause I it was going back and forth and but I just kept on like thinking it was safe. Opportunity fun. Dumbest thing I ever thought of. and and and so it began. And it just was it was a weird relationship.

Chad Sowash (07:34.807)

Mm-hmm.

Kristy McCann (07:58.595)

From the get-go. And then all of a sudden they were no longer panoramic ventures. The guy, Paul Judge, who was part of Panoramic Ventures and apparently raised his $300 million opportunity fund, just disappeared. I'm asking questions like, all right, well, who who who who am I hanging out with these days? Like, you know, I mean you're you're supposed to be my lead investor, not really getting any answers. and then they became VIP ventures. And I just noticed immediately.

Like there was just shifts and changes. I mean, we really didn't talk to them much to begin with because like guy that you know, I was dealing with was no longer there. But they really started to like get into our business like i in a very over over zealous way. And I kept on talking to my other investors, I'm like, Is this normal? And nobody r really knew what was going on because

Chad Sowash (08:51.778)

Well, how did they get involved in the business? That's the big question.

Kristy McCann (08:55.058)

my God. I spent more time with them than I did with my own team of customers. It was ridiculous. Like it was it you know, they they were I felt like I was being micromanaged by an investor that had no idea what I was doing in HR tech. Right? Like they're just like, Well, why don't you just be like a AI bot coaching company? I'm like, No, like that that like I I'm not gonna AI bot this like they're you know, like I had

Chad Sowash (09:11.298)

Gotcha. Gotcha. Gotcha.

Kristy McCann (09:23.084)

views on AI before A by AI became mainstream. And they never understood what we were doing. it was clear and I was trying to create a new category and it was going to be tough. Like we were changing from a service model to a SaaS model, an AI SaaS model, on top of that. Like it it was just a ridiculous amount of time being spent with them trying to for them to understand the business.

Joel Cheesman (09:35.984)

Mm-hmm.

Joel Cheesman (09:46.168)

Was was it a

Chad Sowash (09:47.663)

Well, you notice that a lot. mean, when you're talking to VCs and PEs, just separately out of, especially ones who have broad ranges of portfolios, which it looks like VIP does have a very broad range, where it's like they really don't understand. They just got a good pitch out of it. And then they come in and it feels like from your standpoint, they really just wanted to start controlling the organization. Is that the case?

Kristy McCann (10:13.9)

yeah. Yeah. I mean that I I felt it immediately. I mean, like, you know, we went from having quarterly board meetings to monthly board meetings to I'm talking to them every day. Like I was just like, yeah, I'm like, seriously, I'm like, what don't you get? Like it it was annoying and red flags start to go up, but like they would have a annual symposium where they would bring all the startups that they had funded. and based on their website and based on the amount of

Joel Cheesman (10:24.026)

Daily.

Chad Sowash (10:24.206)

Ouch.

Kristy McCann (10:42.614)

startups that came, there's a very big difference, needless to say. yeah.

Chad Sowash (10:46.572)

Really? Because it looks like there's about a hundred of them in their portfolio on their website.

Kristy McCann (10:51.03)

Yeah, I think that there's I think there's vintage and I think that I I think there's some weird things going on in that website, not gonna lie.

Chad Sowash (10:53.888)

A fraction. okay.

Chad Sowash (10:58.944)

Okay, okay, okay.

Joel Cheesman (11:00.122)

Was was it a a little bit of a Jekyll and Hyde situation, like before they did the deal, was it we're gonna let you run, we're gonna let you do the business, we're just gonna sort of be there to support and then when the deal was signed, and what kind of due diligence did you do before the deal that may have surprised you?

Kristy McCann (11:16.704)

So I did a lot of due diligence on them and they did a ton of due diligence on me. I mean, believe me, I mean, my my legal bills for the, you know, amount of due diligence with all the money that I raised were extremely high. I was doing due diligence. I was talking to other investors, trying to find out more about them, that there just wasn't much. and again, I just kept on going back to the opportunity fund, but it was I felt it. I mean, like

I'm you know, bipolar. I have this thing where I call it my five point five cents, not complete six cents, but I I I call it my five point five cents. And I felt it in my chest that I just knew, but like I was just also like taking the counsel from, you know, my investors, like you could, you know, ball the product, you know, hire more people, like hire them actually full time, you know, give people benefits, what have you. And it was that. I was looking out for the the company, which is, you know, what I was doing from

beginning. It was always about the company. It's why I didn't pay myself. It's why I put so much money in there. It's why, you know, I was able to survive during COVID and we were able to, you know, scale. Like, you know, we we we gave away the platform during the height of COVID to help employees who were getting laid off left and right. And that freemium turned into a huge

you know, up with and to paid revenue because people needed it and wanted it and and businesses couldn't live without it. And so that by me giving I I actually it wasn't a marketing campaign, it was just the right thing to do. And

Chad Sowash (12:49.24)

Right. freemium obviously in some cases does work well. How did you get to the point where they were moving more toward a loan to own kind of strategy and the type of financing that went into that? And can you talk a little bit about that?

Kristy McCann (13:07.628)

Yeah, so we had transitioned the company you know, during twenty two going into twenty twenty three, right? We were really starting to put up a scaffolding, a skill cycled brand, you know, creating this new category, getting the go to market and all that. And I had just raised another round, which, you know, was supposed to be my A round, but they kept on saying, No, like let's do a seat extension.

Chad Sowash (13:16.078)

Mm-hmm.

Kristy McCann (13:37.121)

And even though I had all all my investors were in, you know, companies doing well and then I had new investors coming in and they wanted to make it a seat extension. And I thought that that was odd. and then not only that, making it a price seat extension. I'm like, shouldn't it be priced? Like, you know what I mean, during the series A, like, you what I Like I just didn't understand what was going on. I was sending it to my attorneys, like, I don't know. It was just weird. but you know, I was more focused on the fact that I had them

Chad Sowash (13:59.757)

Mm-hmm.

Kristy McCann (14:05.302)

I have the money in the bank, like I gotta get Skills Cycle up and running, right? Like we have huge market opportunity, huge TAM to expand into all the clients that we are working with primarily in mid markets, but we also had a lot of big enterprises. so we started to make that transition hired up significantly, which was something that I was uneasy with, but was being pushed to do it. and then you know, the

market was wacky Q one of twenty twenty three, right? So we're making a transition the skill cycle. S V bank run is happening at the same time. And then, you know, the I want to say the VC reality checks start to come in. And within the last fundraise, you know, what I'm alleging in my complaint

Joel Cheesman (14:40.711)

Good times.

Chad Sowash (14:41.172)

Mm hmm. Geez.

Chad Sowash (14:47.054)

Mm.

Kristy McCann (14:55.082)

Is that they had this tranche, right? Like that was the other thing that started to be introduced. Tranche investing. I'm like, what is this? And then there's like, I'm like, are you giving me, like, you know, I mean, two and a half million dollars or are you giving me four million dollars? Cause it was like two and a half million now and like a million point five later. And there's like, no, like, you know, it's four. Like, we're just gonna start with two and a half now. And it's like, all right, Mike, is there goals attached to this? Like, you know, what is this? And right. Yeah.

Chad Sowash (15:18.892)

Right. When is it released? When is that funding released? Yeah.

Kristy McCann (15:24.078)

'Cause like I'm building my whole budget off of it. Like the board approved budget, needless to say. And it was just very and they kept on saying, like, well, that's why the language, like, there's no goals or anything attached to it. And that's why the language is very you know, like watered down. It's just like, you know, w w we have the option to put an additional one point five. I'm like, all right, well, is it an option and or is it actual? Because like I have to build a budget and a forecast based off this. And so

Chad Sowash (15:39.288)

loose.

Kristy McCann (15:51.885)

That tranche investing was sign number one. you know, well, like after the fact that they're no longer panoramic or the opportunity fund, I guess so sign number two. So long story short, you know, Q one we plateaued, which was typical, like based on our cycles. But then we started to grow in Q two of 2023, skill cycle brand getting out there, etc.

Joel Cheesman (16:00.6)

Okay.

Kristy McCann (16:17.302)

Not at the rate that we were growing previous, but this is to be expected with a complete rebrand, you know, service to a SaaS model expansion. Like in, you know, we have put that tension into the overall forecast and operational plan. and then I got a phone call to come to Georgia. I wanna say mid summer. And yeah. Yeah. Yeah, call to go to Georgia.

Joel Cheesman (16:22.501)

Mm-hmm.

Chad Sowash (16:22.638)

Mm.

Joel Cheesman (16:35.296)

No, that's never g that's never good. That's ne the call to go to Georgia is never a good sign. That's

Chad Sowash (16:35.362)

And that's where their headquarters are at, right? Yeah.

Kristy McCann (16:42.178)

So I had already been letting go of a few of the underperformers. I was getting really concerned about burn and nobody was answering my questions as to when they were going to put the tranche money in, right? That was board approved. So in my mind, I'm like, all right, great. I could go to Georgia and I could get a straight answer because I wasn't getting a straight answer. Go to Georgia. And that's when I was told that they they weren't putting in the board approved tranche and that I had to

let go of half of my team. and that that they weren't really ex that we weren't performing well and and that I was a bad CEO.

Joel Cheesman (17:14.705)

Did they say why? Did they say why?

Chad Sowash (17:21.486)

So to be able to actually set the stage to call you an underperforming and bad CEO, even though you were using the proposed dollars to be able to go toward plan, toward strategy, well, that all collapsed because you did not have that tranche per se. So was that, now,

Was that the strategy that you're saying is actually happening? It's like you have all this promised money, you hire, hire, hire, which is exactly what we hear VCs and PE do all the time. As soon as you get money, you gotta go hire a bunch of people. But in this case, you didn't receive that money. talk a little bit about that because you were in this meeting and everything's falling apart. Were you gonna stay CEO? What was gonna happen?

Kristy McCann (18:11.904)

I I was way over my skis at this point. I mean, like, you know, when when they that that tranche wasn't coming in, I think it cut our run rate down to like ba barely five months. and and so I you know, I sat in that meeting and I made it I I made it very clear. This is bullshit, right? Like, you know, let's talk about this. Like, you know what I mean? Let's talk about the stock.

Joel Cheesman (18:12.131)

Ambush.

Joel Cheesman (18:37.873)

Did you feel ambushed? You you didn't think you were gonna go down there and get crucified, right?

Kristy McCann (18:40.678)

yeah, it was me. It was me and twelve of them in a room. Me and twelve of them. yeah. And and I didn't and I sat there for eight hours in that conference room and I barely got fed on top of that. I kept on saying, I'm like, Are you bringing in lunch or something? Like, you know, can I get a water? I'll never forget going back to the airport.

Joel Cheesman (18:46.609)

You got totally sandbagged.

Chad Sowash (18:47.63)

12.

Kristy McCann (19:07.419)

And I saw Burger King and I was like, I I stuffed my face with Burger King on my flight back because I had not eaten any anything all day.

Chad Sowash (19:14.67)

Yeah, so There was also this this plan in diluting your your your equity. How did that happen if they did? Go ahead. Yeah

Kristy McCann (19:25.026)

Well, that's the whole thing. So this is where it started, right? So they they removed the the the tranche, which you know is alleged in the a complaint. And then they started to talk to me about pay to play. I'm like, what the hell is play to play? Like, what are you talking about? It's like, well, you know, we gotta pound down the valuation, but it's a good thing. And, you know, I'm like, How is my valuation going down a good thing? Like, you know what I mean? I was just like, we have grown significantly.

Chad Sowash (19:33.719)

Right.

Kristy McCann (19:53.965)

Yeah, we had we plateaued Q one. We also change trans transitioned the entire company, plus we had the you know, Silicon Valley debacle. Now you're telling me that you're removing a tranche, which is gonna, you know, kill all my growth and my run rate. I'm gonna have to go out and raise again. Meanwhile, I'm fighting the keep employees, like, you know, saying that like I'll go down to like nothing in salary, like we'll take pay cuts. Like I it like we're gonna be going into bone you know, with this. And so

Chad Sowash (20:02.306)

Yes.

Kristy McCann (20:23.158)

I I mean, look at I'm I'm a former CH RO executive. Like, you know, I I I've been in many you know, rooms for long periods of time of, you know, people trying to throw everything at me and I was I just kept on going back to the fact that like you lied. That this is false advertisement. I have no idea what a pay to play is, whatever. So I went back on the the plane back to Florida because it's all in a like ate a Burger King. I'm back on the plane the Florida

And you know, I just started emailing them this like, I we're we're not doing this. I I am not going to let go of employees that I need. and you know, we're that this is gonna kill all growth. I'm gonna figure this out, like whatever. Like, nope, you gotta, you know, you gotta lay off people, you gotta lay off people. I'm just like, look at we we have risk, right? I had a a bunch of women that, you know, had just had children. I had other women that were a few months pregnant, like I'm like

No, I'm just like that this is ton of risk. No, no, no, you gotta do it, you gotta do it. Like and then they went out and told all my investors that like that if they didn't put a check in that they were gonna be diluted and and you know, their preferred shares would go to common. Like I I I it the only thing I kept on thinking was just like, All right, just get through this and then when you get through this, we gotta get rid of them. Like I was just like

Joel Cheesman (21:46.587)

Did you did

Chad Sowash (21:46.67)

Well, help me understand how this advantages them. I mean, because they're going to make money. Yeah. Yeah. I mean, how does this advantage them?

Joel Cheesman (21:50.385)

Yeah, they're supposed to be on your team.

Kristy McCann (21:53.58)

No.

Well, they they they booted out a bunch of investors that couldn't play. They pounded down the valuation. My you know, stake of like, you know, eighty percent like went down like, you know, significantly, right? Because of the pound down because our valuation was at thirty mil and now the valuation was at eight. Right. And and I had no choice. I I didn't have time to go fundraise either and try to find new investors. Like, and so I was like forced into this.

Joel Cheesman (21:59.302)

got the company.

Chad Sowash (22:09.292)

Like single digits, right?

Chad Sowash (22:16.799)

Mm-hmm.

Kristy McCann (22:26.254)

And I just

Joel Cheesman (22:26.257)

We you had it you had attorneys, what was what was their feedback on this? I assume you went to them and said, Hey, what the

Kristy McCann (22:31.298)

Then nobody knew what was going on. Nobody everybody's just like like I remember I was talking to my attorney and there's like, I heard a pay to play is like I don't know, 10, 15 years ago. Like they're like they're they're they're not common now. Talking to my other investors, I was just like like, what is pay to play? And they're like, that doesn't really happen for a company that is, you know, being run successfully, right? Like everybody was just confused. We were all just getting steamrolled. Nobody knew which way was up.

Right. They they they just and you know, the BAP came in with this narrative that, you know, like, you know, we had to do this and bring down the valuation and then it's gonna be a pay to play and all this other stuff. And then pay to play came and guess what? They're gonna put in X amount and then X amount's gonna be in a tranche. I'm like, No. I'm like, there will be no tranches. And like, no, no, no, no, no, like we'll board approving. Like the last one was board approved. Like, no.

Chad Sowash (23:01.676)

huh.

Kristy McCann (23:29.986)

Like, you know what I mean? I they they forced through the the the the tranche component of it. And so

Chad Sowash (23:35.566)

So it was forced, but it sounded like, did you have to give them your approval for them to actually do this knowing how much of the company they already owned?

Kristy McCann (23:47.171)

I was looking at it from the fiduciary responsibility of what needs to be done for the company. I was upholding that, right? I was in a situation, the company was very successful. I have tons of customers, tons of coaches, tons of employees, you know, obligations to other investors. I mean, a and you know, the the pay to play is like it screwed investors where they got converted to common. But here's the other thing. For the investors that did play, they the they they put in money, but then like BIP never ends up putting in the money.

Chad Sowash (24:09.44)

Mm-hmm.

Kristy McCann (24:16.748)

Right. And so but they're getting the equity component of it because they continue to force me in the rounds. Like, you know, and so I I was of looking at it from that. I knew it wasn't right. There was nothing I can do. It was either the company dives, you know, w and it shouldn't be. I mean, we had just landed on the Inc. five thousand list for fastest growing companies, right? Like, talk about the irony of that. And and so it was

Chad Sowash (24:16.803)

Yeah.

Chad Sowash (24:29.526)

huh.

Joel Cheesman (24:41.329)

Yeah.

Chad Sowash (24:41.506)

Wow.

Kristy McCann (24:46.27)

Again, like I I was upholding I was doing what I needed to do to uphold the fiduciary responsibility of the organization to all my other stakeholders. And then Yeah. So it happened again. So like they put me that they withhold held that tranche. They put me in but I was already out there. I'm like, I gotta that this is not working. Like I gotta

Joel Cheesman (24:55.921)

So you're you're no longer CEO. How do we get to that point?

Kristy McCann (25:13.218)

you know, that they they need to come off the cap table. Like they are not working in the benefit of, you know, skill cycle. So I'm out there, I'm talking to other investors, which I am also alleging in the complaint that are very aware of this scheme with them and won't touch me. Blatantly told me, not not touching Yeah. Looking to buy them out. Yep. And investors like, Yeah, Chris, we love your business, but we're not touching that cap table. you know, with them. And

Chad Sowash (25:18.85)

Mm-hmm.

Chad Sowash (25:27.82)

yeah, hands off.

Joel Cheesman (25:27.943)

So you're you're looking to buy them out, just for our listeners that don't understand cap tables and all that. You're looking to get rid of Yep.

Kristy McCann (25:43.043)

They I was being told by other investors. And then, you know, because we were at this, like, you know, VIP would have its annual founder symposium event. All the other founders were talking at these events, like, how's your experience with them? Like it just seemed to be a trend. And then the biggest trend came from you know, one of my other investors had relayed to me that, hey, this playbook

Chad Sowash (25:50.67)

Mm-hmm.

Kristy McCann (26:07.81)

He's been running with this other company that I just invested in. I'm like, you you invested alongside me? He goes, No, they got rid of them. I go, how did they get rid of them? Right. And so the the this investor connected me with one of the companies that's in my complaint where he outlined everything that was happening to me, happened to him, and then how he got rid of them. But the difference between me and him was he was a three-time founder.

and had a lot of money in his pocket. and he the other investors were a lot more knowledgeable of what how to handle him. and so they basically forced him off the cap table and and he became free. And I didn't have that. Yeah.

Chad Sowash (26:34.978)

Mm.

Chad Sowash (26:45.101)

Mm-hmm.

Chad Sowash (26:51.074)

Yeah. So he had money, he had buddies with money and it was, yeah, it's a little bit different support system. Yeah, a little bit different support system.

Joel Cheesman (26:57.575)

Resources.

Kristy McCann (26:59.864)

Different support systems. So I'm looking at it. And I'm like, so I was just I went into it and was like, you know, like, give me the details, like, you know, how bad did this get? Like, tell me my future. And he goes, yeah, he accused me of fraud. I go, What? He goes, yeah, he kept on accusing me of fraud. and he goes, and I brought in auditors and like, you know, he goes, he was trying to do every possible thing. And again, this is yeah. When I I was termed without cause.

Chad Sowash (27:21.986)

Wait a minute, were you accused of fraud?

Kristy McCann (27:28.428)

Right. I was fired without cause. But then when I refused to sign the separation papers, which was all in the complaint, because the separation papers wanted me to indemnify and release all of BIP, all their subsidiaries, all this crazy stuff. I'm like, absolutely not. Because number one, I'm not idemifying releasing these people. I work for Skill Cycle. Like, even though they pretty much own Skill Cycle right now, it's a separate entity. Two, I don't have the insurance to do that. Three.

Chad Sowash (27:28.5)

Okay. huh.

Chad Sowash (27:35.03)

Mm-hmm. Yeah.

Joel Cheesman (27:44.975)

Mm.

Chad Sowash (27:54.892)

Mm.

Kristy McCann (27:57.591)

I I have a fiduciary responsibility, right? Like if if if the you can fire me, but if you're still not upholding, you know, what skill cycle, you know, could be, that that's a whole other thing. And then not only that, it's shareholder oppression, right? And so I'm refusing to sign it. So I'm getting like, you know, emails, you know, Christmas Eve time frame that if I don't sign it, that they're gonna accuse me of fraud. I'm like, by all means.

Chad Sowash (28:04.93)

Mm-hmm.

Kristy McCann (28:23.896)

There's definitely fraud. i it it's not me. Yeah.

Chad Sowash (28:25.964)

Yeah, yeah, yeah, yeah, yeah.

Joel Cheesman (28:26.215)

It's on the other side of the table.

Chad Sowash (28:29.848)

Well, okay, so let's fast forward a little bit. You've also alleged Rico, which is racketeering. And when I saw that, was like, holy shit. You usually think this is the thing that mafia does, right? Is racketeering, know, influence corruption. I mean, it's just, it's crazy. So how did Rico get involved with this whole situation?

I mean, we're talking HR tech here for God's sakes.

Kristy McCann (29:02.774)

I know. Well, you know, it it's it's always interesting. I mean, HR always has the crazy story, so it might as well fit within HR tech. so all the other companies. you know, the d this is a pattern that is happening in other companies, that, you know, I was able to document. and it's also about

Chad Sowash (29:08.809)

Chad Sowash (29:18.102)

Mm-hmm.

Kristy McCann (29:27.906)

the way that that this fund is set up, like it's it's not set up like the fact that the wealth management group is involved, like you know, they have SEC filings that shows how much assets, you know, they have and then what's really paying back and then how much they're collecting in management fees. Because like that's the thing. Like when you keep when you control these companies and you keep them underneath your portfolio, even though the companies are floundering, you're still racking up management fees. You know what mean? And and you know, you add up those management fees across the portfolio.

Chad Sowash (29:50.87)

Right.

Kristy McCann (29:56.067)

You know, that that's how you buy some fancy houses and and homes, which I'm also alleging in the complaint, right?

Chad Sowash (30:00.44)

That's what Ronstadt did with Monster. That's what Ronstadt did with Monster. Management fees. Yeah, go ahead and make that money. So go ahead, go ahead. I'm sure there's more.

Joel Cheesman (30:01.106)

Interesting.

Kristy McCann (30:08.608)

Yeah. So you're you're doing that. You're not upholding the the fish responsibility. You're putting it into a holding pattern. You're you're you're the only one who could essentially, you know, while you're collecting management fees, that can actually like from any type of sale, you know, make it money because you've gotten rid of everybody else. and so you know, it it's that that's essentially a lot of the bars for racetarium, but the biggest thing is is that it it's a playbook, it's a pattern.

Chad Sowash (30:22.882)

Mm-hmm.

Kristy McCann (30:37.326)

a loan to own you know is not is not legit for vc right i mean they do it they usually do it at a much higher level like you know for major you know hundred million dollar growth companies not early stage growth companies like me but it's it it's when you put it all together it it's predatory investing but it's a playbook and I'm I'm gonna break that playbook

Chad Sowash (30:47.854)

Mm-hmm.

Joel Cheesman (31:05.351)

Chad Chad mentioned we we have a lot of startups and people who are thinking about businesses to start up and raise money. What what kind of advice, what wisdom would you give them to make sure they don't end up like you?

Kristy McCann (31:05.666)

Very clear.

Kristy McCann (31:20.78)

Yeah, I mean I think the biggest thing is to do your recon. you know, I I should have known when a lot of people didn't know about them that there was something to know about, right? It's just like you know, that that especially with the information being Yeah.

Joel Cheesman (31:33.447)

And you mentioned the gut feeling. I think a lot of startup a lot of founders like listen to your gut, which you didn't do and you probably regret not doing.

Kristy McCann (31:40.301)

Yeah. Yeah. No. Kept on going back to that word opportunity. Finally a fun for me, right? and so I think there's that. it's also really not just talking to the other portfolio companies that you know, if you're gonna talk to, you know, take VC money, make sure you talk to the other portfolio companies, but make sure talk to the other investors who do business with them. you know, 'cause I mean I like the best was me and you know, I

having conversations with outside investors. And I'm like, you guys knew about this? Like, why aren't you saying anything? Like they're just like, well, we really don't know what to do because like we're a VC. I'm just like, this is bullshit, guys. I'm like, you blatantly are telling me that you knew about this and and and that you love my business, but you hate my cap table because of this. I'm like, okay, that's that's ridiculous. And so they know, I mean, they're an incestuous little crowd. but I mean th there's good ones out there and then there's

Chad Sowash (32:16.034)

Yeah.

Chad Sowash (32:21.742)

Yeah

Kristy McCann (32:40.44)

you know, not so good ones. You you gotta do that. And I think with na right now with AI, right? Like y you could do tons more recon than you possibly could. But if any if anyone here is pay to play, tranche investing, like all this other crap, no. Nope. I I wouldn't go near it.

Chad Sowash (32:56.248)

Well, I think this the story hopefully will end in a more positive note because one thing it sounds like most companies get bullied into submission and then they're just gone, right? They sign the paper and they're done and that's fine. But you didn't do that. So therefore there's going to be a shit ton of discovery that's going to happen. And discovery is not what these guys want anybody to be able to dig into their shit. So.

Kristy McCann (33:16.614)

god yeah.

Chad Sowash (33:23.488)

So that's something that you still have to go through. When is that gonna start? I mean, we'll obviously be following.

Kristy McCann (33:30.624)

Yeah, no. if I had a take a guest that so they were just served, and I think they have couple of weeks, so like mid-late summer to, you know, what they'll probably try to do is dismiss claims. You know, that's typical. and then go from there. And so if we if claims are you know go through everything's fine and dandy, we'll be going into

Chad Sowash (33:42.03)

Mm.

Kristy McCann (33:57.081)

Discovery probably late twenty twenty six, early twenty twenty seven. and yeah, it it would be interesting. I think I think I I know I have a strong case. I'm former HR. I know how to collect the receipts. It it's a fifty page public complaint that every founder, CEO, and C HRO, and even BC should read.

Chad Sowash (34:10.413)

Yeah.

Kristy McCann (34:21.922)

Because it's a it's an education, you know. My my company was an education company. I really wouldn't call it one now, but I I'm still providing the education that I can to make sure that this happen never happens to anybody else again.

Chad Sowash (34:33.838)

Yeah.

Joel Cheesman (34:34.705)

Talk about the the personal side of this. What has it meant to your mental health? What does it meant to your relationships? I assume we we have a hard time understanding how hard it is on your personal life.

Kristy McCann (34:47.02)

Yeah, I mean, I'm one of those to begin with where I I have a high tolerance for pain, probably because I I'm a scrappy kid from Scramp Pennsylvania. and I'm bipolar and I've always been different. I to have everything ripped away from you of s you know, I there is a hole, you know, there in me. a you know

A lot of my team walked out after it happened, but there's still part of my team that's left. and I I I could only understand what they're some of them are going through. you know, it what's happening to me is a microcosm of what's happening on a macro level in this country. Where everybody thinks they can lie, cheat, steal, deny, divide, deflect, like and that playbook is over. Bully. And that and and

Chad Sowash (35:41.122)

Bully. Yeah. Yeah.

Kristy McCann (35:44.67)

And the thing that gets me up every single day is like, all right, you want me to be a mascot, you know, to do the right thing for not only for, you know, my people, but for for, you know, this country as a whole, and and to use my voice and to make the and to help other people so they never fall victim to this because I mean so many other companies fell victim to this and and they didn't have the money, the means, the mechanisms, right? And I got the money, the means and the mechanisms, but I also got a lot of mojo. You do not

fuck with an HR person. I have been through the ringer on everything. and so like I have seen stupid is and stupid does for my twenty year career. You wanna fuck with me? Fine. Let's let's bring it out into a courtroom. He will not take me down. Yeah, discovery. Let's go.

Chad Sowash (36:18.36)

Ha ha ha ha!

Chad Sowash (36:25.827)

Yeah.

Chad Sowash (36:31.276)

Discovery, baby, we're talking discovery. We're talking discovery. And that's Kristy McCann, everybody. Kristy, a cautionary, cautionary tale. I appreciate you coming on the show and talking this through. If there's anybody out there that obviously would like to connect with you for any different reason, how would they do that?

Kristy McCann (36:54.828)

Yes, I'm always on LinkedIn and then I have my new venture, one two seven ventures, where you can go to the website where I'm helping out other HR tech companies, make sure that they realize their dreams and making sure that they're good companies, and not the the crap that I had to buy when I I was an HR that I obviously disliked.

Joel Cheesman (37:15.611)

Don't fuck with the HR department. That is Christie, everybody. We appreciate you. Keep us abreast of what's going on with the case and Chad. That's another one in the can. We out.

Chad Sowash (37:29.72)

We out.