Shad Khan, Jaguars owner, ends association with One Spark, calls financial ties

[KenFSU]

From the Times-Union:

Shad Khan blasts One-Spark related group KYN: Claims only about 12% of his money was helping startups

"Mr. Khan's companies wrote checks for over $1.1 million to KYN, more than fulfilling Mr. Khan's commitments," Woodcock said in an email sent to the Times-Union late Wednesday night. "KYN's financial records reveal that KYN distributed less than 12 percent of Mr. Khan's companies' cash investments to the startup companies and entrepreneurs that Mr. Khan intended to inspire and assist."

Beyond the critique of the use of funds, Woodcock said that KYN administrators and associates were enriching themselves with Khan's money.

"KYN paid its top employees and advisors an amount many times greater than it distributed to Jacksonville startups. KYN offered no realistic plan to address these issues, and had developed no other funding source. The rational conclusion was that further investment in KYN was not sustainable," Woodcock said.

Full (paid) story at:
http://members.jacksonville.com/news/metro/2014-10-09/story/shad-khan-blasts-one-spark-related-group-claims-only-about-12-his-money

[CityLife]

I'm not anti-One Spark either, just want to ensure they aren't paying exorbitant salaries, living it up on expense accounts, and financing outside projects. My request has been put in for all 3 years and they are on notice that I will be contacting the IRS if they don't comply. I'll be sure to post when (or if) I get them.

Oh and everyone check out Chris's blog post. Good stuff.

I can assure you, One Spark is paying exorbitant salaries. Over $100K/year to certain "executives" who did...little, beyond promoting his/her own brilliance. And the rest of the folks there were at around $70K-- all this for an unproven event that hadn't even been staged yet.

I've got the numbers and will be sharing soon.

[GoldenEst82]

I wish KYN wasn't the only accelerator in town.

It's unique for what it does, but are there not other kinds of "accelerators" in Jax? I've read about iStart and The Factory. Beaver Street Enterprise Center though that's a lot less hi-tech. I believe there was another one primarily for coding. Not to mention some incubators as well.

TIL!
However, I still stand by my lamentations over the "closed" information systems in Jax.

I have really tried to insert myself into both the art community and the startup culture, (as much as my family life and financial circumstances allow) and it is NOT easy to "connect" in this town.

That the last post quoting Khan confirmed KYN's demise was due to exactly what I suspected
.
9 of 10 startups fail- WHY would you pay yourself such a salary (or any salary, really) when you have yet to debut a business that would warrant such congratulations? You have to kiss a lot of frogs in the startup world, and until you find a prince, the money should be being used to find more frogs to kiss, and to kiss the frogs you got.
Then again, it never ceases to amaze me how poor a financial steward someone can be, when the money is not theirs. I just hope it hasn't soured other big investors on taking a chance on folks in Jax.

[RattlerGator]

Strong skepticism is an asset in public life, RattlerGator.  It keeps you from making unfounded accusations.

Agreed. Misplaced skepticism, however, is not -- especially when the misplaced skepticism is based on an apparent presumption of questionable intentions. You were clearly guilty of the latter, in my opinion.

In the case of the festival itself, there was no foundation for the claims.

I disagree. Markl clearly zeroed in on crowdfunding and simply used the 100% crowdfunding figure to speak to both the participants and the organizers, in something of an effort to deliver a word to the wise to both groups. You didn't seem to grasp that at the time and I'm not sure you get it now.

And in fairness, (and IM sure that Chris Markl would agree) the original criticism was that enough money wasn't being raised that could 100% fund entrepreneurial startups. 

As indicated above, that's not the way I read it. A more charitable (or simply neutral) presumption seemed to be in order. I never like to presume bad intentions when I'm ignorant (or confused) regarding where someone is coming from -- but I know I'm guilty of doing so at times, even though I know it isn't the best approach. Still, we're all human.

I can tell you that the spokesman for ONE Spark has stopped answering any questions about KYN, and is directing people to ask Elton himself personally.  Cant be a good sign.

On that we absolutely agree. I don't mean to come off wrong on this thread or overly critical of you Stephen (I genuinely appreciate this site and what you're doing), just saying the tone from you in the original thread surprised me.

[Steve]

If the 12% number turns out to be true, then that is staggeringly low (not sure that's a word). Generally for investment organizations , you want that number closer to flipped. Also interesting that a month ago, Stache's chief investment officer "left"-no reason was given, and Rummel states that Kyn and the CIO worked very closely. This might (begin speculation) have been a case where Khan did a review of Stache, realized the money had no return, got rid of the CIO, had someone dig in and came up with these numbers, then Khan flipped his lid and ended the relationship.

What could also be the case is that Rivas is realizing that running a festival and running an investment organization are extremely different things. Perhaps he's good at the festival and not the investment thing. (End speculation)

[ProjectMaximus]

I wish KYN wasn't the only accelerator in town.

It's unique for what it does, but are there not other kinds of "accelerators" in Jax? I've read about iStart and The Factory. Beaver Street Enterprise Center though that's a lot less hi-tech. I believe there was another one primarily for coding. Not to mention some incubators as well.

TIL!
However, I still stand by my lamentations over the "closed" information systems in Jax.

I have really tried to insert myself into both the art community and the startup culture, (as much as my family life and financial circumstances allow) and it is NOT easy to "connect" in this town.

That the last post quoting Khan confirmed KYN's demise was due to exactly what I suspected
.
9 of 10 startups fail- WHY would you pay yourself such a salary (or any salary, really) when you have yet to debut a business that would warrant such congratulations? You have to kiss a lot of frogs in the startup world, and until you find a prince, the money should be being used to find more frogs to kiss, and to kiss the frogs you got.
Then again, it never ceases to amaze me how poor a financial steward someone can be, when the money is not theirs. I just hope it hasn't soured other big investors on taking a chance on folks in Jax.

Yeah, I agree with you on all accounts but just wanted to offer some hope. No doubt Kyn was the biggest and most visible, attracting applicants from all over the country, but hopefully the momentum in the local startup community is not all lost.

[ProjectMaximus]

If the 12% number turns out to be true, then that is staggeringly low (not sure that's a word). Generally for investment organizations , you want that number closer to flipped. Also interesting that a month ago, Stache's chief investment officer "left"-no reason was given, and Rummel states that Kyn and the CIO worked very closely. This might (begin speculation) have been a case where Khan did a review of Stache, realized the money had no return, got rid of the CIO, had someone dig in and came up with these numbers, then Khan flipped his lid and ended the relationship.

Thing is...to me essentially as an outsider, I knew the amount of money they were investing into the startups. It was very clear in the application process. I'd imagine this was very clear to Stache. So it shouldnt have taken them so long to realize and be 'outraged.' I just had no idea their investment of 1 million had evaporated due to overhead costs. But there is merit to the idea that for this type of venture, such capital costs are needed in order to achieve the long term returns that were sought. If the business plan shared with Stache was not clear in this respect then I can understand their reaction, but we'll have to wait til the smoke clears to determine if that was the case.

[Steve]

That could be the case. If it's 12% the first year, 40% the second, 60% the third, etc, that's one thing.

[chrismarkl]

I'm not anti-One Spark either, just want to ensure they aren't paying exorbitant salaries, living it up on expense accounts, and financing outside projects. My request has been put in for all 3 years and they are on notice that I will be contacting the IRS if they don't comply. I'll be sure to post when (or if) I get them.

Oh and everyone check out Chris's blog post. Good stuff.

I can assure you, One Spark is paying exorbitant salaries. Over $100K/year to certain "executives" who did...little, beyond promoting his/her own brilliance. And the rest of the folks there were at around $70K-- all this for an unproven event that hadn't even been staged yet.

I've got the numbers and will be sharing soon.

Woah awesome!  Can't wait to see them! 

[tufsu1]

yes..along with One Spark and CoWork Jax

Why would Co-Work Jax move from where they are now? A block away in the nice digs above Perdue office interiors. Maybe they need more room?

Yes...that is the case...they need more room...in fact, they are looking to expand to other parts of the community, such as the beach.

[Steve]

In related news...the PR folks at One Spark are on the offensive today. Just got my third email about the Jacksonville festival in 2015, and they updated their FB cover photo with the Jacksonville dates. Looks like they want to make sure that people know that One Spark is still a go

[ProjectMaximus]

Looks like the confusion may be blamed on that recently departed CEO of Stache. He approved all of the KYN expenses and my guess is that Khan didn't fully grasp what was happening and just trusted his longtime advisor. Giving the benefit of the doubt to KYN, this miscommunication must suck for all involved...especially the two businesses going through the accelerator right now.

http://jaxdailyrecord.com/showstory.php?Story_id=544054

[Spitfire]

However had we continued on looking up and proving the allegations, then the KYN situation would have probably come to light, as it eventually has.

I was actually one of the first critics of how the money was distributed in the first year.  Along with Al Letson.

And in fairness, (and IM sure that Chris Markl would agree) the original criticism was that enough money wasn't being raised that could 100% fund entrepreneurial startups.  We now know that several millions were raised, but that it apparently didn't make it to many startups (and it wasn't exactly 'crowd funded).

Elton doesn't deal with criticism well, Im sure that he will have his own response to the questions soon enough.

I can tell you that the spokesman for ONE Spark has stopped answering any questions about KYN, and is directing people to ask Elton himself personally.  Cant be a good sign.

The reason why One Spark would stop giving comment is because KYN and One Spark are two separate entities. Other than being the venue that fosters Creators, One Spark has nothing to do with what goes on at KYN and vice versa. The same goes for the difference between One Spark's crowdfund and the potential capital by Stache Investments and other private venture capital groups.

I think it is important to highlight the difference between the crowdfund and the potential investors for Creators. The crowdfund is what Creators are trying to garner votes for during the festival and it is raised by efforts at One Spark, Inc (RocketHub crowdfunding campaign, sponsorships, etc). As an addition to the crowdfund, Stache Investments (as well as other private venture capital firms) was supposed to go around and select Creators that they felt were worthy of investment. Anyone can do this, not just Stache Investments or the potential VC firms. If you love a Creator's idea, you could be that angel investor that gets them off the ground. In the case of Stache Investments, it would eventually ensure a spot at KYN to make that startup viable. These investments were a pledge to possibly invest in startups. It was never a guarantee and never given to One Spark as part of the crowdfund.

Here's the press release from January 30th of this year about the $3.25 million in potential investment: https://www.beonespark.com/jacksonville/blog/press-release-one-spark-grows-to-3-25-million-in-private-investment-opportunities-for-creators

Several millions were not raised for One Spark, Inc, but were potential investments for Creators from venture capital firms that would lead to those Creators enrolling at KYN. It would not factor into Mr. Markl's research of the spread of the crowdfund. 

[dukes_forge]

Rivas responds:
http://www.bizjournals.com/jacksonville/news/2014/10/09/exclusiverivas-pushes-back-against-allegations-of.html?ana=fbk

[ProjectMaximus]

http://www.bizjournals.com/jacksonville/news/2014/10/08/with-kyn-shuttered-whats-next-for-jacksonvilles.html?page=2

"After every shutdown of an organization or startup that fails, there are people involved in it who branch out and launch their own things; it's the evolution of a startup community and we [Jacksonville] are still in our infancy," said Vaughan, whose Jacksonville software engineering solutions company often works with emerging businesses. "I hope people don't see this as a negative, or that it divides the community."
Bill Prescott, a principle with the Heritage Capital Group, pointed to other business accelerators similar to Kyn that continue to thrive in Jacksonville, such as Healthbox and Ignite.
"I don't think this will stop the momentum that's been created around this city as an innovation hub," said Prescott.

I forgot about the Healthbox accelerator. I believe Florida Blue has put a lot of money into that. As for Ignite, that's really an incubator, owned by Adecco.