Liquidity Fund Co-Founder Responds to OpenWeb Collapse
Translated & summarized from Globes by baba
Credit fund Liquidity is embroiled in a dispute with its former portfolio company, OpenWeb, following the latter's collapse. Liquidity, which uses an algorithm to assess risk and provide debt financing, claims OpenWeb's investors failed to provide promised capital, leading to aggressive debt collection. OpenWeb alleges Liquidity's actions caused its insolvency, while Liquidity accuses investors of seeking a scapegoat and withholding crucial information, including the loss of a major client. The case highlights a clash between lenders and investors over responsibility for a startup's failure.
The story in 6 lines · by baba
- Liquidity fund is in a dispute with collapsed OpenWeb over alleged failure to repay debt.
- Liquidity claims OpenWeb investors failed to inject promised capital, necessitating debt collection.
- OpenWeb alleges Liquidity's aggressive tactics pushed it into insolvency.
- Liquidity accuses OpenWeb investors of seeking a scapegoat and withholding key information.
- OpenWeb's value plummeted from $1.3 billion to under $100 million before its collapse.
- Liquidity uses an algorithm to predict company growth and assess risk for debt financing.
Liquidity, a credit fund co-founded by Ron Daniel and Oron Maimon, is facing scrutiny following the collapse of its portfolio company, OpenWeb. Liquidity, which operates as a tech startup analyzing risk for revenue-generating tech companies, raised $3.3 billion to provide debt financing. Unlike traditional credit funds that focus on past performance and collateral, Liquidity uses an algorithm to predict future cash flow with over 94% accuracy, aiming to offer cheaper debt than equity financing.
Daniel claims Liquidity has maintained a zero loss ratio until the OpenWeb situation. OpenWeb, once valued at $1.3 billion, is now in receivership with debts of 177 million shekels, including approximately $20 million owed to Mars, a Singaporean debt fund owned by Liquidity. OpenWeb's investors, Insight Partners and Georgian, accuse Liquidity of aggressive debt collection, while Liquidity alleges that OpenWeb's investors failed to inject crucial capital and withheld critical information.
OpenWeb's financial situation deteriorated rapidly, with projected revenues plummeting and a shift from profit to loss. OpenWeb's attorneys argue that Liquidity's actions, including aggressive collection tactics, pushed the company into insolvency and thwarted recovery efforts. Daniel, however, asserts that Liquidity raised red flags about OpenWeb's performance over a year prior and that investors, including Insight Partners' founder Jeff Horing, repeatedly promised capital injections that never materialized. He states Liquidity's actions were a necessary response to these broken promises and that the company has already recovered half the debt with sufficient collateral for the remainder.
Daniel refutes claims of aggressive collection, stating Liquidity acted legally and that OpenWeb initiated the insolvency proceedings. He believes OpenWeb's investors are seeking a scapegoat for the company's failure, particularly Insight Partners, which he claims had already written off the company. Daniel also highlights that OpenWeb lost its largest client, Microsoft, and concealed this information, contributing to the financial downturn. He maintains that while the company could have been saved, it was the responsibility of the shareholders, not the lender, to provide the necessary funds.
Daniel, who previously lost $30 million in his own failed startup, founded Liquidity to address liquidity crises in the tech sector. The fund's investors include Meitav, MUFG Bank, Spark Capital, and the Abu Dhabi royal family. Liquidity operates globally with offices in Tel Aviv, Abu Dhabi, Singapore, London, New York, and Miami.