An update on our Beachmint story

By Sarah Lacy , written on July 3, 2013

From The News Desk

Late last night, we reported that we'd learned Beachmint's founders had been ousted from the company and it was returning $20 million in capital to investors. This morning the company has categorically denied that any of that is true.

So where does that leave the veracity of our story? We're still trying to conclusively figure that out, but I wanted to be upfront about our process in the meantime.

Regular readers know that we take our jobs seriously here. We are not a site that reports single-source rumors, and we routinely hear dozens of news tips a day we never write up because we can't get another source on the deal. We realize what we report has an impact, and we don't take that responsibility lightly. When we report something, we feel confident about it.

We obviously can't disclose any details on who our sources are. But I can tell you that Michael and I independently heard the details that the founders had been asked to leave and that $20 million was being returned from six well-placed sources in the LA and Valley ecosystems last night. There is no evidence that those six people heard it from the same root source, and it was notable that without leading the sources, each one confirmed the exact same details, down to the amount of money. In fifteen years covering startups I have never had six well-placed sources individually confirm the exact details of story that did not turn out to be true. Typically you hear variations on the news even when a tip is true. Such is the nature of leaks and gossip.

Beyond those details, we have heard for 12 months that Beachmint has been struggling, that many of its verticals have not gotten traction, and that the company has struggled to raise money from dozens of sources in LA and Silicon Valley. In fact, I'm not aware of a single source outside the founders who has denied that the company has been struggling.

The only information in our story that we heard from a single source was that the two had been sighted at 41Ocean eating lunch yesterday with what appeared to be several of the company's investors.

What makes this particular case a challenge for me is that Diego Berdakin has a history of not being completely straight with us and blasting our reporting without presenting any evidence to the contrary. So while he would certainly know if he's still at the company or not, the fact that he's saying the story is "100% false" is difficult for us to reconcile with extensive reporting on the health of the company and Berdakin's track record as a source. (Note to entrepreneurs: This is why being straight with reporters is generally a good policy. It means you get the benefit of the doubt in cases like these.)

The chatter on social media that Michael is somehow out to get the company is absurd. It's a lie that Berdakin has been aggressively spreading to other blogs for the better part of a year. In my view, Michael's work covering the LA ecosystem speaks for itself. He's tough but fair, almost always right, and a huge advocate for the scene. The claim is so absurd that I wouldn't normally dignify it with a response. But Michael wanted to address it explicitly. From Michael:

There has been some speculation and chatter online today that the post in question was a result of a personal dislike that I have for Diego Berdakin and/or a desire to see Beachmint fail. This couldn't be further from the truth. Everything I publish here on PandoDaily is in pursuit of the truth and in adding value to the startup ecosystem through reporting and analysis. Like Sarah, I have questions about Berdakin's credibility, stemming from past dealings, but I wish neither him nor his company any ill will. In fact, as an avid believer in the LA startup ecosystem, I'd prefer to see the company succeed and deliver on its early promise. But in the end, none of this is about what we want to be true. It is about the facts. Ultimately, I expect the facts to speak for themselves.
We've spent most of the morning circling back with sources and talking to even more sources and, well, things keep getting stranger. Multiple highly placed sources seem to be as confused as we are. If it's "100% false" there's an almost unbelievable conspiracy going on in the Los Angeles ecosystem that hoodwinked many senior people close to Beachmint or with direct knowledge of the company's inner-workings.

At this point, I can say with certainty that our reporting was not "100% false," but -- as with most breaking news-- it appears not to be 100% accurate. We apologize for any facts we got wrong. Specifically, it seems that Berdakin and Berman are still employed at Beachmint and that no capital has been returned, yet. This could obviously change, and we'll continue to investigate to find out what the truth is and why so many well placed people close to the company believed with certainty last night that the founders to be ousted and $20 million in capital was getting returned.

I have seen instances where there were disputes over reports of a founder ousting among sources. In some of these cases, the founders dispute the news by claiming they quit voluntarily or their role was just changing. In others they were given a several month "or else" grace period to turn things around and managed to hang on to their jobs. In a few cases, they hadn't been told yet. It's possible, as in these cases, the truth is somewhere in the middle with Beachmint.

Ultimately, all we have as a site is trust with our readers. You can take my word for how solid our reporting was, or you can take Berdakin's word that our story is "100% false." Time will prove one of us right.