Scott Hassan speaks with a colleague on a Beam robot.
Silicon Valley startup Suitable Technologies filed for bankruptcy this week, declaring that its primary product — a video-conferencing robot that looks like an iPad on a wheels — failed to catch on, leading to tens of millions of dollars in losses.
Suitable’s demise isn’t a typical story of a struggling hardware startup: Its bankruptcy is the latest development in a dramatic legal saga between its founder, Scott Hassan, and his wife, Allison Huynh, who are locked in an on-going, nearly five-year divorce proceeding.
Hassan has a storied history in Silicon Valley. He’s credited with writing part of Google’s original code and investing in the company less than two weeks after it incorporated. He went on to sell an email startup to Yahoo for about $432 million in stock in 2002, before founding the robotics pioneer Willow Garage in 2006, which eventually spun off Suitable, where Hassan was founder and CEO. Huynh is an entrepreneur as well: She founded a gaming company called MyDream Interactive and worked with Hassan on an early 2012 investment in augmented reality company Magic Leap.
After being married for nearly 15 years, the couple’s relationship fell apart and they began divorce proceedings in 2015. Meanwhile, the robotics startup floundered. Though Edward Snowden, Steph Curry, President Barack Obama, and others have used Suitable’s Beam product to talk to someone remotely, the company only sold or leased about 7,000 units and was never profitable, with operating losses totalling more than $50 million between 2013 and 2018, according to the bankruptcy declaration.
Suitable’s legal entanglements began late last year. In November, Huynh, as a shareholder in Suitable, sued Hassan over an alleged breach of fiduciary duty. The suit claimed that Hassan agreed to sell Suitable’s assets to Denmark-based Blue Ocean at an “indefensible” low price of $400,000 in order to claim a tax loss. The suit alleged that Suitable’s assets were worth in the “tens, if not hundreds, of millions of dollars,” and aimed to stop the sale. Hassan denied the allegations — the Blue Ocean deal was the best available, his team claimed, particularly because it would continue fulfilling Suitable’s obligations to its customers — and is also disputing that Huynh is a shareholder through the California divorce proceedings.
However, the deal with Blue Ocean failed to close, and Hassan gave up control of the company to a chief restructuring officer, who would “lead a process to maximize the value of all the company’s assets.” Then this week, Suitable filed for bankruptcy in Delaware, with its declaration estimating its assets at as $50 million with liabilities of as much as $100 million.
The filing is “unusual,” according to Adam Stein-Sapir, managing partner at Pioneer Funding Group, which specializes in bankruptcy cases. Normally, a third party like a bank or a venture capital fund is involved, but in this case, Hassan is both the creditor and the debtor: He poured more than $90 million into the startup through various investment vehicles and was Suitable’s sole source of funding. The bankruptcy filing allows Suitable’s assets to be sold free of all legal issues, Stein-Sapir says, in a process that is “beyond reproach,” since it’s supervised by the court.
“The dispute with the soon-to-be-ex-wife is not something that your typical buyer is going to want to step into, but with bankruptcy it’s a lot cleaner and easier,” he said.
A lawyer for Huynh called the timing of the filing “highly suspect.”
“Why now? Nobody was pressing the company to pay any bills, so there was no immediate cause to do it,” said Pierce O’Donnell, representing Huynh.
Hassan’s legal representative said, on the contrary, that the failing of the Blue Ocean deal left the company little choice.
The timing is not suspicious; it was inevitable,” said Brandon Blevans, a lawyer representing Hassan, referring to the dissolution of the Blue Ocean deal.
In order for Huynh to continue with her legal case from the fall, she would need to go to bankruptcy court to get a motion to lift the company’s protection against her legal actions, says O’Donnell, who hints that that may be in the cards. “We’ll do what we have to do,” he said.