Cosgrave’s Web Summit sues former partners over ‘covert’ venture fund

Published date30 September 2021
Publication titleIrish Times (Dublin, Ireland)
Among the detailed claims are that fund managers David Kelly and Patrick Murphy went behind Mr Cosgrave's back to woo investors from an initial fund all three had been partners in.

The claims, according to court papers filed in San Franciso, "arise from a plan hatched by Murphy and Kelly to deceive Web Summit and Mr Cosgrave, breach an agreement with them, and secretly establish a follow-on fund that improperly usurped Web Summit's brand, resources and assets".

Sources indicate the litigation has arisen from a falling out between Mr Kelly and Mr Cosgrave and from a failure to reach a consensus on how the new fund would be structured.

Mr Kelly resigned as a board member and employee of the Web Summit earlier this year.

The company's action - alleging breach of contract, fraudulent misrepresentation, unjust enrichment, violations of unfair competition law and trade libel among a total of nine allegations - is seeking compensation by way of a jury trial.

A separate but related legal action has been filed against Mr Kelly in the High Court in Dublin.

A spokesman for Mr Kelly said it was a "meritless case. We will strongly defend our position".

'Unique position' It is understood Mr Kelly and Mr Murphy will argue that the second investment fund was only established independently of Mr Cosgrave's participation after the three could not agree on terms.

The US case is filed under the plaintiff name Manders Terrace, the operator of Web Summit.

The papers describe how in 2018, in a bid to leverage the success of its global conferences, it founded the initial venture capital Amaranthine Fund I entity with the defendants. "Web Summit was in a unique position to establish such a fund given its broad and well-established relationships with investors, founders, portfolio companies and other prominent figures in the technology industry," the documents say.

Given the structure of such funds, the defendants are likely to argue that the fund was never a Web Summit fund per se.

However, the papers set out that from the fund's inception the Web Summit's capital investment, brand, connections and intellectual property would play a central role.

It notes an initial capital commitment of $2 million (€1.7 million) and says it was granted 30 per cent share of profits.

"Web Summit played a key role in attracting investors...

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