- Cyrus Massoumi said in a lawsuit filed last month that a group of executives and directors misled him about the purpose of a 2015 board meeting, sprung a trap, and pushed him out.
- The targets of his lawsuit fired back, saying the company's revenue had plateaued under Massoumi's leadership and it was losing sales staff faster than it could hire them.
- The company said its board's move against Massoumi had widespread support among employees.
- They also alleged Massoumi used confidential company information to file a lawsuit in New York because it would be thrown out in Delaware, where it belongs.
- A spokesman for Massoumi said Zocdoc was inventing a "new mythology" around its business and called its legal arguments "flimsy."
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Zocdoc and three of its executives and directors have fired back at a lawsuit by co-founder and former CEO Cyrus Massoumi that accused them of forcing him out of the company and running it into the ground, saying he was mismanaging the business and employees wanted him out.
In a Tuesday court filing and a Wednesday blog post, the company and three employees that were sued said Massoumi was fired for "repeated unprofessional conduct and extremely poor business judgment." The company said revenue growth slowed to 1% monthly by October 2015, just before Massoumi was fired, and business and cultural problems were emerging.
Business Insider reported in 2015 that former employees described a "frat house" atmosphere at Zocdoc, and the company linked to that story in its blog post on Wednesday. The company had attained unicorn status when it raised money at a $1 billion-plus valuation, which was its most recent funding round.
Massoumi has said the company was unable to raise further equity funding and had to borrow money instead. The company said on Wednesday that its revenue and EBITDA profitability metrics in recent years meant it was no longer reliant on outside funding to expand.
Massoumi said in a lawsuit filed last month that his cofounders Nikhil "Nick" Ganju and Oliver Kharraz and then-CFO Netta Samroengraja misled him about the agenda of a 2015 board meeting and removed him before he could exercise stock options that would have given him control of the company. He said they were underperformers and that searches for their replacements had been underway.
But the defendants and Zocdoc said the company was in a tailspin when Massoumi was removed. Problems with the $3,000 flat-fee subscription model were becoming evident, the company said, with some doctors considering it too expensive and others deriving much more value out of it than they were paying for.
"A key strategic solution at the time was to hire more salespeople to sign up more providers in an effort to outpace provider churn," the blog post said. "This proved unsuccessful because we lost salespeople faster than we hired them: by October 2015, on an annualized basis, the sales team was on pace to hire 144 people and lose 232 people."
The company said in its blog post that it pivoted to a pay-per-booking model in 2017 and hasn't looked back. It said it became EBITDA profitable in September 2019 and that revenue was up 36% year-over-year in the first two months of 2020, before the coronavirus pandemic hit. The company said it pivoted to providing telehealth booking services and hasn't needed to raise new money.
The company also said in its legal papers on Tuesday that Massoumi's lawsuit had no basis. They said he abused access to confidential information that he had after his removal, as a major shareholder in the company, and sued in New York because he knew that his case would have been "dead on arrival" in Delaware, where he should have filed.
In his lawsuit, in which Zocdoc is technically not named as a defendant, Massoumi accused Ganju, Kharraz, and Samroengraja of fraud, saying they took him by surprise with a series of votes to give themselves more voting power, remove Massoumi and amend the company's bylaws to make it impossible for him to retake control.
Massoumi also said the lawsuit belonged in New York because everyone involved lived there and because relevant events took place there. The defendants said in their Tuesday court filing that the company's bylaws and a nondisclosure agreement Massoumi signed in 2018 require the parties to sue in Delaware.
A spokesman for Massoumi said Zocdoc was inventing a "new mythology" around its business and called its legal arguments "flimsy." "This case … is about the fraud that was committed in the removal of a CEO," the spokesman said in an email. "They can try to distract from that on their own blog, but it won't stand up in court."
Both sides have high-powered law firms working for them. Massoumi is represented by Williams & Connolly, a litigation firm based in Washington that has defended presidents and billion-dollar corporations, and the New York lawyer Jonathan Lupkin.
The defendants have hired Orrick Herrington & Sutcliffe, a firm with West Coast roots that has represented tech companies like Pinterest and Microsoft. Papers they filed on Tuesday showed that Massoumi had been working with Susman Godfrey, an elite litigation firm based in Texas.
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