Google’s billionaire CEO Eric Schmidt has taught a class on entrepreneurship and venture capital at Stanford University, but one might wonder whether he did his own due diligence when it comes to TomorrowVentures, a Palo Alto-based venture firm that is regularly cited as Schmidt’s personal investment vehicle.
Indeed, a simple Google search suggests that TomorrowVentures’ managing partner, 38-year-old Court Coursey, whose bio cites “numerous successful companies,” is more controversial than he might seem at first blush. Not only does his background also include numerous failed startups but at least two lawsuits, including against pop star Michael Jackson.
Whether old news or highly relevant, the first lawsuit dates back to 1999, when WebMD sued Coursey after purchasing his then year-old company, Certifiedemail, which enabled users to send, track and verify secure emails. WebMD purchased the company in December 1998 for 50,000 shares of common stock — a deal valued at just $1 million. But six months after the acquisition, the company sued Coursey, charging that he had provided WebMD “false and fraudulent” financial information that led to its purchase.
The lawsuit also stated that Coursey, who’d agreed to work for WebMD in business development for $100,000 a year, resigned two months after Certifiedemail was sold. According to the suit, Coursey claimed “intolerable and oppressive working conditions.” Meanwhile, according to WebMD, Coursey “did little more than travel on first class airline tickets and incur business expenses for which he claimed reimbursement.”
Coursey, through TomorrowVentures, declined to be interviewed, but a source with direct knowledge of the lawsuit says that it was a “contractual dispute,” litigation of which lasted less than two months and “to everyone’s mutual benefit.”
Yet more trouble followed when Coursey launched a holding company with friend Derek Rundell, called Rundell, Coursey & Company.
The pair launched several companies, including a “virtual” production studio called WebEI and a site called HollywoodTicket.com that aimed to “put fans into show business” by allowing them to vote on script concepts and actors, enter contests, and more.
Both ventures were short-lived, but notably, HollywoodTicket.com attracted the hard-won involvement of Michael Jackson, who Coursey and Rundell reportedly wooed at his L.A. ranch and who ultimately gave them $2 million for the site. Citing a “source who was involved with Rundell and Coursey in another failed venture,” a New York Post article from September 2001 quotes the insider, who told the paper: “Those two were spending a lot of time with Michael at Neverland. They were very empowered by knowing him.”
Trading on Jackson’s name didn’t save HollywoodTicket.com, which was out of business less than a year after it had launched. Still, Rundell and Coursey managed to sign a deal with Jackson in May 2001 to provide him financial “advice, consultation, and assistance” over a three-year period. The agreement called for the pair to be paid $60,000 a month. It also stipulated that Jackson had just 60 days to back out of the arrangement, which had been made retroactive to April 2001.
When Jackson fired them roughly two months later, on July 3, 2001, they filed a $25 million lawsuit against him.
Asked about that suit earlier today, a source familiar with the dealings says that “the litigation lasted less than several months, and [Coursey and Rundell] got rid of a lot of hangers-on in Michael’s life and continued to have communications with him” after their lawsuit was settled.
“They fronted a number of [Jackson’s] expenses and had a number of contractual arrangements with him,” added this person, who said that though “‘friends’ is too strong a word” for Coursey’s relationship with Jackson after the suit, that Coursey attended Jackson’s massive memorial service at the Staples Center in Los Angeles last July.
The source would not confirm that Schmidt is an LP in TomorrowVentures, but this person suggested that the undisclosed “mid-size fund” has more than one individual LP.
Asked last week about TomorrowVentures and whether Google Ventures has a process to work with or avoid competing with it, Google spokesperson Andrew Pederson told peHUB that “Any Googler’s personal investment company would operate independently from both Google and Google Ventures. That’s actually also the main reason I can’t say much more than that about Eric’s investments – they’re not connected to Google, so I don’t know much about them. ”
Asked about Coursey, one of his fellow board members calls him “nice” and a “stand-up guy,” who “travels around the world a lot for Eric [Schmidt].” He also called Coursey “very well-connected. He’s always quick to suggest a contact, and the CEO is able to get to those contacts.”
Asked how Coursey knows Schmidt, the source close to TomorrowVentures declined to comment.
TomorrowVentures has invested in a dozen companies since launching last year, including the mobile gifting startup Giiv, which has raised $3.35 million, including from Saban Ventures, Founder Collective, and SK Telecom Ventures; the gaming platform company Titan Gaming, led by John Maffei, a ten-year veteran of Microsoft (it has raised just $1 million in seed funding); and Prosper, the online people-to-people lending site. Tomorrow recently led a $14.5 million Series D round for the company, joined by CompuCredit Holdings. Prosper has raised $55.5 million altogether.
In the years after Coursey and Rundell’s lawsuit against Jackson was settled, the two continued to invest their own capital in startups through Rundell, Coursey & Co. Asked if the pair were known to have exits from that portfolio, the source said that most of their investments were “specialty finance” and that they received “cash-on-cash type returns.”