Last month a strange story appeared in the Polish press. It was about an American consultant living in Denver who had been “preying” on Polish startups, promising them investor contacts and customers in America. The story started breathlessly enough. Here it is in translation:
The “American Dream” is something that grips the imagination of almost every startup founder. America is the biggest market in the world, it’s where Facebook and Uber raised $1 billion from investors. It’s a tempting place and it beckons many. However, one should be careful because criminals are lurking, criminals like Jakub Kostecki, a Pole with American passport living in Boulder, Colorado.
It went on to describe seven startups who felt cheated by Kostecki. It’s full of anonymous sources and ominous language ending with an interview with Kostecki, a self-described recovering alcoholic who claims to be unable talk about his startup problems due to NDAs signed in the US. You can read a summary in English here.
It’s a confusing story and one at odds with the all but official Polish mania for startups that culminated in the official announcement that the conservative Polish government created a 630 million euro fund to support the local ecosystem. Like so many Central European countries, startup founders are at once well-educated in the ways of western investment and also frightened. Consultants like Kostecki pop up over and over, promising big and, in some cases, delivering big. But once in a while discontent bubbles to the surface and insular startup ecosystems start arguing – and accusing.
In the end, however, it shows the lengths startups will go to escape the confines of their home countries and how communication, anger, and NDAs can create every entrepreneur’s worst nightmare.
A few thousand
“I lost a few thousand dollars and have already reconciled myself with this,” said one anonymous startup founder in the story. “But I want to publicize the case so that I can warn other startups who enter into business relationships like this one.”
When it all began the companies approached Kostecki to look for customers and investors in the US. Kostecki, who considered some of the founders friends, offered to help.
The interactions were formal enough at first but slowly the startups began to worry about the relationship. Again, the story is one-sided but in general the cooperation slowly broke down over time. When Kostecki didn’t get paid the startups complained that Kostecki “began to threaten them.” He promised to take their US-based intellectual property if they didn’t pay him. He warned them that he would steal their trademarks in the US or simply post a nasty story about the startup, burning them and preventing them from doing business in the US. He said he would tell the world about the “lack of professionalism and dishonesty” exhibited by startup founders. He threatened them with a smear job, two thousand miles from the medieval streets of Krakow or the hipstervilles of Warsaw.
The startups all claimed different things but mostly it looked like a contract gone sideways. Kostecki was hot-headed and the startups, believing they had been duped, were angry. The result was a story that titillated the Polish startup world for a week and seemingly petered out.
But in truth this is a common story, one of miscommunication, distant promises, and misunderstandings. It’s part of almost every foreign startup ecosystem I’ve seen. A macher promises one thing and the local misunderstand him or expect miracles. The macher tries, maybe fails, maybe does less than the founder expects. But in most cases the founders chalk it up to bad luck and the consultant apologizes. But in this case the founders went to the press.
“My partner and I knew Kostecki,” said one of the alleged victims, Szymon Kubicki. “I was skeptical but my partner insisted and finally he convinced me after weeks of discussion. My partner paid him $500 in advance. There was no formal agreement document with Kostecki, only email exchanges with well defined work and payments.”
“For $500 Kostecki was supposed to find leads and a suggest strategy to automate sales. The next payments were supposed to be on success fee basis,” he said. “Kostecki received the advance and sales presentation. We waited patiently for the results but nothing was happening. No emails no calls. All the correspondence was with my partner. He believed that any day something is going to happen. We did have one introductory call with some guy from the US, but Kuba didn’t follow up.”
Then things took a turn. When Kubicki asked for the money back, Kostecki balked and got angry.
“In response Kuba attacked me personally and said he’d return the money but would reserve the trademark in the US and said that any action in US meant that he got payment,” said Kubicki. “He also announced he’d send emails to contractors in Poland informing them the he’s the owner the brand in the US. He also said he would publish on Medium about how you can lose rights to brand/name through lack of competence.”
None of this happened but the threats were enough to get most of the startups to clam up.
Kostecki agrees with most of the claims, although he doesn’t remember the story as negatively as the startups do.
“What was written was 90-95% factually correct,” he said. He spoke to me in detail about his experience and his candor was, after a news article filled with anonymous griping, refreshing.
Kostecki is an outspoken Pole who now lives with his family in Boulder and has quit drugs and alcohol after years of “bipolar depression, alcohol, immaturity and everything that entails,” he said. He was featured in a Chronicle piece about founders and mental health. He’s a vegan and has short brown hair and tired light blue eyes. In photos he oscillates between joyously happy with his family and serious and sad in a business setting. He sees some of the silliness associated with the Polish startup scene and he’s not afraid to call out their mistakes and try to help small companies trying to make it big.
“I never solicited any business directly,” he said. “People came to me. I gave out a lot of free advice to dozens of Poles. When they wanted more I offered a service to a select few. I declined a lot of business when it didn’t make sense for them or for me. I never advertised, I never went out after people, I never intended to do this as a business. It grew very quickly and could have been big, but I didn’t enjoy the work and I decided to not continue.”
Kostecki tried to be clear about how he could help the startups.
“I ran a customer acquisition funnel or a fundraising funnel, but a funnel meaning a process,” he said. “I never promised introductions, although they would certainly be a part of the process, but I was clear that this isn’t the way to go in my opinion (the type of warm intros these startups can get is usually very poor) and that reaching out to investors with a good team and product in a semi-automated and content-rich fashion was what I believe would work for them. I offered to prepare content and collateral and distribute it and handle the response etc”
The communication broke down almost immediately. Founders “went dark” and stopped responding or got angry. Kostecki replied in kind.
One company, for example, made odd claims as the business relationship soured.
“I was told by the CEO (who didn’t have a contract with me) that the guy who paid me left and that I had to give the new guy the old guy’s money back if I chose to not work for him. When I asked to see some paperwork that would attest to this I didn’t receive a response. There was no written contract. I didn’t receive an even semi-formal email. The guy just went dark.”
In most cases Kostecki got frustrated. Then the Polish press began to talk about a warrant for alleged tax evasion and his clients panicked.
“I learned about the ruling a few months ago. People can ask how that could have happened or judge me or whatever but that is the truth. This happened during the heady time of drinking, a nasty hypomanic episode and so on (again, not faulting anyone but myself and taking 100% responsibility). My move to the U.S. was planned 3 years in advance and was put off for 2 years so the timing was not correlated. I am the sole breadwinner for 7 people (living in my household) and need to figure out how to make everything work from a legal / logistics point of view.”
“Because there was no contract and the guy was very aggressive I decided to up my leverage regarding his intellectual property,” he said. “I totally agree that this is hardball and I’m willing to be judged for it.”
These days Kostecki is out of the Polish startup biz. He’s dealing with his issues, both personal and legal. The startups he worked with have stopped responding.
Startup heal thyself
Small companies from places like central Europe have a big problem. They are trapped, for lack of a better word, in a great, valuable market that can offer them a living wage but not the seemingly untold riches available to the Ubers and Facebooks of the world. You can, for example, set up the best ecommerce site in Croatia but when you try to expand you bump up against Amazon. You can create a Polish Facebook – one of the biggest was Nasza-Klasa – and fall to Facebook’s might outside of the country. In short, the local market is at once a lure and a deterrent. A startup can make some money selling in their back yard but it becomes harder and harder to expand once the full focus is on local customers and not global ones.
People like Kostecki want to help out but communication and unmanaged expectations often get the best of deals like his. In most cases the best thing for an international company to do is to simply fly to the country of interest and start doing business. One Polish company, Estimote, started building their US presence early and it netted them contracts, sales, and developers. Others have doubtlessly done the same, from Spotify to payment giant Klarna. But that takes money and time.
The bottom line? Startups need to build with expansion already in the business plan. Expanding later is difficult if not impossible one founder told me and folks like Kostecki are everywhere, offering to help and sometimes delivering – or not. But they are rarely a solution.
Kostecki, for his part, is done helping the Polish ecosystem.
“I have stopped taking on any new business of this kind, but I continue to work for several companies who are very aware of what’s going on and have decided to continue,” he said. “This was always a side consulting gig, I never decided to pull the trigger and make it a permanent thing.”
“Of course I fucked up by lashing out. I apologized to the people who felt I wronged them. I wasn’t soft but there was no malice here. There is nothing that can’t be dealt with by people sitting down and talking. I’m not promising everyone at the table will like everything they hear. All of this could have been resolved.