Sep 9, 2020 - Health

Lawsuit reveals behind-the-scenes power struggle at Zocdoc

Illustration of a statue of Justice wearing a doctor's coat and a stethoscope
Illustration: Sarah Grillo/Axios

Five years ago, Zocdoc was one of New York's hottest tech companies. It raised venture funding at a $1.8 billion valuation, back when that was still rare, and seemed poised to become the industry standard for physician discovery and appointment scheduling.

Fast forward: According to a lawsuit filed yesterday in the New York Supreme Court, there was a behind-the-scenes power struggle that co-founder and former CEO Cyrus Massoumi now refers to as a fraudulent "coup."

  • Since that time, Zocdoc hasn't raised any VC funding, and investors Founders Fund and Khosla Ventures have relinquished their board seats.

Background: Massoumi's late 2015 departure was referred to in press reports as "relinquishing his day-to-day role," with plans that he'd stick around as company chairman.

  • It was a bit eyebrow-raising, given the company's trajectory, but the company was already eight years old and Massoumi was to be succeeded by a fellow co-founder.
  • In other words, it didn't really make waves.

What's happening: Massoumi alleges in his lawsuit that company co-founders (Nick Ganju and Oliver Kharraz) and CFO (Netta Samroengraja) orchestrated a plot to oust him from the company, during a November 2015 board meeting.

  • At the time, Massoumi claims Zocdoc was in the process of finding replacements for both Kharraz (then COO) and CFO Samroengraja. Both allegedly were aware of those plans, with some candidate interviews even taking place the morning of the board meeting.
  • Massoumi expected the board meeting to be run-of-the-mill, based on prepared board books he received ahead of time.
  • Once the meeting began, however, the expected topics were allegedly eschewed in favor of Ganju and Kharraz moving to fire Massoumi as CEO.
  • The company's voting structure effectively gave proxy control to any two co-founders working together. But Massoumi could have individually assumed majority control via an early exercise feature of his options, had he believed there was a reason to do so.
  • Khosla Ventures partner David Weiden allegedly voted in favor of the switch, with Massoumi alleging he appeared to know about the plan (neither Khosla Ventures nor Weiden is named as a defendent, and Weiden declined comment on the situation).
  • Founders Fund's Ken Howery (now U.S. ambassador to Sweden) allegedly did not support the "coup."

What they're saying: Massoumi claims the company has deteriorated in his absence, and his list of required reliefs includes reinstallation as CEO.

  • Zocdoc did not respond to a request for comment.
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