Notion Ink – Who owns, runs and funds the company

About a year ago, the promise of an innovative and cutting edge product, a convincing entrepreneurial story, and the romance of supporting an unknown start-up, all conspired to help me decide to buy the Notion Ink Adam (3G, Pixel Qi) when it first became available for pre-order.

The fairy tale started to unravel right from the pre-order and delivery stage, with the missed deadlines and frustratingly vague communiqués. I put all of those initial issues down to teething troubles, but I could not explain away the deficiencies with the product itself when it finally arrived. A buggy, nearly unusable interface coupled with a terrible display (thanks for nothing Mary Lou Jepsen, that one’s on you) and disappointing battery life were only the most obvious problems. The founder’s behavior, which initially seemed endearingly sincere and uncluttered with marketing speak, now just comes across as irrational, even dishonest. The panels interface had (and continues to have) immense potential, but the final user experience depends heavily on the actual execution of that design idea, and Eden made quite a hash of that.

This post, however, is not about my problems with the Adam or the unfulfilled promises made by the founder of Notion Ink (with the latter having been quite capably chronicled here).

I would like to believe that Notion Ink can still turn things around. But unlike the past, when I went mostly on faith, I’d like to base my belief on more concrete data. For all the rambling blog posts, Notion Ink is a remarkably non-transparent company, and it is impossible to get any sense of the scale of their operations, or the competence and experience of their management and board.

If Notion Ink is to have any hope of surviving and turning things around, they need to hire or retain a reasonable number of technical, design and support personnel, and they need professional management. All of this costs money. While we have heard about various ‘rounds of funding’, there has been no information forthcoming from the company, or released through the media, on what this means. There is, of course, no obligation whatsoever for the company to reveal financial data or the identities of its investors.

However, that hasn’t stopped me growing curious about these details, mostly so I can assess the state of the company, and consequently the chances of a REAL software update from NI that will let me migrate from AdamComb (thanks MrGuy and Newbe5!) and actually use this device as originally advertised. I think I am entitled to use all publicly available information to arrive at such an assessment. And so are you. Therefore, I’ve taken the liberty of posting the results of my search for information about NI below, so you can study the data and come to your own conclusions. Please note that:

• All the information below was obtained legally, from the statutory filings of Notion Ink Design Labs Private Limited.
• I am NOT an accountant, and have no background or training in finance. I don’t guarantee that these figures are accurate. That said, this isn’t the first financial statement I’ve read, and I have a basic idea of how they work.
• All US dollar figures are approximations assuming $1=Rs.47.

Shareholding pattern

Name of shareholder	No. of shares	% holding
Rohan Pandey (I assume this is Rohan Shravan)	194,756	45.72
Rohit Rathi	194,756	45.72
Suncorp Information Technologies Private Limited	26,442	6.21
Kaipa Srinivasa Reddy	9,988	2.34

Investments in the company

• The company started out in August 2009 with Rohan Pandey and Rohit Rathi as the only shareholders, each holding 5,000 shares. Each share in the company has a face value of Rs. 10 ($0.21).

• Kaipa Srinivasa Reddy appears to have been an angel investor, who invested Rs. 2,497,000 ($53,128) on 7 August 2010 in exchange for 9,988 shares with a face value of Rs. 10 each. That’s a premium of Rs. 240 ($5.1) per share. A basic search suggests that Reddy is a university administrator and academic, and helped incubate the idea of Notion Ink.

• A day before Reddy’s investment, Rohan and Rohit were allotted 189,756 shares each, at face value with no premium paid. Interestingly, they only paid for 32,306 shares in cash. The remaining were issued against ‘salary payable by the company’. Which effectively means that at that point in time (August 2010), the company owed Rohan and Rohit Rs. 1,574,500 ($33,500) each in back pay.

• Suncorp Information Technologies Private Limited invested Rs. 38,058,499 ($809,755) on 9 June 2011 in exchange for 26,442 shares, at a premium of about Rs. 1,430 ($30.4) per share. There doesn’t seem to be much information available about this company, but I will do a follow-up post if I am able to find anything significant.

Board of directors

• The company started out with two directors (no prizes for guessing who!): Rohan Pandey and Rohit Rathi.

• A third director (non-executive) was appointed to the board on 22 October 2010, but resigned just 19 days later on 10 November 2010.

• This spot was filled on 7 June 2011 with the appointment of another director, who is indicated as being non-executive, and not independent. The current strength of the board is three.

Financial position

• Financial statements are available for the period 31 August 2009 (date of incorporation) to 31 March 2010. In this period:
  • The company incurred an operating loss (I believe this would be the right term) of Rs. 3,926,618 ($83,545).
  • The only sources of funds were equity and debt. This is not surprising, considering the Adam went up for pre-order only in December.
  • The financial statements note that Rs. 1,006,837 ($21,422) were expenses incurred in foreign currency ‘towards directors and employees travelling.’

• The company hasn’t yet filed its accounts for the financial year 2010-11 (the financial year in India runs from 1 April – 31 March). The revenue numbers there should give us some idea of how many units they have actually sold – that’s bound to be interesting!

My initial assessment

• The board of directors doesn’t inspire any confidence. Two of them are founder-directors who have no business experience, and have titles which suggest that they would need to spend a substantial amount of time on the nitty-gritties of design, development and manufacturing. The third recent appointee to the board is (a) non-executive, which means he isn’t going to be involved in day to day business decisions, and (b) classified under the ‘promoter’ category, which means he is probably a relative/nominee of one of the shareholders. There doesn’t seem to be a professional CEO or Managing Director.

• Who the hell is Suncorp?! From what I have seen, they appear to be footing pretty much the entire bill for the running of the company, because I see no other substantial source of funds for the company. Why would anyone do this in exchange for just 6% in the company? Any investor in their position would drive a much harder bargain, considering the premium at which they invested. Apart from a bigger stake, they would expect veto rights and other protections, none of which seem to have been put in place here. Even if the new director is their nominee (which is possible, considering the timing of his appointment), he can be outvoted and decisions can be taken without him. These are not the hallmarks of a savvy investor. Usually, a good venture capital/early stage investor is someone who brings on board not just money, but business skills and professionalism. Somehow, I think that might be unlikely in this case…

• I don’t know much that’s useful about the angel investor, but I haven’t seen anything to suggest that he has much business experience.

All in all, not a pretty picture. They’ve had two rounds of investment so far, and I wonder how much cash they have left. In the absence of employee numbers or data about how much they need to invest in the development of the Adam 2, it’s hard to assess the company’s financial situation. When it comes to management, though, the situation is grim.

Question is, is it time for me to give up and put my Adam on ebay? Or does it make sense to stick around a bit longer and see if Rohan manages to pull that long-promised rabbit out of the NI hat? Right now, I’m leaning in favour of cutting my losses and running.

Update

For the really curious, here are the filings from which I’ve extracted the data above. These are pdf forms, which are slightly painful to use. Make sure you check the attachments within each pdf file (click on the paperclip icon within Adobe Reader to see attachments):

Annual report/ annual return for 2009-2010

• Annual report
• Annual return

Share allotments

• Allotment to Rohan and Rohit
• Allotment to Kaipa Srinivasa Reddy
• Allotment to Suncorp

Change in directors

• Appointment of director, followed by resignation.
• Appointment of director

Charter documents

• Articles of association
• Memorandum of association