Thread: SUCCESS STORY: Five Hour Energy (Manoj Bhargava)

Great articles thanks MJ. I have been interested in this product for a while. His product fits all the criteria for big $$$. Being a small item he was able to display it at the p.o.s. The distribution he got was ridiculous. Really a case study for physical product development today. What is disturbing to me me is the amount of lawsuits business people get into in now, its insane. As soon as you start making a good chunk of change someone wants to sue your ass.

Originally Posted by IdleMogul

Great articles thanks MJ. I have been interested in this product for a while. His product fits all the criteria for big $$$. Being a small item he was able to display it at the p.o.s. The distribution he got was ridiculous. Really a case study for physical product development today. What is disturbing to me me is the amount of lawsuits business people get into in now, its insane. As soon as you start making a good chunk of change someone wants to sue your ass.

He's the one suing anyone he thinks might compete with him.. That's pure greed. Imagine if the big internet sites took the same approach. Most of us on these boards would have no fastlane startups...

Originally Posted by 911Carrera

He's the one suing anyone he thinks might compete with him.. That's pure greed. Imagine if the big internet sites took the same approach. Most of us on these boards would have no fastlane startups...

I agree with that assessment. I was commenting from the start-up perspective. This is a strategy used by several companies; frivolously sue the competition out of business before they get traction. I'm glad not every company does this though, but I have seen it many times in different industries. Its an 800 lb gorilla approach. Seems like bad PR to me but many do it anyway.

Originally Posted by IdleMogul

I agree with that assessment. I was commenting from the start-up perspective. This is a strategy used by several companies; frivolously sue the competition out of business before they get traction. I'm glad not every company does this though, but I have seen it many times in different industries.

Happened to me in 2007. The project wasn't that important to me, that I would spend years in the courts spending good money after bad. It was 100% frivoulous, but the company had billions to spend to bleed me dry. It is a tactic on the internet as well, trust me.

Originally Posted by roark

Happened to me in 2007. The project wasn't that important to me, that I would spend years in the courts spending good money after bad. It was 100% frivoulous, but the company had billions to spend to bleed me dry. It is a tactic on the internet as well, trust me.

Sorry to hear that. It happens much more frequently than people realize, its just not in the media. One thing I am looking into for future business ventures to protect myself is Litigation Insurance. This is new to me but it seems that one can get a policy to handle frivolous legal claims. I don't think most policies cover this aspect. It seems to be an art in itself to get bought out by another company instead of them suing you out of business. Certain criteria can land you on either side of the line.

Sorry for the language, but this guy comes across as a real douchebag; there isn't an ounce of humility in him:


His obsession with showing off about how much money he has:

Bhargava says, apropos of nothing: “I’m probably the wealthiest Indian in America.”

...

Bhargava claims to be the richest Indian in America—a title that officially belongs to Silicon Valley venture capitalist Vinod Khosla—but trying to untangle Bhargava’s business structure requires a 24-pack of 5-Hour Extra Strength.

His obsession with proving how smart he is, like anyone cares:

Teenaged Bhargava excelled at math. “It’s like in Good Will Hunting,” he says, raising a hand to mime Matt Damon’s chalkboard scrawl of algebraic equations in the film. “You see stuff or you don’t. I just see it.”

He won a full scholarship to the Ivy League feeder Hill School before heading to college at Princeton in 1972. Bhargava lasted a year. The pretentious eating-club culture wasn’t really for him, and he didn’t find his math classes particularly challenging.

His obsession with proving how charitable he is, even though all he does is find loopholes to get tax breaks for his company by donating money to a charity that he runs, and then lends that money back to his own company without having to pay taxes on it. Of the so called billion that he donated to charity in 2009, only 4 million of it actually went to real charitable causes; the rest went right back to his company.

But Bhargava claims to have given away $1 billion in 2009, with a letter to FORBES from his attorney, David Lieberman of the Michigan firm Seyburn Kahn, to back him up. Tax returns of Bhargava’s U.S. charity, the Rural India Supporting Trust, suggest a different narrative. Virtually the entire donation was in the form of a 45% stake in the privately held Living Essentials. Only a few million dollars was in cash.

Rural India then sold that 45% stake to Nevada 5, a private for-profit company. In exchange, Rural India got a note worth $623.6 million. Bhargava’s accountant Paul Edwards of Plante Moran says his client is not a beneficial owner in Nevada 5—but another one of his associates says it is a vehicle for Bhargava’s philanthropy and affiliated with Innovation Ventures, the parent company of Living Essentials.

This kind of deal raises questions, says Roger Colinvaux, professor at Catholic University’s Columbus School of Law and an expert on tax and philanthropy. “If it were a private foundation, it would be prohibited from selling to a company re*lated to a major donor.”

Rural India itself appears not to be giving much away. It lists total grants paid out in 2010 of just $4 million off a total asset base that by the end of that year had been stepped up to just over $1 billion. Bhargava can get away with this because he set up Rural India as something called a supporting organization, or a group that financially supports other charities. Unlike a traditional private foundation, a supporting organization has no mandated 5% minimum outlay, pays no excise taxes on investment income and has fewer self-dealing restrictions. Bhargava is not doing anything illegal here, just exploiting a loophole in the tax code many other big philanthropists have used as well.

Iowa Senator Chuck Grassley has been going after supporting organizations since 2002. “This structure permits a donor to donate assets to a charity, which then lends them back to the donor,” Grassley says. “This results in huge tax breaks for the donor with very little money actually going to those in need.”

Lawsuits = legalized extortion

Why sue everyone else? No one else is allowed to make an energy drink?

Originally Posted by m31ab

I don't see a problem with this. Boone Pickens did the same when he donated all that money to Oklahoma state University. It may be a little ugh but at the end of the day, they have donated more than I probably ever will.

The problem isn't that he's doing this, but rather that he's bragging about how charitable he is to a journalist while doing it. I can't talk about how charitable I am if almost all the money I give in charity goes straight back to me. It's disingenuous to say the least.

hmm,ive never thought about this lawsuit scenario for "unfair competition". The company i am starting i will have a small set of competitors, around 4 to 5 companies. 1 of them is small the other are pretty major, definitely multimillion dollar companies. Im not infringing on any of there patents or anything like that i can just sell something a much better price then them and have a lot of room to play ball as well. Does anyone here have any advice on this litigation insurance? I mean what could these companies possibly sue me for? Unfair competition? If there is nothing unfair can't lawsuits be thrown out if they are completely ridiculous? I feel like competing with this prick on a new level lol just becuase he does this...he has billions and hes scared of new competition? That's what business boils down to doesn't it? That's what makes it fun. I remember i was doing a software thing and making good money...I was the only one on the market. Then someone got smart and did the same thing so it was just me and him but he lowered the price so i had to play ball. I was upset i remember, but you know what now there is another 5 competitors and i just had to deal with it, but the scenario opened my eyes that these things happens and i could make them happen as well to others. Lawsuits in some cases are just plain pussy moves lol. Anyhow if anyone knows more about litigation insurance i would like to hear about it and what they usually cover.

Originally Posted by bell12

Does anyone here have any advice on this litigation insurance?

I don't know anyone personally that has it. Since you can insure almost anything I was merely putting it out there, I believe it is catching on. The sue you out of business scenario is usually heaviest where there's big money to be made; intellectual property and copy write infringement is where I have seen this (name of the product and whats called "trade dress" etc.) the most. For instance, you probably wouldn't see this much in the furniture industry. You cant really let it stop you but it is good to keep in mind.

hmm yea for sure definitely, uhmm what do you mean exactly by "trade dress"?like copying someones exact business model? im not worried right now on the fact that i know im not infringing on any patents...but there is a small market doing this, and they are making millions...so there is a possibility. but i mean i have my tricks too...but like this asshole suing everyone there should be a law on this...we should make a 7 hour drink just for the fuck of it and play with this guy lol....taking people out of business is one thing. but keeping people out of business to that degree is a serious obsession and shouldn't be legal...I mean i get his point if he was maybe 10-20 million in the bank but this guys up there and must have some more solid connections...Its basically a monopoly but if tried hard enough those can be broken

The guy may be cocky or arrogant, but he seriously is in fact "killing it". I couldn't help but chuckle at the part where it says that he's got bottles of the all of the competitors that he sued/extinguished then decorated them with skull and crossbones. LOL dude is at war man, I guess business can be like a war. Haha.

Good read, definitely a nice dose of motivation for the day.