Montreal seems to be the hotbed for controversy in the Web 2.0 world in Canada. Where else could you find someone who will sell you the Brooklyn Bridge and someone else who will supposedly pay you for joining their social networking site? It is the latter, the multi level marketing site called Capazoo.com that is bringing us the latest dirty laundry.
Capazoo is a social networking site, in this case it is a lot like MySpace, which charges anywhere from $25 to $35 a year for a membership. The big idea is that the more people I get to sign up, the more referral kickbacks I get. We’ve all seen this before in other disguises, in the case of Capazoo, they have attracted their share of B and C-list celebrities.
I won’t even try to recount the whole story, but it seems to involve some brothers, at least one of which has been convicted of fraud before, a bunch of ex-NHL hockey players, some online porn kings and a bunch of investors who still don’t seem to know what is going on.
La Presse, a French-Daily in Montreal has been digging in to the story (google translate) and it isn’t pretty. The two founders, who are also brothers, are now in court fighting over who has control of the company and they are also sorting out the small matter of who embezzled how much off the top from the investors money (one side is claiming it was a “10% commission on funds raised”).
There was also the small matter that one of the two guys who were managing the company had decided that pornography should become a big part of the sites content (who knows — they may have made a fortune doing that), then add on the death threats that were going around and it seems you have something worth writing about.
I am not sure what to make of the whole thing. The worst part is that these guys have sucked a lot of investable money out of Montreal and have left a long trail of investors who probably now have a bad taste for web startups. I haven’t written much about Capazoo up until now because I always felt they were a very poor reflection of the entrepreneurs I know in Montreal. It remains one of the most exciting startup cities in Canada and judging by some of the great projects and startups I have been hearing about, it is going to stay that way for a long while.