Shad Khan cut financial ties to the KYN business accelerator because of how the $1.1 million he provided was divvied up among the startups and the employees.
Jim Woodcock, a spokesman for the Jacksonville Jaguars owner, said KYN’s financial records showed less than 12 percent of the money was given to the “startup companies and entrepreneurs that Mr. Khan intended to inspire and assist.”
In a statement late Wednesday night, Woodcock said KYN paid employees and advisers “an amount many times greater than it distributed to Jacksonville startups.”
Further concerning, he said, was that KYN didn’t have a plan to address those issues and had no other funding sources.
“The rational conclusion was that further investment in KYN was not sustainable,” he said.
RELATED STORY: Shad Khan, KYN part ways.
Elton Rivas, who founded KYN, said this morning that KYN’s bi-weekly payroll was distributed from an account controlled by Flex-N-Gate and approved by Jim Zsebok, who until recently was chief investment officer for Khan’s Stache Investments.
Rivas said it was his understanding that Zsebok approved every expense in the process, including payables and payroll.
Rivas said about $660,000 of Khan's investment went to support the six companies that participated in the accelerator program. That included $35,000 in seed money for each, as well as funding for needs ranging from the cost of office space and Internet to services such as project management tools, marketing support, web development and business development.
"It takes both cash and services provided by people to help make a startup successful," he said.
Rivas said he met with Zsebok every 30 days to share reports and discuss how long it would take each of the businesses accepted into the accelerator program to reach profitability.
Rivas said Zsebok never expressed any concern about the pace of the progress or, in general, anything about KYN.
Rivas said a couple of weeks after Zsebok was no longer with Stache, Woodcock said via a statement to the media that no investments would be impacted by the departure.
Four weeks ago today, Rivas met with Khan and Kevin Hamilton, an executive from Flex-N-Gate. Rivas said they discussed the future of the partnership and the need for KYN to find additional investors.
“We discussed the future of KYN and that Stache would communicate directly with me and without giving a false sense of hope, would work with us on a transition as they knew it would take time,” he said. “We confirmed that we would meet again the following Friday to discuss next steps.”
The following day, the CFO from Flex-N-Gate called KYN’s staff and said the funding for the accelerator would end.
“Since then, communication from Stache has been minimal on the business side and most communication has come to KYN either through Mr. Khan’s spokesperson through the media or his lawyer,” Rivas said. “We seem to be caught in the middle of something bigger with how Mr. Zsebok handled things for Stache Investments.”
Woodcock said Wednesday night that Khan “will continue to seek more efficient ways to financially support Jacksonville’s entrepreneurs and startup community.”
Rivas said Monday that he made the decision Friday to close KYN.
The business accelerator spun out of One Spark, which Rivas helped create.
Four businesses completed the first class and two were in the second class, which was underway when KYN shut down. Rivas said this week that he and other KYN employees would continue to work with those companies through the middle of January to finish the program.
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