OrderUp founder sued by early investors

The Baltimore Sun

Early investors in OrderUp, the Baltimore-based meal delivery company, have sued one of the company's founders, saying they were pushed out of their investment as the company prepared to bring on deeper-pocketed investors who would carry the company to an acquisition.

In a federal lawsuit, four angel investors allege OrderUp and founding CEO Chris Jeffery misled them about the company's financial outlook, persuaded them to give up their interest and ultimately swindled them out of a major payday when the company was acquired by Groupon Inc. last July for $69 million.

The lawsuit filed May 23 in U.S. District Court for the Southern District of New York against OrderUp and Jeffery seeks unspecified damages.

Jeffery and OrderUp could not be reached for comment late Tuesday afternoon.

The four investors, Charles Lipson, Doug Potolsky, Samuel Cooper and Steve Israel, invested a total of $850,000 between 2011 and 2012. Their investment would have been worth nearly 20 percent of the company's equity in the event of an acquisition or initial public offering, according to the lawsuit.

"Like any angel investors, they were hoping to hit a home run. And here they were, about to do that, but the opportunity was taken away," said Robert B. Bernstein, a lawyer with the New York firm of Eaton & Van Winkle who is representing the investors.

OrderUp is an online food ordering and delivery company founded in 2009 by Jeffery and Jason Kwicien. It uses a mobile app and a network of drivers to deliver food from dozens of restaurants in more than 60 markets across the country.

In August 2014, OrderUp raised a $7million Series A financing round led by Revolution Ventures, AOL co-founder Steve Case's venture firm. A year later it was acquired by Groupon.

Months before closing its Series A deal, the lawsuit alleges, Jeffery told angel investors the company might not be able to return a profit on their investment for several years and pushed them to cash out of their investment. The investors argue that OrderUp brought on its new investors with plans to prepare the company for an acquisition, and intentionally withheld this information from its angel investors.

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