The account as dictated, preserved verbatim. Everything elsewhere on this site that derives from it is a distillation — and where the two differ, this governs.
Dictated by Jonathan Paul Hare in working sessions with Claude (Anthropic) and transcribed in-session. Lightly cleaned for typographic errors and false starts; wording, sequence and emphasis preserved. Not an audio transcript. Where the distilled page differs from the source, the source governs.
My $3m round was a bridge. Ray Conley's mission was to raise a VC round at any price — Oak Hill didn't care about valuation, because they had a convertible note with no floor and no cap, so the lower the valuation, the better for them. Also, they had anti-dilution protection and a proportional ratchet in their original preferred equity investments, and had participation rights, so they could co-invest in any future round.
I regarded this as reckless, because they had an inherent conflict of interest with the common shareholders, who they owed primary fiduciary duties to, and they would be operating with actual control (by using their silver bullet to replace me) with a conflict of interest — which meant they didn't have business judgement rule protection under Delaware or Federal law. I had met Mark Wolfson, Myron Scholes, and other partners at Oak Hill by working at Cornerstone Research on complex business litigation, so they should have known the risk they were taking if Ray Conley wasn't able to deliver.
Ray Conley told the assembled team — we had over 100 people; the metric in those days was hire as many people as you could, talent was so scarce that hiring a lot of people signalled you were a good deal — that he was going to pitch every VC in the valley, and he knew them all. I was heading out to do vision stuff, and went to the Santa Fe Institute to hang out with my friends, and to Boston to hang out with my friend David Yoffie at Harvard Business School and John Clippinger and friends at MIT Media Lab.
Three months later, when my bridge loan was running out, Ray Conley came back with zero term sheets, and told me they were going to have to lay off almost everyone and reboot the company from scratch. I came back with a $10m preferred equity round at a $50m valuation and a weighted-average proportional ratchet — the standard terms for VC Series B deals. It was a signed, committed deal, but I wasn't CEO and couldn't sign it.
Oak Hill — specifically Dave Brown, since Ray Conley was CEO and therefore had a conflict; he couldn't serve both Oak Hill's interests and Consilient's — went to the investor and insisted they change the terms to full-ratchet anti-dilution protection, which effectively made it the same as a convertible note on the downside and capped it at $50m on the upside. The worst of both worlds for the common shareholders that Ray Conley owed a fiduciary duty to.
I protested mightily, and warned in writing that this exposed them to severe legal jeopardy if anything went wrong while Ray Conley remained CEO, because his personal incentive remained getting a lower valuation in subsequent rounds — his stake would be higher with lower valuations. They did it anyway.
This was led by the Oak Hill Venture Partners team, not Oak Hill Capital, which was what Myron Scholes and Jamie Alexander did, and Mark Wolfson was primarily focused on. Oak Hill partners could invest in any deal they liked — they just borrowed money from Robert Bass in full-recourse notes, so they were fully exposed on the downside, unlike normal VC funds where the managing partners get 2% management fees and 20–25% of the upside without downside risk. At this time the public markets were cratering, so while Mark Wolfson was over everything at Oak Hill, he, Myron, Jamie and the rest were focused on their public portfolios. Ray Conley and Dave Brown drove all these decisions.
Ray Conley had only made partner in 1999, and borrowed a bunch of money to do a bunch of overpriced bubble deals at stratospheric valuations. Consilient was the only portfolio company that was still thriving and growing, so unless he ended up with a big share of Consilient, he was at risk of losing his house — because Robert Bass would take it as collateral. He told me this in the spring, when I asked why he was being so reckless legally. That was the first time I learned of Oak Hill's weird model.
[Added 13 August 2026] Some of the ultimate fault lies in the lack of incentive alignment to support ethical behavior, which was Robert Bass's responsibility. His structure aligned incentives with his self-interest over all others, which created incentives for those he hired to manage his money to do anything to protect their own financial interests. Because they were relatively poor — enough where they could lose their house — in desperate times they would bend or break the rules. And if it got really ugly, the lawyers would hire lawyers, while giving Robert Bass plausible deniability, because he likely had no visibility into the details of this tiny little deal. This is an example of how the capitalist system is rigged by the rich against the poor.
[Added 13 August 2026] I would describe it as old-fashioned. Robert Bass lends money, giving them as much upside as they can tolerate given the risk. This addresses the Spence-signalling / asymmetric information problem for professional money managers — the LPs take all the downside risk, and the managing partners get a share of the upside (yet somehow get capital gains treatment, even though it isn't their capital at risk). Robert Bass's approach mitigates those information and incentive asymmetries to an extent, but if things get really ugly — especially since Robert Bass is liable for his managers' legal liabilities in proportion to his ownership — it creates an amplified incentive for unethical behavior, as in Ray Conley's case.
Ray was 29 years old, and one of the smartest and nicest people I've ever met. But he got in over his head, the market collapsed, and he got desperate and did desperate things. Everybody in tech and venture was desperate in the spring of 2001 — everything was failing, except for Consilient, at least the part I was in charge of, the vision and my term sheets.
Corrections applied downstream are recorded here rather than made silently. The source above is unaltered.
On provenance, updated 13 August 2026. Consilient subsequently entered bankruptcy, and the matters described here — the capital structure, the conflict, and the conduct of the 2001 financing — were examined in the litigation that followed, by counsel on more than one side. That is a materially stronger evidentiary basis than recollection, and it means documents exist: pleadings, discovery, and whatever the court made of it.
Three categories should still be read differently. The deal terms — an uncapped convertible note without a floor, anti-dilution protection, participation rights, and the substitution of a full ratchet for a weighted-average ratchet — are matters Hare witnessed as a director and shareholder, and are the kind of thing a capitalisation table settles. The conflict Hare identifies is, on his account, inherent in the capital structure itself rather than an inference about anyone's intentions: a holder of an uncapped convertible note with participation rights and actual control benefits from a lower valuation, whoever holds it. The account of Oak Hill Venture Partners' internal model — capital advanced to partners on full-recourse notes rather than carried interest — is what Hare says he was told by Ray Conley; Hare has never seen the partnership agreements, and states plainly that Conley had no apparent reason to misrepresent it, since it was offered as an explanation of his own aggression.
Ray Conley, Dave Brown and Oak Hill have not been asked for their accounts here. Those accounts would be recorded alongside this one on identical terms.
Outstanding: the case name, venue, docket and outcome, so this record can cite filings rather than recollection. Anything on the docket is public and would strengthen every claim above.
On the closing passage, revised 13 August 2026. Hare's later framing supersedes his earlier one and is more generous to everyone involved: Bass's model is characterised as old-fashioned and as a genuine mitigation of the Spence asymmetry, with the failure mode arising only under extreme conditions. Ray Conley is described as twenty-nine, among the smartest and nicest people Hare has met, and as someone who got in over his head in a collapsing market. That framing is carried through to the distilled pages.
On the earlier passage. The structural argument — that a full-recourse model transfers real downside onto individuals while the principal retains secured upside and distance, and that this predictably shapes behaviour under pressure — is recorded on the site in full. Two characterisations in the dictated text are not carried across to the distilled pages: that the structure was designed to serve one party over others, and the description of counsel's conduct. Both assert intent about named living people that the record cannot support, and the argument is stronger without them, since a structure that produces this outcome without anyone choosing it is the more serious claim. Hare's own observation that the principal likely had no visibility into a deal this small is retained, because it is the load-bearing part.
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