The Wildest Startup Story I’ve Covered: The Fight for Toptal

The story on CNBC.com

I moved to Silicon Valley just over a quarter century ago, and I’ve been covering it in some capacity ever since. This is probably the wildest startup story I’ve ever reported.

Taso Du Val is a high school dropout. In 2010, he founds a wildly successful startup, connecting companies with workers anywhere in the world. He structures it as an LLC that he controls.

Toptal is profitable from early on. But a couple of years into the journey, he gets financial backing in the form of loans that would convert to shares of Toptal if he does what the vast majority of high-growth startups do: raises an equity round from venture capitalists to fuel growth. Only Du Val never raises an equity round. He repays the loans with interest, and keeps growing the company on its own cash flow.

Denis Grosz, court documents show, lent Toptal $1 million and got repaid. He told people he didn’t think he got a fair shake. He believed he was promised a stake in the company. So after consulting with some other investors, he executed a plan to attack Du Val’s reputation, start a secret competitor to Toptal, and poach Toptal employees. In emails it's labeled a "cancer patient strategy."

Du Val sued him and videotaped the court proceedings. And so far, Du Val has won. Grosz is appealing the jury verdict.

I teamed up with Paige Tortorelli , investigative producer at CNBC, to tell the story. (See the written version here.) Du Val sat down with me on camera and told his side. Grosz did not. But from court documents and video footage of the trial, we worked to sketch out what happened and represent both points of view, along with facts to help the audience understand the context.

For decades now, I've had founders and investors tell me how important it is that founders be careful who they take money from, and that their interests and expectations are aligned. But the Toptal saga piled on a whole different set of lessons and questions that rarely get discussed.

How important is a startup's ownership structure? How aggressively do founders have to manage the expectations of investors and employees? And when a company has a largely remote culture, does it make it harder to gauge their loyalty and morale – or conversely, easier for outsiders to convince them that something is wrong?