South African startup Custos Media Technologies and VC firm HAVAÍC have reached an “amicable and confidential resolution” to a dispute regarding HAVAÍC’s investment in Custos, with Disrupt Africa understanding some form of investment has now been formalised.  

Disrupt Africa reported earlier this year South African blockchain startup Custos, which combats digital piracy by embedding bitcoin bounties as watermarks within videos and movies, had been sued for US$4.45 million in the Western Cape High Court by local VC firm HAVAÍC, which claimed the startup backtracked on an investment agreement.

HAVAÍC, an active investor in African tech startups, claimed Custos agreed in writing to take on ZAR3.5 million (US$186,000) investment from the VC firm as part of its Series A round, and subsequently reneged on the deal.

Custos denied this, with chief executive officer (CEO) G-J van Rooyen saying the startup did not sign any agreement with HAVAÍC and ultimately was within its rights to decide not to accept its offer of investment.

The legal action – which Custos said forced it to significantly cut the size of its team and meant it was battling to survive – provoked disquiet in the South African startup and VC space, with several well-known investors and entrepreneurs taking to social media to criticise the approach taken by HAVAÍC. The company strongly defended its actions.

There has now been a “meeting of the minds” and both organisations said they now have a better appreciation of the factors that influenced their respective positions. Custos and HAVAÍC agreed to a mediation process, and a resolution has now been concluded, with the parties agreeing to work together in their mutual interest.  

HAVAÍC will as a result make an investment in Custos, though it is not clear if that will be under the terms initially suggested. Both parties refused to clarify when approached by Disrupt Africa.

“I’m pleased that this matter has been resolved. We can now look forward to a mutually  beneficial association, long into the future. We have always had confidence in Custos’s  technology and the expertise of their management team,” said Ian Lessem, managing partner at HAVAÍC.  

“While it has taken longer than we had hoped, I am delighted that HAVAÍC and Custos have  agreed a settlement of the lawsuit against Custos and that we can now focus on a constructive future. We have resolved the outstanding issues and we have agreed to work together in future,” said van Rooyen.