Asking you to be more precise where it matters isn't pedantry.
The behavior is "perfectly rational" only in the economics sense of that term. On a human scale, we often call it things like "sociopathic".
I will also note that companies don't have perspectives either. Which also isn't pedantry, because in analyses where we seek change to a system, we have to understand exactly who is involved and what their motivations are. So in this case it's worth being very specific that the people involved who think this is "rational" are very modest in number. The VCs, probably the rest of the board. To some extent the CEO, but as a founder it's possible he's conflicted enough that he might depart from his short-term economic incentives to protect the think he's spent a major part of his life working on. Maybe some of the execs if they came in to prep in for an IPO.
So now we're not talking about the whole company, which is 2,000 employees, thousands of volunteers, and millions of content creators. We're talking about maybe a dozen greedy people. That's a much more tractable number.
Even if the founders aren't sociopaths they will be pressured by themselves and their investors to do what's best for them and the whole time someone will be telling them that "business is business". If people can rationalize committing genocide they will easily rationalize screwing you over.
The company is currently suing the no-equity cofounder COO for fraud. Perhaps the lawsuit is entirely baseless and this is just another part of the CEO fucking his cofounder over, or perhaps there's actually a good reason for the cofounder to not get any equity. We really don't have the ability to judge based on the information we have, and calling the CEO a psychopath is a bit much.
It is effectively the founder saying "I don't need/want as many shares as were allocated to me, but I value <charity X> more than the people who helped me reach this outcome." It's a big screw you to the later employees.
As with others, the morality of this situation depends on details we don't know. What always trips me out is the double standards in posts like yours. People are fine with the capitalist notion of starting a business, giving most people in it almost nothing, often collecting any I.P. produced rather than a license, and having goal of selling out in a way that will likely cost the employees their jobs. Almost all value goes to investors or a few founders while almost all work is done by employees. The process is often supported by false promises or emotional manipulation to keep workers loyal & with a tiny part of the pie. This is default in Silicon Valley from what I read here and in other media.
Then, an employee decides to do what's best for him or her in a way that negatively impacts the founding business person or investor. This is seen as unethical: such employees, upon some agreement or context, cannot possess the ability to make other choices that damage founder or VC goals. They don't possess the trait that founders and investors wield with nary a thought over employees like we're starting to see with more layoffs. The employees are, instead of rationally selfish, being Evil and called out for it.
A double standard that serves captains of industry and startup founders very well at everyone else's expense. In reality, capitalism says that everyone, including employees, should act in their own self interest externalizing all costs of such actions. So, per capitalism, the founder did the right thing by trying to screw the employee out of lots of net worth and the employee did the right thing screwing the founder by taking another path. Naturally, being utilitarian, I oppose such capitalism in favor of stakeholder-focused models with rules reducing opportunities for each party to screw the other. The market goes the other way, though, so everyone continues to help or screw everyone to heart's content.
And I get to read nonsense like this where people cry "But that's not right and fair!" while simultaneously...
"Business guys are typically going to make more money than the coders are, it's pointless to fight this. The better route is to go into business yourself and capture the value yourself. "
...supporting amoral, selfish practices of capitalists on founder or VC side. It's just also what the developers were following: do whatever provides most perceived value for themselves. It is really good advice, though. Keep preaching it while system works as it does given that's where money is at. It's just that making an exception for one party but not others seems unfair and irrational. Thanks for the entertainment though. :)
I agree that there isn't necessarily anything unethical about this. The investors knew what they were doing.
However, founders who would pocket $6M from a not-even-close-to-profitable company are probably not good founders, or they don't believe in the company. Either way, their behavior doesn't inspire confidence.
This case reminds me more the classic boycott handbooks. A tiny group of people sparking the flames of revolution for no reason, maybe desperately trying to get the attention of Musk, maybe for profit.
This people can sink a startup really fast. The kind of people drawing caricatures of the CEO where they should be doing calculus on critical parts of the system. Letting they go is the correct move. They are 100% free to fund a better, more moral and more ethic Space-Z with their own money and promote a CEO that they like more.
I’m willing to accept the 0 to 100M to 0 plot line. But I agree, if this was a truly productive post the poster would have also admitted some level of personal culpability. They are the founder after all and the VC is just another stakeholder. The founder hired those VPs, not the VCs.
A key requirement of any company is managing your equity holders.
I'm reserving judgement until we hear both sides of the story.
Obviously, this could simply be blatant bad behavior, but as even Arun said in his post, he doesn't really know what's going on. I could easily envision a situation where the company has run out of capital and one of the founders decides to take things into their own hands to keep the idea going simply driven by passion.
Of course, if that was his motivation, his execution was remarkably poor.
You think that the startup employee, who's placed a bet on their own personal value, doesn't deserve sympathy, but the VC, who gets to hedge their bets, does?
Fair enough. I missed the part where this is an employees perspective.
WRT being selfish. It's often the last thing a founder wants. Boards, family members, and even sometimes employees - often pressure a founder into an acquisition the founder themselves isn't as keen on.
People are really good at rationalizing things that make them rich. A founder’s earnest feelings about their business’s externalities should never be taken at face value.
It was plain intimidation by the founder and further doubling down on it made it pretty clear where they stand ethically.
Whether someone wants to let the behaviour of a company's founder color their judgement of the company is upto them. But painting the whole thing as "one badly handled issue" undermines is.
"(2) to stick out with the early investors and only accept further investment provided they honour your agreement (and not try to strong-arm the early investor in giving up their rights), even though it's not rational for you (the founder) or your company to do so (however, it's rational for you+early investor)."
The rationality of ethics depends on everyone believing they are part of a multi-round game.
Hint: even if you think you are playing a single round game, you probably aren't.
If I were working at a startup and this was the content coming out of it, I'd assume they'd be hiring competitive sociopaths and the risk of politicking and aggressive diluting of shares would go way up even if it did succeed.
Yeah, I can see how that kind of behavior would result in resentment. You're right that a founder cash-out can have a lot of negative consequences, but one should make it clear that alignment is a big part of investors' concerns as well.
Exactly. It's a "sorry not sorry" guilt-alleviation "confessional" for "victim-," social approval-, and popularity-points.
Issues:
1. They took a bunch of VC cash.
2. Scaled big-and-fast, rather than carefully.
3. Decided to throw people who built their business under the bus to squeeze more short-term profits. This is fucking with people's lives in the name of money, and not even close to resembling a social venture with the values of their supposed "creator" customers.
4. Intent on coasting on their laurels to grab and stack more cash.
The behavior is "perfectly rational" only in the economics sense of that term. On a human scale, we often call it things like "sociopathic".
I will also note that companies don't have perspectives either. Which also isn't pedantry, because in analyses where we seek change to a system, we have to understand exactly who is involved and what their motivations are. So in this case it's worth being very specific that the people involved who think this is "rational" are very modest in number. The VCs, probably the rest of the board. To some extent the CEO, but as a founder it's possible he's conflicted enough that he might depart from his short-term economic incentives to protect the think he's spent a major part of his life working on. Maybe some of the execs if they came in to prep in for an IPO.
So now we're not talking about the whole company, which is 2,000 employees, thousands of volunteers, and millions of content creators. We're talking about maybe a dozen greedy people. That's a much more tractable number.
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