Yes I think you are right here. The purchase price is high enough for all parties to be get return on their shares, and whilst there will be a waterfall for who gets paid first, I doubt many people will be unhappy with this deal.

Unlike Windsurf... who's 2nd employee only got 1% of what their shares were worth (https://news.ycombinator.com/item?id=44673296)

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spiantino 16 hours ago | parent | next [-]

i thought so at first, but I did some digging and changed my mind. it's possible the following is how it goes:

- secondary transaction with the preferred shareholders (VCs) at some price that implies a 20b valuation

- founders quit and get new employment agreements

- some cash is transferred to the company as a license fee

- no acquisition means no DOJ approval

in this scenario the headline can be $20b but the cash expense can be much lower, you have full flexibility to direct whatever cash or equity you want to founders vs the rest of the company, as an up front payment or as retention/salary, and the founders have no hinderance from working on anything they touched at previous company because of IP license.

I actually bet this is how it went down. This is becoming the standard in the industry and it's just awful for the future of SV

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theptip 14 hours ago | parent | next [-]

Don’t the founders (and the board) still have fiduciary duty to the common holders?

You can’t stop the founders from leaving, but selling the crown jewel IP in a transaction that doesn’t benefit the shareholders seems a stretch.

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chii 11 hours ago | parent | next [-]

> fiduciary duty to the common holders?

as long as the transaction is reasonable, they've held up this fiduciary duty.

And the minority holders will need to sue for damages in any case, it's not an "automatic" crime. The cost of that suit will be more than the value of the gains and damages awarded.

Therefore, minority shareholders in a startup are highly likely to get screwed - not to mention they don't get a say in decisions being made at the top.

The only thing preventing this is social pressure (ala, reputational damage, if the founder did it). And if the payday is high enough, the reputational damage is irrelevant (you'd be out of the game with a big enough payday!)

	▲	theptip 10 hours ago \| parent [-]
		> The cost of that suit will be more than the value of the gains and damages awarded. In many cases this is so, but here we are talking about tens of billions in value. Even a few percent of value won is worth lawyering up to the hilt for. > as long as the transaction is reasonable What does “reasonable” mean? If the OP is correct and selling the IP guts the company then it seems hard to justify. I also don’t think you can reduce the concept of fiduciary duty in this way. It’s a well-defined term of art with specific precedent.

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didntknowyou 2 hours ago | parent | prev | next [-]

likely they can vote for the deal with their personal bias without any repercussions, whereas the CFO can be directly targeted so he stayed on the ship.

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14 hours ago | parent | prev [-]

[deleted]

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jcheng 15 hours ago | parent | prev | next [-]

To make this right they’d just have to amend the first part to “secondary transaction with shareholders at some price that implies a 20b valuation”.

Has there been any evidence yet that the VCs got paid for their shares but the left behind employees didn’t?

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lumost 16 hours ago | parent | prev [-]

Wouldn't this imply that the founder's don't get paid either? The acquirer would simply need to have buy-in from the investors to make the deal happen, and the founder would need an offer that is bigger than any other possible "soft landing."

	▲	spiantino 15 hours ago \| parent [-]
		Founders could either get paid through secondary as well or through new employment agreements. Secondary is much more tax efficient, otherwise it doesn't really matter

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lumost 16 hours ago | parent | prev [-]

Doesn’t this depend on how the ip was structured? If it was kept as a separate entity, or the firm named ownership of the ip in nonstandard terms, then they could pay investors but not employees.

Unfortunately, we could likely find thousands of different ways not to pay employees given they don’t have board seats, and are typically on non standard equity.

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Salman23 13 hours ago | parent [-]

Definitely agreed that there exist thousands of different ways to not pay employees... but they don't have good incentive to cut them out.

Purely from a social contract lens, why would founders actively seek out ways to cut out their employees from a (potentially life changing) exit.

	▲	Retric 13 hours ago \| parent [-]
		So they get more money, founders are unlikely to start a new company after existing like this.