[zackattack]

Can someone please clarify the ethical as well as legal ramifications of subverting investors by starting a new company?

For example: You start company A, in market M. Your investors give you 5k in exchange for 50%. You spend your 5k learning about market M and now you're diluted. What's stopping you from creating company B, to attack same market, but from an enhanced perspective?

[michael_dorfman]

In many cases, there are contracts in place to prevent exactly that.

When I cashed out of my first startup, I was legally prohibited for working in that domain for X years.