[nrmitchi]

The actual title is "Element AI sold for $230-million as founders saw value mostly wiped out". This is an important difference, since the submitted title here implies they were entirely wiped out.

It looks like this company raised ~$250M, and sold for $230M. This isn't any sort of nefarious "founders got wiped out"; they sold for less money than they raised and this is the typical outcome in that situation.

Also, from the article:

> As part of the deal – which will see ServiceNow keep Element AI’s research scientists and patents and effectively abandon its business – the buyer has agreed to pay US$10-million to key employees and consultants including Mr. Gagne and Dr. Bengio as part of a retention plan.

This is the kind of "everyone got wiped out but the founders got an out-of-band parachute" that highlights an often-understated difference between "founders" and "just an employee". Even with a terrible outcome, founders and top executives can still manage to come out on top, and only employees actually get wiped out.

[dang]

Thanks—we've reverted the title to what the article says (shortened slightly to fit the 80 char limit).

Submitters: "Please use the original title, unless it is misleading or linkbait; don't editorialize." https://news.ycombinator.com/newsguidelines.html

[rossjudson]

If preferred shareholders gain control, common shareholders are screwed (as in zero value). I speak from personal experience. In our case, the founders and top executives absolutely went down with the ship and lost everything.

Briefly, cash was needed and investors were found at an relatively early point. The agreement set a value (V) under which the proceeds would benefit the preferred shareholders (the new investors). After the agreement was signed, the new investors joined forces with another investor achieving control. A new entity was set up, controlled by the investors, and they used their control to force the sale of the company at V, instantly destroying all common shareholder value.

All of this was announced (in a rather gloating manner) by the new head of the company. "You report to me now", basically.

This did not sit well with the staff, who had been working hard for a while. I walked that day, and within a few days the entire engineering team did as well.

For their $5 million, they got office desks, a bunch of PCs, and some half-built software they had no idea what to do with.

I suppose that did not work out particularly well for anybody ;)

[musicale]

> For their $5 million, they got office desks, a bunch of PCs, and some half-built software they had no idea what to do with.

I suppose when they sold it off it was a good deal for some other startup that needed office equipment.

> I suppose that did not work out particularly well for anybody ;)

Sounds like the staff who quit probably enjoyed their revenge, and also got a great story out of it.

[dmix]

Yeah this is basically part of the deal when you take VC and raise hundreds of millions. Don't expect much in return if you fail to deliver, or really unless you skyrocket at least 10x as expected in such arrangements.

This is the sort of middle ground where it's not a complete disaster but some value is still generated out of the entity.

[JoeAltmaier]

This always baffles me. You buy a startup that has made some progress. You want to keep going on the current product? Then keep the employees, let the 'founders' go. The founders have done their thing. But to keep the lights on will need everybody who knows how this unique thing works.

Yet they always do the opposite. As if the founders have a clue how the software/deployment/support system works at all.

[arolihas]

It also says ServiceNow agreed to hiring many of the employees in this deal so it’s not that catastrophic. Although yes their options aren’t even worth the paper they were printed on.

[908B64B197]

It's a real acqui-hire.

They basically acquired a world class AI team. Had they let the company die I'm certain most of the AI talent there would have been poached rather quickly.

[nrmitchi]

Ya, but let's not pretend that most of these employees couldn't haved walked outside and ended up with a full line up of interviews scheduled for the first week after the holidays.

[Aeolun]

> only employees actually get wiped out

Presumably they were paid a salary while they were working there.

Having to find a new job now sucks, of course, but I find it hard to say they got wiped out.