[spiantino]

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

[theptip]

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.

[chii]

> 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]

> 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.

[lumost]

There was a report groq missed revenue targets by 75%. It wouldn’t move hard for the board to conjure a “dire” sell or die story. As it’s not an acquisition, they are somewhat freed from proving market value.

[theptip]

It’s a good point, if they are actually struggling then a fire sale is justified.

The counterpoint would be that 3 months ago they raised $750m at a $6.9B valuation. Unless they are burning through that cash so fast that they need to start raising immediately, the missed target shouldn’t be an existential blow.

[didntknowyou]

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.

[jcheng]

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?

[lumost]

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]

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