[pbiggar]

In the article, it says they made this decision after much discussion with the board. The board is the investors, so the investors are probably OK with this.

It's likely the investors were investing in "the next big social network". When it became clear that this wasn't going to be successful, they were faced with the choice of get 80% of their money back, or to "invest" (as it were) that money in the remaining team.

Maybe the remaining team had an idea, but the investor didnt want to invest in that idea. Or maybe the team was tired and didn't want to continue, and the investor would prefer their money back then try to force the team to continue.