Why would investors have veto power? Did the founders and employees give up complete control over the company?
In such a situation, might it make sense for all workers to drop those investors and recreate a similar company without them?
In such a situation, might it make sense for all workers to drop those investors and recreate a similar company without them?
They often sit on the board, and also often control enough shares to outvote the founders.
> In such a situation, might it make sense for all workers to drop those investors and recreate a similar company without them?
I'm not certain but that would probably be illegal? At least immoral.
I guess the better question is, "Why would workers give up control to investors?"
>I'm not certain but that would probably be illegal? At least immoral.
I guess it would depend on the specifics of the relevant contracts, however I don't really see the immoral aspect of it. If anything, it would be the investors who were acting immorally in this situation. Slavery has been abolished and everyone is free to dissociate with whomever they'd like. Investors have no claim to force you to only work for them, for their ends, yet that is exactly what happened in the situation you described.
Because they gave you hundreds of millions of dollars. It's like saying why would a bank secure a mortgage with the house.
Loyalty is a two way street, and can be earned or taken away... "what would the company do in the opposite situation, say 'we will look after you', or 'you are on your own'?" - if the latter you should know about how much loyalty you have if you choose to walk away.
Mayharm says "the reason the workers give up control to investors is to get hundreds of millions of dollars".
The workers "give up" (if they have any say in it) control so that the company gets that money, not them.
I'm just saying that's not really the case, and it shouldn't be seen as any real quid pro quo.
It would be immoral for a founder to leave the company to start another one after taking in investors money promising them he will work hard.
It would be immoral for an employee to agree not to take commercial and technological secrets when leaving the company and sign non-compete agreements, and then do exactly that and found a competing company.
It would not be immoral for the employees to leave with a few colleagues to start their own company, but it would be immoral for the founder if the founder were to join them.
It would be immoral for employees to stop attending the office and stay home to work on their own startup while accepting a pay check.
Workers give up control to investors when the investors can give them the certainty of a pay check next month - because having control yourself means you must forgo the certainty of income in the short to medium term. This is valuable to people with debt and no savings (graduates and people with mortgages and families).
Workers don't like to give up control if they don't have to, that's why there is a proliferation of startups in Silicon Valley, and wages for software engineers are very high compared to many other professions.
Likely. Sometimes you'll do anything for the investment to keep your company afloat. I know of companies who gave up board control in their seed round.
I mean I've never been in that position but that seems pretty blatantly... idiotic.