Just because something has good intentions behind it doesn't make it more or less illegal. It might help at your sentencing when you tell the judge you were thinking about your employees families and not just lining your own pockets but it doesn't making it less of a crime. Just like stealing a loaf of bread is still stealing even if you're destitute.
How is this not "heads I win, tails you lose"?
The investor exchanged $ for % of the company. At the time of the $ for % trade, the founder probably had every intention of succeeding beyond everyone's wildest dreams. The seller's intent was never fraudulent, and buyer's remorse isn't fraud.
More to the point, keeping the company in-tact for as long as possible in hope of an aqui-hire is a justifiable end-game for a company in failure mode. If the VC wanted control over the failure mode end-game, they should've written that into the "$ for %" contract.
PG even has an essay encouraging founders to adopt this mindset: http://www.paulgraham.com/die.html "Startups rarely die in mid keystroke. So keep typing!"
If the founder legitimately believes that the company will go under and there's no chance of an aqui-hire or similar out, then maybe possibly it's fraud. But calling it fraud when a business fails and a founder makes a judgement call to "not stop typing"? Seems like "I get your money if you win, and sue you if you lose".
Because the investor will not have 100% recovery rate.
Says who? At which point in time is it "obvious" that there's "no intention, let alone hope, of actually turning it into a successful business"?
If you and I judge that point in time to be different, does that constitute fraud on the part of the person who's being less conservative? What if that person the investor? Presumably the founder also owns part of the company...
Futhermore, even "unsuccessful" ventures can have a greater than 100% recovery rate from a given point in time. An aqui-hire that loses investor money isn't a "successful" businesses, but it can end up losing a lot less cash than a company that folds a month or two before the deal is cut.
What if you force my hand and we fold but leaked confidential documents from BigCorp. indicate that if we had waited three weeks my company would've been aqui-hired for 1500% of the value of the liquidated assets? Does that make you guilty of fraud? And if not, then why is it fraud when you turn the tables?
Basically, it's really difficult for me to imagine any scenario in which the facts and intentions of all actors are clear enough to trigger koolba's scenario. And even then, it's still possible for a failed business to make it over the 100% recovery rate at the point in time when the investor things the plug should be pulled.
Or, much more likely, they only own a part of it. Maybe even a minority of it.
> including firing the CEO
Maybe the can. And if they can, and they think that's the best course of action, then they should definitely do that. It's a must cleaner solution that waiting and then crying "fraud" over a difference of opinion on the future of the company.
Hahahahaha! Oh boy, that piece of Ayn Rand junk propaganda never gets old.
Yeah, they took on so much "risk" compared to everyone else. I wonder what are they going to do when the investment fails. Are they gonna be able to get health insurance? Not default on mortgage payments? Justify holes in the resume timeline to potential employers? Put food on the table for the kids, and a roof above their heads? Send their kids to college? These are tough to do when you're "risking" so much.
Poor things, they live so close to the edge, it breaks my heart.
The people there, day after day, they gave their time. That's something we all only have a limited amount of, and that's something you'll never get back.
It is in many ways personally more rewarding, but taking a job in a startup versus a well-established business is taking a risk, accepting subpar conditions today for a shot at a big prize later on.
The employees were/are highly paid and not assuming any real risk.
What about employees who moved across the country, or who worked for two years of their lives here and lost the opportunity costs of working elsewhere, and now have nothing more than a failed company on their resume?
So, it fails, as startups often do, and you find another job. During your time there you pocked over 200k + benefits. What a rough life. What did you lose exactly?
You think that the startup employee, who's placed a bet on their own personal value, doesn't deserve sympathy, but the VC, who gets to hedge their bets, does?
If some unfortunate VC tied 100% of their assets in this, which was tied to 100% of some direct persons money, then that'd suck for sure. Not likely though.
No, they don't. They are putting more money in the game, but way less skin -- since with "skin" we usually refer to actual personal consequences (it doesn't get any more personal that our own literal skin).
And aren't VCs well compensated as well? In many cases taking the bulk of reward despite not doing any of the work?