This is an interesting move, it seems like an acqui-hire without all the upfront money to actually do the acquiring. I wonder what someone who owned equity in Homejoy would think of this.
The extent to which the equity-holders can reasonably expect money is the extent to which the company-held IP is valuable in and of itself (or, to a lesser extent, valuable when combined with the expertise you get by hiring the team).
EDIT: Hand remaining money back to VC, say "We've received better job offers", turn off the lights and move on.
The principals might have enforceable contracts which they would be breaking by doing so; most employees -- and this is about a subset of the technical staff -- would, however, be free to leave at any time.
Can you truly force someone to work for you though, legally? I don't believe so, other than preventing the principal from receiving some sort of future-promised compensation (bonus, etc) or having a compensation clawback (which, I would think, would be extremely difficult to enforce).
Can you force them? Generally, no.
Can they be substantially penalized for failing to honor contract terms, potentially beyond merely returning any unused leftovers of what they received in exchange for their promises? Yes.
That's what I'm interested in. What could these consequences be?
(depends on the type of IP though, but you better have a really solid claim)
If this was a contributing factor to Homejoy going belly-up, rather than a consequence of the shutdown decision, they'd probably be unhappy with it, not that there is anything they could likely do. The technical staff aren't property which belongs to the company or its VC investors.
You mean someone like Google Ventures?
Since your concern appears to be "how can I make employees the slaves of investors?", that's no bad thing.
Corporate VCs are effectively a way for cash rich corporations to buy call options on promising and/or potentially disruptive teams and technologies and keep close tabs on what is happening and how things are progressing. I can't think of a situation where corporate VC was a markedly better outcome for a startup or entrepreneur than a traditional financial VC.
Perhaps they should have done more due diligence? When you invest in a company there is always a risk something like this will happen. The question is: why would you invest in a company that can't survive without constant funding injections? It seems like a house of cards that suddenly fell down when the investors stopped propping it up.
Google didn't do anything wrong. The company folded and they hired some of the employees. It sucks for the investors, but that's life.