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.
If the only valuable asset of the company is the talent, and the talent is composed of at will employees, then the company doesn't have a valuable asset.
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).
Is there anything legally preventing a startup from folding regardless of their VC's demands and going to work for someone else if an offer is extended?
EDIT: Hand remaining money back to VC, say "We've received better job offers", turn off the lights and move on.
> Is there anything legally preventing a startup from folding regardless of their VC's demands and going to work for someone else if an offer is extended?
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.
> The principals might have enforceable contracts which they would be breaking by doing so
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 truly force someone to work for you though, legally?
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.
> 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?
Through non compete agreements specified in the contract maybe? That person is not literally forced to work for you but can't work for a competitor where his/her skills will be the most valuable.
Nothing and some market players are known to make generous offers to the critical people they're interested in. For the entrepreneur "raise some angel money to help build a resume" strategy works only once though.
Maybe issues with intellectual property? VC's lawyers could be ready to pounce if the former employees do things very close to what they were doing. (IANAL).
> I wonder what someone who owned equity in Homejoy would think of this.
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.
That doesn't resolve my concern. It actually makes things even shadier in my mind since Google Ventures was just one of many backers. A cynical mind might view this move as simultaneously acquiring the tech talent behind a startup, laying off any non-essential staff that wouldn't be attractive to acquire, freezing out all the other investors who had money in the company, and ducking the lawsuits that the previous company was involved in.
I've always been skeptical of corporate/strategic VCs for exactly this reason. At the end of the day, no matter what kind of Chinese wall you put in there, people are people and corporate agenda is a corporate agenda and it's perhaps naive to think you can separate the two.
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.
What's wrong with hiring someone? I've never understood why investors, sales/idea people, and various other hangers-on should be rewarded during the acquisition of a technical team.
>I wonder what someone who owned equity in Homejoy would think of this.
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.
Maybe there is something to do with taking on the liability of possible legal action? From what I understand reclassification suits are retroactive. I'm not sure how that works with an acquisition, but I wonder if that had something to do with it.
