Working at a zombie company with very little chance of success isn't a great gig either. Shutting it down cleanly, paying decent severance, and letting the staff move on is a good move for them too.
I don't understand what this even means. For everyone involved in a startup, time is the most precious resource they're investing. If the startup is doomed, pretending it isn't and keeping employees on the hook is the worst thing a founder can do. And what is "blood equity"?
>> founder and team with nothing to lose is more likely to pull a rabbit out of that blood-equity-soaked hat.
> what is "blood equity"?
Even failing startups, with little cash and poor market penetration are often worth something to somebody. It could be a small client list, the team, patents, or just an attractive domain name. Most founders leading failing startups will try to sell to suitors for pennies on the dollar invested. Sometimes they get a small cash bump (or in WeWork's case, a small $1B), but it also means they can say they were acquired rather than simply failed. And they're right, building a company and selling it for $1.00 is far more difficult than not selling it at all.
Investors don't always like this because they recognize the loss at acquisition, which hurts their published returns. But more often, they don't care. They know the odds before-hand and prepare for events like this.
The people who lose the hardest are the employees with just stock-options or small equity stakes. Everyone's stock will be worthless, but the founder can potentially walk-away with a decent "consulting" contract. The best a standard employee can hope for is being hired by the acquiring company and that their culture doesn't suck.
From the employees perspective, the bright side is that they are often the first people to figure out that a company is doomed (before investors, customers, or the press). They have the advantage of time when it comes to planning their next move.
