There's a bunch of problems here. For a start, laying off the team is probably the worst thing a startup founder wants to do - he likely wants to protect them a

There's a bunch of problems here. For a start, laying off the team is probably the worst thing a startup founder wants to do - he likely wants to protect them and so sending them as a unit to FitBit is better. But if we was to go down to 10 people, then if he sent the rest to FitBit they'd be competing against the current team! So he's given the choice of the company succeeding or the employees finding a new home with little disruption. Secondly, the cap table is probably fucked. It's hard to go down to a 10 person company without fixing the cap table. It's probably something like VCs own 55%, founders 25%, employees 20%. So for it to "behave" like a 10 person company, you want to recap it and make it more like a Series A company (investors 35%, founders 50%, remaining employees 15%). If you don't it's shitty for the founders and remaining employees. If you do, it's shitty for investors. Who wants stock in a Series A company at Series C prices? They wouldn't even have product market fit. And given they have the option to get their money back instead, I'd wager they'd all vote to sell. A final reason is that the culture of a company changes as it grows. They'll currently have a "big company" mentality. They'd have to switch to a "small startup" mentality, which might be tough: they might not even have "small startup" employees left (it's not uncommon to see early employees leave when the company gets too big for them to enjoy). Whereas if he starts a new company, he'll find it really easy to raise money, he can probably pull away the employees that he needs from FitBit, and he'll own almost all of it.