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StabilityAI cofounder says CEO tricked him into selling stake for $100

346 points by bhouston 3y ago

SV_BubbleTime 3y ago
https://archive.is/Sl3XS https://archive.is/Sl3XS (Also, I didn’t research this author, but a reminder that for $500 or so, you too can become a writer for Forbes. They have a massive credibility issue and I suspect are cashing out what little name they have left)
- ada1981 3y ago
  Where do I sign up for $500?
- bhouston 3y ago
  It is also in Bloomberg, but it was a subscriber only line, so I found a free version of the same information.
andrewstuart 3y ago
So many people don’t do the right thing.
jujube3 3y ago
Maybe he used one of those super-persuasive AIs I keep hearing about.
dustingetz 3y ago
VCs don't like dead equity, they will have pressed for this. Nonetheless you cannot lie and this could have been resolved with integrity.
- andrewstuart 3y ago
  >> VCs don't like dead equity Isn’t a VC investment dead equity?
  - bloudermilk 3y ago
    How could you say that? VCs are there to go to bat for you, make connections that change the trajectory of your business, and support you however they can. /s
  - zeroCalories 3y ago
    Yeah, that's why they pay a lot of money to get in. Would you give your buddy joe that doesn't do any work 10% for fun?
  - s1artibartfast 3y ago
    Not if they are actively participating. They might have a seat. They might vote on deals. They might actually help. Dead equity does none of the these things. Think of it as spent or no longer in play. I don't know why some people are so touchy about the term. It's not a value judgment on the contributor. Furthermore, I would argue that a lot of the time Angel investment or friends and family investment is dead Equity too
- dpiers 3y ago
  I had a former employer call once and ask me to sign a form confirming that I had opted not to exercise the stock options worth 0.125% of the company when I left. They were raising a new round and my old grant was a sticking point because the new investors weren't content with the company not having a record of my exercise. I signed because it helped them out, cost me nothing and seemed like the right thing to do. Just think it was funny that a VC was so averse to dead equity that they made the company make sure someone who wasn't on the cap table agreed that they weren't on the cap table.
- photonbeam 3y ago
  What does dead equity mean?
  - __loam 3y ago
    Equity owned by former employees or anyone not still involved in building the company. Awesome derogatory term for people who got paid fair and square.
    - s1artibartfast 3y ago
      Dead people made a lot of contributions to the world too.. They just aren't contributing any more.
khazhoux 3y ago
Odd story. The point at which you're selling your stake for $100, you've basically decided to give it away. Which raises the question: if he was just going to get $100 and nothing more, why not just hang on to it?
- throw03172019 3y ago
  And it was in a few transactions? That’s even more odd like the CEO couldn’t afford $100 in a lump sum.
- sidewndr46 3y ago
  Yeah, I had a similar conversation with a founder a while back. Company he had founded was getting acquired. He was a minority stakeholder at this point. No ability to oppose the acquisition. Acquiring company wanted him to sign docs saying "I relinquish all my interest for no compensation". His answer was basically something like "I think you can spare $10000 if this is that important"
  - gamblor956 3y ago
    Doesn't make sense without additional facts. Such an agreement would not be valid in court as there wouldn't be an exchange of consideration.
    - hgsgm 3y ago
      That's not true. Gifts are obviously legal. Consideration is only required to enforce a contract for future performance, since otherwise there is no harm in breaking the contract.
      - gamblor956 3y ago
        Yes, gifts are legal. But the attorneys weren't asking for a gift, they were asking him to sign a binding legal document. And generally the law does not recognize "gifts" to for-profit entities; such a transaction is characterized as a contribution to the entity...which in the original comment would have defeated the very purpose of the agreement the attorneys were asking him to sign. Furthermore, consideration isn't required to enforce future performance. It's a fundamental basic requirement to have a contract in the first place. Without consideration, there is no contract.
cj 3y ago
I was chatting with a company who sold a large minority stake in their company to a well known private equity group (think 49%) with the explicit purpose of retaining control. Soon after the transaction closed, the PE firm was able to covertly buy another 2% of voting shares from a pre-existing investor in the company, which resulted in the PE firm gaining full majority control over the company, kicked out the CEO, replaced the board of directors, the whole works. The unfortunate part about these kinds of things is that 1) they happen all the time, and 2) founders rarely talk about it because doing so can so often destroy your ability to get funding for future endevors, etc. I really wish there were an anonymous but vetted "yelp" type of site for people/firms who do bad business. So much business is done in bad faith and the people on the losing end rarely have the ability to warn others of their experience without killing their own reputation.
- JohnFen 3y ago
  They call it "swimming with the sharks" for a reason.
  - deleted 3y ago
    [deleted]
  - lotsofpulp 3y ago
    The above situation seems like swimming with goldfish. If you have less than 50% yourself, why would you bank on someone else not being able to get more than 50%?
    - JohnFen 3y ago
      It was misplaced trust. That's a really easy mistake to make until you've been burned by it. I'll bet that person won't make that mistake a second time. But better is to avoid swimming with the sharks at all. I have a wonderful horror story about a business deal I made where I was cheated out of about $5 mil. I didn't trust the party I was doing the deal with, so the contract negotiations took most of a year and the contract ended up being very thick as my attorney and I tried to anticipate and block every possible way that I could get screwed. But we missed one rather obscure method. That's what happens when you swim with sharks. (Don't shed tears for me, though. I did very well through that deal -- just not as well as I should have.)
epolanski 3y ago
May I just say, that the most ridiculous thing in this news really is selling a 15% stake in a company for $100? I'm no way rich, but I would not even bother taking the time to go to a lawyer or whatever and do all this kind of paperwork for such a ridiculous amount of money, I'd just ride it however it goes and not care.
- Michelangelo11 3y ago
  Right? Like ... what happened in that transaction? My feeling is that the guy also got some favors or something under the table, and the $100 was purely nominal. If that's the case, it could be that whatever he was promised didn't actually pan out, and now he's suing in retaliation. In any case, "$100 for a 15% stake" simply cannot be the whole story.
- sigstoat 3y ago
  > May I just say, that the most ridiculous thing in this news really is selling a 15% stake in a company for $100? no kidding. i wouldn’t sell a 15% stake in a lemonade stand for $100. that doesn’t even cover the hassle of reviewing the contract and signing a bunch of notarized paperwork
  - getmeinrn 3y ago
    I can think of a scenario where someone might. Suppose you made it very easy for them to sign it over, with the contracts ready and someone in person ready to guide you through signing them. You could apply guilt and some made up scenario about needing those shares back so that the company can move forwards. Enough spin and pressure could do it.
- wongarsu 3y ago
  Owning a 15% stake in a company also generates paperwork. Long-term, getting rid of it should be less paperwork overall.
- winddude 3y ago
  That was my initial reaction as well, maybe he had concern about being liable or something... but yea, seems like something is up there...
kkielhofner 3y ago
One of the biggest warnings with "equity" in a startup: Even if you know what you're doing and you watch it like a hawk it's pretty easy for other parties to pull any number of shady but technically legal moves to significantly devalue yours/others while protecting their own. If this proves to have merit it's one of the more shocking (yet straightforward) instances of this kind of unfortunately routine behavior. That said it's a little hard to believe anyone would take $100 instead of holding on to it to see what happens. Depending on personal circumstances I can see how $100k or more could be tempting but $100 is ridiculous.
qiaoliang89 3y ago
epic cover photo...
system2 3y ago
I ate dinner last night and cost me $100. What kind of weirdness is this?
andrewstuart 3y ago
Isn’t this essentially what Zuckerberg did to his cofounder? Or some variant of the same recipe…,
- rexreed 3y ago
  Not quite -- Eduardo Saverin has had a pretty good life after he was diluted out. "Eduardo Luiz Saverin is a Brazilian billionaire entrepreneur and angel investor based in Singapore. Saverin is one of the co-founders of Facebook. In 2012, he owned 53 million Facebook shares (approximately 2% of all outstanding shares), valued at approximately $2 billion at the time" https://en.wikipedia.org/wiki/Eduardo_Saverin https://en.wikipedia.org/wiki/Eduardo_Saverin I'd say nothing like giving up a stake for $100
  - JustLurking2022 3y ago
    He had to go through a lawsuit to get them... kinda like the story.
  - jononomo 3y ago
    Saverin had to sue Zuckerberg to get the money though, which is what the guy in this story is also doing.
  - sergiotapia 3y ago
    How do you go from cofounder 50% to owning 2%? Did he just trust his friend like most of us would and the zucc made him sign a document he didn't bother to review?
    - aledalgrande 3y ago
      > after he was diluted out
iambateman 3y ago
I was part of a group which ceded managerial control of a small business (think 100-500k/year) to a minority shareholder. This person was paid a professional salary to maintain the business, while we kept majority voting rights. We still had majority ownership until he decided he didn’t give a ** about our ownership claims and openly did his own thing. The problem is, no lawyer is going to take the case because the $$ is too small and we would be risking our own capital vs the company capital. The worst part…it’s an LLC and the manager remains kind enough to send the tax statement each year, so I pay for the privilege of having a company stolen from me. Choose your business partners carefully. :(
- fallingknife 3y ago
  You had majority voting, right. Why not just fire him.
- codethief 3y ago
  I don't understand. You have majority ownership and you can't fire the manager of your own company?
- icedchai 3y ago
  The company is yours. Why can't you use its capital? Do you no longer have access to the bank accounts?
- bhouston 3y ago
  It is confusing what when on here. If you hired him then you have a contract. Fire him. And if he doesn’t leave or return bank accounts or money get the police to charge him with trespass or thief depending. Also he has probably misappropriated money so find that and claw it back.
  - iambateman 3y ago
    It’s hard to explain, but it’s…complicated.
    - 3y ago
varelse 3y ago
[dead]
Dreako 3y ago
[flagged]
anotheryou 3y ago
Not that I could judge for either side here, but I feel we are missing part of the story. Who would sell anything like that for 100 dollars in 2 transactions? If it really was worth nearly nothing I'd probably not ask my cofounder to pay me 100 bucks for it either.
ansk 3y ago
This dude very well may be better off with the 100 bucks at this point. The company is bleeding money at a ridiculous rate, so they're going to need to fundraise shortly. Given how little they have to show for their initial funding, they're going to struggle to attract any further investments. The initial investors already look like absolute clowns for giving a $1B valuation to a company whose primary selling points were 1) a model which was state-of-the-art for maybe a month 2) a github repo with a lot of stars and 3) a loose association to some mediocre researchers. Unless they can find someone to hold the bag in the very near future, their equity is going to be just about worthless.
- ivalm 3y ago
  The loose association was with decent researchers, no need to bring them down. I do agree about the rest.
  - ansk 3y ago
    Mediocre in regard to the standard set by other research teams pulling $1B+ valuations. The OpenAI founding team and the recently announced team at xAI are what I would consider to be exceptionally strong groups. Adept, Anthropic, Inflection, and character.ai are also strong. Look at the track records and accolades of researchers at these groups. Ilya Sutskever alone has more research experience than the combined team of phd students Emad was working with (and eventually hired).
    - anonylizard 3y ago
      Wow, the AI field has barely boomed for like 1 year, and we are already all-in on credentialism? Stable Diffusion has had a very large impact on the entire arts industry, far more people have used SD than have Claude or pi. If another open source startup can reach that level of industry shaking fame and intense user interest, they could have easily be valued at 1B. If SDXL works out, that'll be another large leap forward. Midjourney's models are stronger, but they can't compete against a legion of 1000 fine-tunes for every purpose.
dpiers 3y ago
This story by itself might sound like sour grapes, but in combination with other reports about the CEO(1), I suspect bad news ahead for Stability's investors. It seems like a narcissist with a very 'dynamic' relationship with the truth chased the AI hype train and ended up with a bunch of money and attention due to a stupid VC. He pissed off the teams that invented Latent Diffusion and his partners at RunwayML in the process, and now it seems like his cofounder as well. What value is there in a company that's only famous because they spent $600k in VC money training an open source model on AWS? 1: https://www.forbes.com/sites/kenrickcai/2023/06/04/stable-diffusion-emad-mostaque-stability-ai-exaggeration https://www.forbes.com/sites/kenrickcai/2023/06/04/stable-di...
- kristopolous 3y ago
  The finance side of the AI boom is just the crypto bros chasing a new hustle. Before that they were the Uber for x/y as a service people. It's a shame we can't get things financed without these PT Barnum clown cars
  - fsckboy 3y ago
    it would actually be pretty cool if we could run Uber Pool with PT Barnum clown cars!
    - kristopolous 3y ago
      Knowing Uber, they'd probably force the drivers to listen to the Benny Hill Theme on a loop.
  - TheNewsIsHere 3y ago
    I have often thought that the current AI hype is a perfect example in some intersection of i) tragedy of the commons; ii) the idea that you don’t have to be smart or skilled to make money; and iii) new fools and new shills are born every minute.
  - devjab 3y ago
    I'm not convinced they are throwing money at nothing this time. If you look into my post history (don't, I'll give you a tl/dr) you can see me being fairly critical about the state of LLMs, but also that I find them incredibly useful for some things. GPT basically writes 95% of our documentation now, only the code we absolutely don't want to share with the internet is still be documented by hand. And that is just a tiny bit of how the new AI boom is actually useful. My wife works with dyslexic people, and the amount of usability AI has in terms of turning the written word into audio is outright amazing. I'm sure this will be hard on a lot of voice actors, copy writers and so on, but AI can do those jobs and a lot of other things. To me that means that, unlike blockchain, there is actually a viable product behind all the AI hype, and unlike Uber companies have already started selling it rather than waiting for it to become profitable through scale. Maybe it's just me but the AI hype reminds me a lot more of the dotcom era than any of the recent hype cycles. Of course this means that for every Amazon or Google there will be 9 million failures, and unlike the dotcom era, it's likely that it'll be Google (or most likely Microsoft) who hits the jackpot, meaning it'll be even harder to find the right investment opportunities this time, but I don't think it's a fad.
worik 3y ago
High finance. It is best understood by modelling it as an international criminal conspiracy. All models are wrong.....
idlewords 3y ago
The captains of this new industry selling their stake for a handful of magic beans is not great news for solving the AI alignment problem.
YetAnotherNick 3y ago
If the cofounder is that level of unaware about the existence of his own company, I would say it was even right to take shares from him. The worst case scenario is that CEO has to dissolve previous company and create a new one to take that 15%.
morpheuskafka 3y ago
What's the point of cashing out for literally $100? That's barely a single grocery trip. At that point, even if it was nearly worthless you may as well keep the stock certificate as a souvenir and hold on to a small hope things turn around.
Mizoguchi 3y ago
How broke someone has to be to sell 15% of anything for 100 bucks? Just the domain name was probably worth 10 times that.
NoZebra120vClip 3y ago
Man, he should've at least held out for a sack of magic beans!
- NoZebra120vClip 3y ago
  ...or a couple of BTC?
anonzzzies 3y ago
Seems more and more of these stories make company owners sound like criminals. Those exist surely and we do have a movie about Zuck, but while that seemed interesting enough to make a movie about, it now seems to quite normal. People murder for a few bucks, how does this ceo sleep at night? It is not ‘just business’.
sharts 3y ago
It's like spending your worthless bitcoin on pizza.
vpastore 3y ago
[dead]
max_cooper 3y ago
Corporations do not benefit from open source as a phenomenon. Another attack on Emad from Forbes, which is clearly paid for and lobbies for the interests of AI giants.
ChemSpider 3y ago
I assume this guy has a decent income and is not desperate for money. Why would he sell anything for $100??? Time, effort, legal fees and whatnot are much higher than $100. Even if the company would be indeed worthless, I would not bother selling my shares for $100. I would just watch them go to 0.
Aeroi 3y ago
As crappy as this is... There's a hard case the CEO would have never raised a dollar if there was 15% of zombie equity on the cap table, making this guys 15% stake worthless anyway. However, if he refused to sell his 15% stake, there's absolutely no reason why you wouldn't incorporate a separate business all together, especially if you were on the cusp of fundraising a massive round. Summary: Bad business by the CEO, poor thinking by the stakeholder, Bad due-diligence by the VC firms. /end
emadm 3y ago
https://www.cultofmac.com/475927/ron-wayne-quits-apple/ https://www.cultofmac.com/475927/ron-wayne-quits-apple/
throw14082020 3y ago
It takes a few years before liars/fraudsters are put behind bars. I enjoyed this video today about Alex Mashinsky who lied a lot and was finally arrested for fraud: https://www.youtube.com/watch?v=zRpl7Pr0fs4 https://www.youtube.com/watch?v=zRpl7Pr0fs4
vaxman 3y ago
The founder of DataTree (bought by NYSE:FAF) did something similar and got away with it bc coming forward would have wrecked all the mom n pops as the acquisition fell thru. Of course, the mom n pops turned into nasty bitches as soon as they received their wires, but…

346 points by bhouston 3y ago

https://archive.is/Sl3XS https://archive.is/Sl3XS (Also, I didn’t research this author, but a reminder that for $500 or so, you too can become a writer for Forbes. They have a massive credibility issue and I suspect are cashing out what little name they have left)

ada1981 3y ago
Where do I sign up for $500?
bhouston 3y ago
It is also in Bloomberg, but it was a subscriber only line, so I found a free version of the same information.

andrewstuart 3y ago

So many people don’t do the right thing.

jujube3 3y ago

Maybe he used one of those super-persuasive AIs I keep hearing about.

dustingetz 3y ago

VCs don't like dead equity, they will have pressed for this. Nonetheless you cannot lie and this could have been resolved with integrity.

andrewstuart 3y ago
>> VCs don't like dead equity Isn’t a VC investment dead equity?
- bloudermilk 3y ago
  How could you say that? VCs are there to go to bat for you, make connections that change the trajectory of your business, and support you however they can. /s
- zeroCalories 3y ago
  Yeah, that's why they pay a lot of money to get in. Would you give your buddy joe that doesn't do any work 10% for fun?
- s1artibartfast 3y ago
  Not if they are actively participating. They might have a seat. They might vote on deals. They might actually help. Dead equity does none of the these things. Think of it as spent or no longer in play. I don't know why some people are so touchy about the term. It's not a value judgment on the contributor. Furthermore, I would argue that a lot of the time Angel investment or friends and family investment is dead Equity too
dpiers 3y ago
I had a former employer call once and ask me to sign a form confirming that I had opted not to exercise the stock options worth 0.125% of the company when I left. They were raising a new round and my old grant was a sticking point because the new investors weren't content with the company not having a record of my exercise. I signed because it helped them out, cost me nothing and seemed like the right thing to do. Just think it was funny that a VC was so averse to dead equity that they made the company make sure someone who wasn't on the cap table agreed that they weren't on the cap table.
photonbeam 3y ago
What does dead equity mean?
- __loam 3y ago
  Equity owned by former employees or anyone not still involved in building the company. Awesome derogatory term for people who got paid fair and square.
  - s1artibartfast 3y ago
    Dead people made a lot of contributions to the world too.. They just aren't contributing any more.

khazhoux 3y ago

Odd story. The point at which you're selling your stake for $100, you've basically decided to give it away. Which raises the question: if he was just going to get $100 and nothing more, why not just hang on to it?

throw03172019 3y ago
And it was in a few transactions? That’s even more odd like the CEO couldn’t afford $100 in a lump sum.
sidewndr46 3y ago
Yeah, I had a similar conversation with a founder a while back. Company he had founded was getting acquired. He was a minority stakeholder at this point. No ability to oppose the acquisition. Acquiring company wanted him to sign docs saying "I relinquish all my interest for no compensation". His answer was basically something like "I think you can spare $10000 if this is that important"
- gamblor956 3y ago
  Doesn't make sense without additional facts. Such an agreement would not be valid in court as there wouldn't be an exchange of consideration.
  - hgsgm 3y ago
    That's not true. Gifts are obviously legal. Consideration is only required to enforce a contract for future performance, since otherwise there is no harm in breaking the contract.
    - gamblor956 3y ago
      Yes, gifts are legal. But the attorneys weren't asking for a gift, they were asking him to sign a binding legal document. And generally the law does not recognize "gifts" to for-profit entities; such a transaction is characterized as a contribution to the entity...which in the original comment would have defeated the very purpose of the agreement the attorneys were asking him to sign. Furthermore, consideration isn't required to enforce future performance. It's a fundamental basic requirement to have a contract in the first place. Without consideration, there is no contract.

cj 3y ago

I was chatting with a company who sold a large minority stake in their company to a well known private equity group (think 49%) with the explicit purpose of retaining control. Soon after the transaction closed, the PE firm was able to covertly buy another 2% of voting shares from a pre-existing investor in the company, which resulted in the PE firm gaining full majority control over the company, kicked out the CEO, replaced the board of directors, the whole works. The unfortunate part about these kinds of things is that 1) they happen all the time, and 2) founders rarely talk about it because doing so can so often destroy your ability to get funding for future endevors, etc. I really wish there were an anonymous but vetted "yelp" type of site for people/firms who do bad business. So much business is done in bad faith and the people on the losing end rarely have the ability to warn others of their experience without killing their own reputation.

JohnFen 3y ago
They call it "swimming with the sharks" for a reason.
- deleted 3y ago
  [deleted]
- lotsofpulp 3y ago
  The above situation seems like swimming with goldfish. If you have less than 50% yourself, why would you bank on someone else not being able to get more than 50%?
  - JohnFen 3y ago
    It was misplaced trust. That's a really easy mistake to make until you've been burned by it. I'll bet that person won't make that mistake a second time. But better is to avoid swimming with the sharks at all. I have a wonderful horror story about a business deal I made where I was cheated out of about $5 mil. I didn't trust the party I was doing the deal with, so the contract negotiations took most of a year and the contract ended up being very thick as my attorney and I tried to anticipate and block every possible way that I could get screwed. But we missed one rather obscure method. That's what happens when you swim with sharks. (Don't shed tears for me, though. I did very well through that deal -- just not as well as I should have.)

epolanski 3y ago

May I just say, that the most ridiculous thing in this news really is selling a 15% stake in a company for $100? I'm no way rich, but I would not even bother taking the time to go to a lawyer or whatever and do all this kind of paperwork for such a ridiculous amount of money, I'd just ride it however it goes and not care.

Michelangelo11 3y ago
Right? Like ... what happened in that transaction? My feeling is that the guy also got some favors or something under the table, and the $100 was purely nominal. If that's the case, it could be that whatever he was promised didn't actually pan out, and now he's suing in retaliation. In any case, "$100 for a 15% stake" simply cannot be the whole story.
sigstoat 3y ago
> May I just say, that the most ridiculous thing in this news really is selling a 15% stake in a company for $100? no kidding. i wouldn’t sell a 15% stake in a lemonade stand for $100. that doesn’t even cover the hassle of reviewing the contract and signing a bunch of notarized paperwork
- getmeinrn 3y ago
  I can think of a scenario where someone might. Suppose you made it very easy for them to sign it over, with the contracts ready and someone in person ready to guide you through signing them. You could apply guilt and some made up scenario about needing those shares back so that the company can move forwards. Enough spin and pressure could do it.
wongarsu 3y ago
Owning a 15% stake in a company also generates paperwork. Long-term, getting rid of it should be less paperwork overall.
winddude 3y ago
That was my initial reaction as well, maybe he had concern about being liable or something... but yea, seems like something is up there...

kkielhofner 3y ago

One of the biggest warnings with "equity" in a startup: Even if you know what you're doing and you watch it like a hawk it's pretty easy for other parties to pull any number of shady but technically legal moves to significantly devalue yours/others while protecting their own. If this proves to have merit it's one of the more shocking (yet straightforward) instances of this kind of unfortunately routine behavior. That said it's a little hard to believe anyone would take $100 instead of holding on to it to see what happens. Depending on personal circumstances I can see how $100k or more could be tempting but $100 is ridiculous.

qiaoliang89 3y ago

epic cover photo...

system2 3y ago

I ate dinner last night and cost me $100. What kind of weirdness is this?

andrewstuart 3y ago

Isn’t this essentially what Zuckerberg did to his cofounder? Or some variant of the same recipe…,

rexreed 3y ago
Not quite -- Eduardo Saverin has had a pretty good life after he was diluted out. "Eduardo Luiz Saverin is a Brazilian billionaire entrepreneur and angel investor based in Singapore. Saverin is one of the co-founders of Facebook. In 2012, he owned 53 million Facebook shares (approximately 2% of all outstanding shares), valued at approximately $2 billion at the time" https://en.wikipedia.org/wiki/Eduardo_Saverin https://en.wikipedia.org/wiki/Eduardo_Saverin I'd say nothing like giving up a stake for $100
- JustLurking2022 3y ago
  He had to go through a lawsuit to get them... kinda like the story.
- jononomo 3y ago
  Saverin had to sue Zuckerberg to get the money though, which is what the guy in this story is also doing.
- sergiotapia 3y ago
  How do you go from cofounder 50% to owning 2%? Did he just trust his friend like most of us would and the zucc made him sign a document he didn't bother to review?
  - aledalgrande 3y ago
    > after he was diluted out

iambateman 3y ago

I was part of a group which ceded managerial control of a small business (think 100-500k/year) to a minority shareholder. This person was paid a professional salary to maintain the business, while we kept majority voting rights. We still had majority ownership until he decided he didn’t give a ** about our ownership claims and openly did his own thing. The problem is, no lawyer is going to take the case because the $$ is too small and we would be risking our own capital vs the company capital. The worst part…it’s an LLC and the manager remains kind enough to send the tax statement each year, so I pay for the privilege of having a company stolen from me. Choose your business partners carefully. :(

fallingknife 3y ago
You had majority voting, right. Why not just fire him.
codethief 3y ago
I don't understand. You have majority ownership and you can't fire the manager of your own company?
icedchai 3y ago
The company is yours. Why can't you use its capital? Do you no longer have access to the bank accounts?
bhouston 3y ago
It is confusing what when on here. If you hired him then you have a contract. Fire him. And if he doesn’t leave or return bank accounts or money get the police to charge him with trespass or thief depending. Also he has probably misappropriated money so find that and claw it back.
- iambateman 3y ago
  It’s hard to explain, but it’s…complicated.
  - 3y ago

varelse 3y ago

[dead]

Dreako 3y ago

[flagged]

anotheryou 3y ago

Not that I could judge for either side here, but I feel we are missing part of the story. Who would sell anything like that for 100 dollars in 2 transactions? If it really was worth nearly nothing I'd probably not ask my cofounder to pay me 100 bucks for it either.

ansk 3y ago

This dude very well may be better off with the 100 bucks at this point. The company is bleeding money at a ridiculous rate, so they're going to need to fundraise shortly. Given how little they have to show for their initial funding, they're going to struggle to attract any further investments. The initial investors already look like absolute clowns for giving a $1B valuation to a company whose primary selling points were 1) a model which was state-of-the-art for maybe a month 2) a github repo with a lot of stars and 3) a loose association to some mediocre researchers. Unless they can find someone to hold the bag in the very near future, their equity is going to be just about worthless.

ivalm 3y ago
The loose association was with decent researchers, no need to bring them down. I do agree about the rest.
- ansk 3y ago
  Mediocre in regard to the standard set by other research teams pulling $1B+ valuations. The OpenAI founding team and the recently announced team at xAI are what I would consider to be exceptionally strong groups. Adept, Anthropic, Inflection, and character.ai are also strong. Look at the track records and accolades of researchers at these groups. Ilya Sutskever alone has more research experience than the combined team of phd students Emad was working with (and eventually hired).
  - anonylizard 3y ago
    Wow, the AI field has barely boomed for like 1 year, and we are already all-in on credentialism? Stable Diffusion has had a very large impact on the entire arts industry, far more people have used SD than have Claude or pi. If another open source startup can reach that level of industry shaking fame and intense user interest, they could have easily be valued at 1B. If SDXL works out, that'll be another large leap forward. Midjourney's models are stronger, but they can't compete against a legion of 1000 fine-tunes for every purpose.

dpiers 3y ago

This story by itself might sound like sour grapes, but in combination with other reports about the CEO(1), I suspect bad news ahead for Stability's investors. It seems like a narcissist with a very 'dynamic' relationship with the truth chased the AI hype train and ended up with a bunch of money and attention due to a stupid VC. He pissed off the teams that invented Latent Diffusion and his partners at RunwayML in the process, and now it seems like his cofounder as well. What value is there in a company that's only famous because they spent $600k in VC money training an open source model on AWS? 1: https://www.forbes.com/sites/kenrickcai/2023/06/04/stable-diffusion-emad-mostaque-stability-ai-exaggeration https://www.forbes.com/sites/kenrickcai/2023/06/04/stable-di...

kristopolous 3y ago
The finance side of the AI boom is just the crypto bros chasing a new hustle. Before that they were the Uber for x/y as a service people. It's a shame we can't get things financed without these PT Barnum clown cars
- fsckboy 3y ago
  it would actually be pretty cool if we could run Uber Pool with PT Barnum clown cars!
  - kristopolous 3y ago
    Knowing Uber, they'd probably force the drivers to listen to the Benny Hill Theme on a loop.
- TheNewsIsHere 3y ago
  I have often thought that the current AI hype is a perfect example in some intersection of i) tragedy of the commons; ii) the idea that you don’t have to be smart or skilled to make money; and iii) new fools and new shills are born every minute.
- devjab 3y ago
  I'm not convinced they are throwing money at nothing this time. If you look into my post history (don't, I'll give you a tl/dr) you can see me being fairly critical about the state of LLMs, but also that I find them incredibly useful for some things. GPT basically writes 95% of our documentation now, only the code we absolutely don't want to share with the internet is still be documented by hand. And that is just a tiny bit of how the new AI boom is actually useful. My wife works with dyslexic people, and the amount of usability AI has in terms of turning the written word into audio is outright amazing. I'm sure this will be hard on a lot of voice actors, copy writers and so on, but AI can do those jobs and a lot of other things. To me that means that, unlike blockchain, there is actually a viable product behind all the AI hype, and unlike Uber companies have already started selling it rather than waiting for it to become profitable through scale. Maybe it's just me but the AI hype reminds me a lot more of the dotcom era than any of the recent hype cycles. Of course this means that for every Amazon or Google there will be 9 million failures, and unlike the dotcom era, it's likely that it'll be Google (or most likely Microsoft) who hits the jackpot, meaning it'll be even harder to find the right investment opportunities this time, but I don't think it's a fad.

worik 3y ago

High finance. It is best understood by modelling it as an international criminal conspiracy. All models are wrong.....

idlewords 3y ago

The captains of this new industry selling their stake for a handful of magic beans is not great news for solving the AI alignment problem.

YetAnotherNick 3y ago

If the cofounder is that level of unaware about the existence of his own company, I would say it was even right to take shares from him. The worst case scenario is that CEO has to dissolve previous company and create a new one to take that 15%.

morpheuskafka 3y ago

What's the point of cashing out for literally $100? That's barely a single grocery trip. At that point, even if it was nearly worthless you may as well keep the stock certificate as a souvenir and hold on to a small hope things turn around.

Mizoguchi 3y ago

How broke someone has to be to sell 15% of anything for 100 bucks? Just the domain name was probably worth 10 times that.

NoZebra120vClip 3y ago

Man, he should've at least held out for a sack of magic beans!

NoZebra120vClip 3y ago
...or a couple of BTC?

anonzzzies 3y ago

Seems more and more of these stories make company owners sound like criminals. Those exist surely and we do have a movie about Zuck, but while that seemed interesting enough to make a movie about, it now seems to quite normal. People murder for a few bucks, how does this ceo sleep at night? It is not ‘just business’.

sharts 3y ago

It's like spending your worthless bitcoin on pizza.

vpastore 3y ago

[dead]

max_cooper 3y ago

Corporations do not benefit from open source as a phenomenon. Another attack on Emad from Forbes, which is clearly paid for and lobbies for the interests of AI giants.

ChemSpider 3y ago

I assume this guy has a decent income and is not desperate for money. Why would he sell anything for $100??? Time, effort, legal fees and whatnot are much higher than $100. Even if the company would be indeed worthless, I would not bother selling my shares for $100. I would just watch them go to 0.

Aeroi 3y ago

As crappy as this is... There's a hard case the CEO would have never raised a dollar if there was 15% of zombie equity on the cap table, making this guys 15% stake worthless anyway. However, if he refused to sell his 15% stake, there's absolutely no reason why you wouldn't incorporate a separate business all together, especially if you were on the cusp of fundraising a massive round. Summary: Bad business by the CEO, poor thinking by the stakeholder, Bad due-diligence by the VC firms. /end

emadm 3y ago

https://www.cultofmac.com/475927/ron-wayne-quits-apple/ https://www.cultofmac.com/475927/ron-wayne-quits-apple/

throw14082020 3y ago

It takes a few years before liars/fraudsters are put behind bars. I enjoyed this video today about Alex Mashinsky who lied a lot and was finally arrested for fraud: https://www.youtube.com/watch?v=zRpl7Pr0fs4 https://www.youtube.com/watch?v=zRpl7Pr0fs4

vaxman 3y ago

The founder of DataTree (bought by NYSE:FAF) did something similar and got away with it bc coming forward would have wrecked all the mom n pops as the acquisition fell thru. Of course, the mom n pops turned into nasty bitches as soon as they received their wires, but…