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The Lessons Google Ventures Learned from Secret

115 points by awwstn 11y ago

jefflinwood 11y ago
One of the most interesting economics lessons from the Secret shutdown relates to the $6 million of stock sold by the founders to investors. Because the founders had taken some money off of the table, presumably now sitting in the form of a money market account + a red Ferrari, they probably didn't have to ride the Secret company all the way down to zero - they could see that the app wasn't going to be the next Snapchat or WhatsApp, and now that they had a few million dollars, their time was suddenly worth a lot more - they could take some of that money, create a prototype, and shop it around to get more funding. Compare that to an app like Path, which has raised lots of money, but hasn't gotten traction anywhere except Indonesia. Now they're using their late round investment dollars to try to see if a GIF selfie app, a chat app, or a concierge/customer support service will take them to the next level. Of course, that's just what they've launched - presumably there are lots of mobile app prototypes that haven't seen the light of day. Will Path's investors get their money back? I don't know. Secret's investors at least have their money back to fund more app ideas, after they've shown some promise.
- boling11 11y ago
  It's an interesting point, although Path may not be the best counter example since Path's founder is well off from being early at Facebook.
- philipn 11y ago
  Yeah, I'm not sure there's really a whole lot we can glean from the purchase of founders' stock here. To an outsider, it feels unfair, but I agree that without it the founders would have likely spent that $25M down to zero.
  - MCRed 11y ago
    How does it feel unfair to sell stock to investors? In the current scheme new shares are issued and everybody gets diluted, so the founders have less economic interest (as does every other employee). If the founders take some money off of the table, then they're just selling their shares directly--- and there's less dilution. (It's not the case that they're just pocketing some of the proceeds from the investment.) In that case the employees will be diluted less than they would be if the same investment amount was made and the founders didn't sell any of their shares. So it's better for employees. Ideally, though, I think all employees including founders, should be able to sell some of their vested shares in each round of funding. Maybe %10?
  - toast0 11y ago
    $6M seems like a lot to take out of a $25M round, but if the investors were ok with it, and the founders were ok with it, how is it not fair? Earlier investors don't seem happy about it, but I'm not sure how much weight that has; early investors often have to accept new terms during a fund raising round; for better or worse.
    - pbiggar 11y ago
      Does it? They sold $6/160 = 3.75% of the company, likely about 15% of their holdings. Seems reasonable given the valuation.
- nedwin 11y ago
  You think Dave Morin hasn't taken any money off the table? You're kidding yourself.
MCRed 11y ago
I think founders should take some money off of the table in every investment round, beyond the seed/incubator stage. (In fact probably every employee should be able to do this, maybe to a max of %10 or %20 of vested shares.) The first reason is that you want he founders to be focused on the company, and not struggling to make ends meet. That way they can make long term decisions. Secondly, every round the founders lose more and more control. They should be compensated for this. Yes, they have economic dilution from the investment as it is now, but some of the shares the investors buy should be founders shares. This results in less dilution for the company, and is a repayment of the sweat equity they founders have created. One of the big problems with venture capital these days (and the reason I won't take it anymore) is that it disrespects the founders by demanding liquidation preferences for the VCs. As if the VCs who merely put up other people's money should have rights superior to the people who literally put part of their life into the company. That's not right. All shares should be equal, and if not, the founders should at least be respected. (For those firing up your keyboards to explain to me why LPs are necessary, two points: 1) I've heard a bunch of arguments for this already. 2) they've all come from VCs and are self serving. You can't really make an argument that it's better for the company or fair for the founders.) Thirdly, too often I've seen VCs force founders to revest shares. But the value of those shares was already earned. The founder incentive to do well comes from increasing the value of the shares... and revesting the shares denies the founders crucial voting rights that they have earned already. (And makes it that much easier for the VCs to force a founder out, which is usually a bad idea in my experience.)
- ztratar 11y ago
  "The first reason is that you want he founders to be focused on the company, and not struggling to make ends meet." Pay yourself a higher salary. If you're paying yourself less than 80k, bump it up. When you're selling stock, you're usually talking about tens of thousands of value at the minimum. Founders and especially employees shouldn't seek to take money off the table because it rewards them for hitting the wrong milestones. Fundraising is not the goal -- a sustainable business is. They should get rewarded for the latter and use the former as a source of fuel to achieve it. "Secondly, every round the founders lose more and more control. They should be compensated for this." They are compensated for this in the form of their net worth skyrocketing come fundraising event. Really, the question is should they receive liquid compensation. Sure, it would be nice for some risk to be left off the table, but if you signal to people that you're selling your own stock, what does that do to the employees mentalities? The cost is higher than the reward. "One of the big problems with venture capital these days (and the reason I won't take it anymore) is that it disrespects the founders by demanding liquidation preferences for the VCs." I agree! If the stock is liquid, I see no reason why VCs should get preference... the only thought that comes to mind is that they wouldn't invest if the preferred treatment didn't exist, or that the funding market would be significantly smaller. Remember... VCs are paid a lot to mostly lose money.
pasta_2 11y ago
Says a lot about Google Ventures that when something goes south with one of their investments they'll go to the press and slam you. Not the first time either. http://www.businessinsider.com/what-happened-between-google-ventures-and-bustle-2014-3 http://www.businessinsider.com/what-happened-between-google-...
- MCRed 11y ago
  Well, MG Sigler and Kevin Rose are/were there. MG is the vindictive type, and to be honest, I see it as one of the Four Horseman of The Bubblepocaplypse that reports (and terrible ones at that) are becoming VCs.
LordHumungous 11y ago
They shouldn't return a single dime. The investors who allowed them to take $3 million off the table should be punished for their stupidity.
karangoeluw 11y ago
Previous: https://news.ycombinator.com/item?id=9495606 https://news.ycombinator.com/item?id=9495606
pbiggar 11y ago
I'm amazed anyone is asking for the founders' money to be returned. Can someone who believes this explain the rationale?
- tsunamifury 11y ago
  The writer, Gelles, is both financially illiterate and a poor reporter. No one believes what he is trying to insinuate for the sake of dramA.
numair 11y ago
I have a great story about a startup run by a bunch of insane guys. One of the founders cashed out a ton of money early and bought a $100k car; another founder's dorm buddy proceeded to wreck it within a month. Ron Conway's son used to bring cash to one of the founders, who blew it on drugs and partying while supposedly spending it on business development. Crazy. Irresponsible. Negligent. Bill Maris would NEVER invest in such people. All of the Valley VCs who are outraged with Secret and the founders' cash-out would NEVER want any of those guys in their portfolios. Too bad those crazy kids ended up building a $250B company, huh? I always find it quite rich, and quite immature, when investors try to tell entrepreneurs how to live their lives or spend/not spend their money. The Secret founders offered their investors a deal, the investors took it, circumstances changed, and the investors got less of a bargain than they thought. This happens every day. Should Mark Cuban return the billions of dollars he made off Yahoo from selling them that epic turd of a company called Broadcast.com?
- sunnyps 11y ago
  Can't tell if you're justifying embezzlement.
- untog 11y ago
  Oh, come on. Anecdote is not data. I'd wage a considerable amount of money that people who do not trash cars and inhale kilos of drugs are a better investment return, on average. The perception that VCs should consider themselves lucky to have invested in an immature asshole's startup sums up much that is wrong with Silicon Valley. I don't wish for another burst bubble, but if it happened it might be a useful reset.
  - numair 11y ago
    Secret was one of the most aesthetically impressive apps I'd seen on iOS, ever. It had all of the little usability details nailed on its first attempt. Even those of us who didn't appreciate its use case (myself included) couldn't help but feel jealous of the technical ability of its creators. The founders weren't random "immature assholes," and one would hope that the investors weren't either. A lot of people were chasing those guys with money, and they all knew what they were getting into. I wish people would spend less time obsessing over the money and more time figuring out why the company (and the two cofounders) fell apart; that's far more useful to learn/discuss. Hating on people just because they got a couple mil is pretty stupid and childish, especially when they are clearly more technically talented than their critics. If there is a bubble in this industry, it is a bubble of amateurs; people who shouldn't be investing or working in a field that is driven by extremes, and always has been. Extreme people chasing extreme success at extreme odds. And you know, everything in those extremes is going to look weird to people on the outside. Young Gates also wrecked sports cars and nearly went to jail; maybe these are all anecdotal, but the fact remains that you've got to accept a bit of eccentricity in this industry, if you want eccentric returns. If this whole Secret backlash thing continues, the kids in this industry might need a history lesson on why Peter Thiel called his VC firm the Founders Fund, and why it was so novel at the time. Investors always want to give founders a tough time; until Thiel and Co. came along, Valley VCs practically colluded to ensure that young entrepreneurs remained poor until an exit. I'm sure they would love for that era to return, but thankfully there's just too much capital for such a thing to happen anytime soon.
CPLX 11y ago
The suggestion that VC's deserve a do-over and the ability to back out of a negotiated and executed purchase of stock from the founders is patently ludicrous absent clear evidence of fraud or deception in the transaction. They really have no shame do they.
- mathattack 11y ago
  I agree. If the stock goes up 10X, it's the founder's loss. (I've seen this happen to several folks)
AndrewKemendo 11y ago
“They hadn’t done anything. They got some press. They hadn’t built anything sustainable.” Yet Google Ventures put some portion of 8.6M into them well before any of that - 2 months after launch. I guess like everything the "traction and addressable market" pathway is only for the rest of us peons not in the bubble. [1]http://9to5mac.com/2014/03/14/secret-app-picks-up-8-6m-in-funding-from-google-ventures-other-notable-investors/ http://9to5mac.com/2014/03/14/secret-app-picks-up-8-6m-in-fu...
aresant 11y ago
the company was founded October '13 the series B was in March '14 where the founders took the infamous $6m So they wouldn't have qualified for long term cap gains right?
- adventured 11y ago
  In theory it should be straight up taxable income. They likely owe ~$1.5 million in taxes on the $3m, between state and federal.
deleted 11y ago
[deleted]
jpatokal 11y ago
> In that round, the two founders each wanted to take $3 million off the table for themselves, a practice that is commonplace for more mature companies, but less so for very young start-ups. > “It’s like a bank heist,” Mr. Maris said. “That’s not how you do a start-up.” As they say in Finnish, it's not the fool who sells, it's the fool who buys. My sympathy for VCs who signed this deal with the founders is pretty darn limited.
tsunamifury 11y ago
What unprofessional, borderline cry-baby, nonsense for Mr. Maris. You're a VC, you bellied up to the table, and if you wanted to dictate terms, then you should have invested in a second round. If not, then don't tut-tut founders who get a little share from a high quality product that happened to not be astronomically successful. So they took a few million off the table for their hard work -- well deserved.
olivercameron 11y ago
Bill Maris (The Google Ventures VC in this article) followed up with more thoughts on Secret: https://medium.com/gv-notes/a-few-thoughts-on-secret-3cb50a338fae https://medium.com/gv-notes/a-few-thoughts-on-secret-3cb50a3... "I want to correct and amend a few things. I wanted to let you know how my views had evolved since we spoke. I aspire to be someone that says when that’s the case and it is here. I hadn’t spoken to David Byttow when you and I chatted, and I should have done that. I’ve spoken to him now and have a better understanding of things."
bfstein 11y ago
One thing I haven't seen anyone mention in these comments yet is that Evan Spiegal and Bobby Murphy did the EXACT same thing after Snapchat's B round [1]. They each took out $10 million. It didn't demotivate them, nor did it misalign their incentives. That $10 million would now be worth upwards of $100 million in equity at their current valuation. Just like Secret, it's a deal that both sides agreed to; sometimes it works out better for the founders, sometimes for the VCs. [1] http://www.cnet.com/news/snapchat-founders-reportedly-pocket-20m-from-funding-deal/ http://www.cnet.com/news/snapchat-founders-reportedly-pocket...
tlogan 11y ago
What is point of this? Investment went south or that Byttow and Bader are scum? I do not know the whole story but it is not really cool for VCs to go to the press and slam their founders they supported. Do not take money from Google Ventures.
leeleelee 11y ago
I never used Secret, but I can't imagine how an app like that would ever make revenue. Maybe I'm just not creative when it comes to figuring out how to monetize these silly social apps. Can anybody explain what goes through the minds of investors and founders? How do you eventually make revenue with something like Secret?
- pbiggar 11y ago
  A lot of different social networks have tried different things (eg Facebook's tryst with currency), but it always comes down to ads, specifically "native" ads (ones which look like the content of the platform).
zomgbbq 11y ago
Are the founders legally obligated to return the $6MM they took off the table or is it a moral obligation? (Or is there no obligation whatsoever) And if it is a moral obligation, what would incentivize them to do so - is it to save their reputation in the future?

115 points by awwstn 11y ago

One of the most interesting economics lessons from the Secret shutdown relates to the $6 million of stock sold by the founders to investors. Because the founders had taken some money off of the table, presumably now sitting in the form of a money market account + a red Ferrari, they probably didn't have to ride the Secret company all the way down to zero - they could see that the app wasn't going to be the next Snapchat or WhatsApp, and now that they had a few million dollars, their time was suddenly worth a lot more - they could take some of that money, create a prototype, and shop it around to get more funding. Compare that to an app like Path, which has raised lots of money, but hasn't gotten traction anywhere except Indonesia. Now they're using their late round investment dollars to try to see if a GIF selfie app, a chat app, or a concierge/customer support service will take them to the next level. Of course, that's just what they've launched - presumably there are lots of mobile app prototypes that haven't seen the light of day. Will Path's investors get their money back? I don't know. Secret's investors at least have their money back to fund more app ideas, after they've shown some promise.

boling11 11y ago
It's an interesting point, although Path may not be the best counter example since Path's founder is well off from being early at Facebook.
philipn 11y ago
Yeah, I'm not sure there's really a whole lot we can glean from the purchase of founders' stock here. To an outsider, it feels unfair, but I agree that without it the founders would have likely spent that $25M down to zero.
- MCRed 11y ago
  How does it feel unfair to sell stock to investors? In the current scheme new shares are issued and everybody gets diluted, so the founders have less economic interest (as does every other employee). If the founders take some money off of the table, then they're just selling their shares directly--- and there's less dilution. (It's not the case that they're just pocketing some of the proceeds from the investment.) In that case the employees will be diluted less than they would be if the same investment amount was made and the founders didn't sell any of their shares. So it's better for employees. Ideally, though, I think all employees including founders, should be able to sell some of their vested shares in each round of funding. Maybe %10?
- toast0 11y ago
  $6M seems like a lot to take out of a $25M round, but if the investors were ok with it, and the founders were ok with it, how is it not fair? Earlier investors don't seem happy about it, but I'm not sure how much weight that has; early investors often have to accept new terms during a fund raising round; for better or worse.
  - pbiggar 11y ago
    Does it? They sold $6/160 = 3.75% of the company, likely about 15% of their holdings. Seems reasonable given the valuation.
nedwin 11y ago
You think Dave Morin hasn't taken any money off the table? You're kidding yourself.

MCRed 11y ago

I think founders should take some money off of the table in every investment round, beyond the seed/incubator stage. (In fact probably every employee should be able to do this, maybe to a max of %10 or %20 of vested shares.) The first reason is that you want he founders to be focused on the company, and not struggling to make ends meet. That way they can make long term decisions. Secondly, every round the founders lose more and more control. They should be compensated for this. Yes, they have economic dilution from the investment as it is now, but some of the shares the investors buy should be founders shares. This results in less dilution for the company, and is a repayment of the sweat equity they founders have created. One of the big problems with venture capital these days (and the reason I won't take it anymore) is that it disrespects the founders by demanding liquidation preferences for the VCs. As if the VCs who merely put up other people's money should have rights superior to the people who literally put part of their life into the company. That's not right. All shares should be equal, and if not, the founders should at least be respected. (For those firing up your keyboards to explain to me why LPs are necessary, two points: 1) I've heard a bunch of arguments for this already. 2) they've all come from VCs and are self serving. You can't really make an argument that it's better for the company or fair for the founders.) Thirdly, too often I've seen VCs force founders to revest shares. But the value of those shares was already earned. The founder incentive to do well comes from increasing the value of the shares... and revesting the shares denies the founders crucial voting rights that they have earned already. (And makes it that much easier for the VCs to force a founder out, which is usually a bad idea in my experience.)

ztratar 11y ago
"The first reason is that you want he founders to be focused on the company, and not struggling to make ends meet." Pay yourself a higher salary. If you're paying yourself less than 80k, bump it up. When you're selling stock, you're usually talking about tens of thousands of value at the minimum. Founders and especially employees shouldn't seek to take money off the table because it rewards them for hitting the wrong milestones. Fundraising is not the goal -- a sustainable business is. They should get rewarded for the latter and use the former as a source of fuel to achieve it. "Secondly, every round the founders lose more and more control. They should be compensated for this." They are compensated for this in the form of their net worth skyrocketing come fundraising event. Really, the question is should they receive liquid compensation. Sure, it would be nice for some risk to be left off the table, but if you signal to people that you're selling your own stock, what does that do to the employees mentalities? The cost is higher than the reward. "One of the big problems with venture capital these days (and the reason I won't take it anymore) is that it disrespects the founders by demanding liquidation preferences for the VCs." I agree! If the stock is liquid, I see no reason why VCs should get preference... the only thought that comes to mind is that they wouldn't invest if the preferred treatment didn't exist, or that the funding market would be significantly smaller. Remember... VCs are paid a lot to mostly lose money.

pasta_2 11y ago

Says a lot about Google Ventures that when something goes south with one of their investments they'll go to the press and slam you. Not the first time either. http://www.businessinsider.com/what-happened-between-google-ventures-and-bustle-2014-3 http://www.businessinsider.com/what-happened-between-google-...

MCRed 11y ago
Well, MG Sigler and Kevin Rose are/were there. MG is the vindictive type, and to be honest, I see it as one of the Four Horseman of The Bubblepocaplypse that reports (and terrible ones at that) are becoming VCs.

LordHumungous 11y ago

They shouldn't return a single dime. The investors who allowed them to take $3 million off the table should be punished for their stupidity.

karangoeluw 11y ago

Previous: https://news.ycombinator.com/item?id=9495606 https://news.ycombinator.com/item?id=9495606

pbiggar 11y ago

I'm amazed anyone is asking for the founders' money to be returned. Can someone who believes this explain the rationale?

tsunamifury 11y ago
The writer, Gelles, is both financially illiterate and a poor reporter. No one believes what he is trying to insinuate for the sake of dramA.

numair 11y ago

I have a great story about a startup run by a bunch of insane guys. One of the founders cashed out a ton of money early and bought a $100k car; another founder's dorm buddy proceeded to wreck it within a month. Ron Conway's son used to bring cash to one of the founders, who blew it on drugs and partying while supposedly spending it on business development. Crazy. Irresponsible. Negligent. Bill Maris would NEVER invest in such people. All of the Valley VCs who are outraged with Secret and the founders' cash-out would NEVER want any of those guys in their portfolios. Too bad those crazy kids ended up building a $250B company, huh? I always find it quite rich, and quite immature, when investors try to tell entrepreneurs how to live their lives or spend/not spend their money. The Secret founders offered their investors a deal, the investors took it, circumstances changed, and the investors got less of a bargain than they thought. This happens every day. Should Mark Cuban return the billions of dollars he made off Yahoo from selling them that epic turd of a company called Broadcast.com?

sunnyps 11y ago
Can't tell if you're justifying embezzlement.
untog 11y ago
Oh, come on. Anecdote is not data. I'd wage a considerable amount of money that people who do not trash cars and inhale kilos of drugs are a better investment return, on average. The perception that VCs should consider themselves lucky to have invested in an immature asshole's startup sums up much that is wrong with Silicon Valley. I don't wish for another burst bubble, but if it happened it might be a useful reset.
- numair 11y ago
  Secret was one of the most aesthetically impressive apps I'd seen on iOS, ever. It had all of the little usability details nailed on its first attempt. Even those of us who didn't appreciate its use case (myself included) couldn't help but feel jealous of the technical ability of its creators. The founders weren't random "immature assholes," and one would hope that the investors weren't either. A lot of people were chasing those guys with money, and they all knew what they were getting into. I wish people would spend less time obsessing over the money and more time figuring out why the company (and the two cofounders) fell apart; that's far more useful to learn/discuss. Hating on people just because they got a couple mil is pretty stupid and childish, especially when they are clearly more technically talented than their critics. If there is a bubble in this industry, it is a bubble of amateurs; people who shouldn't be investing or working in a field that is driven by extremes, and always has been. Extreme people chasing extreme success at extreme odds. And you know, everything in those extremes is going to look weird to people on the outside. Young Gates also wrecked sports cars and nearly went to jail; maybe these are all anecdotal, but the fact remains that you've got to accept a bit of eccentricity in this industry, if you want eccentric returns. If this whole Secret backlash thing continues, the kids in this industry might need a history lesson on why Peter Thiel called his VC firm the Founders Fund, and why it was so novel at the time. Investors always want to give founders a tough time; until Thiel and Co. came along, Valley VCs practically colluded to ensure that young entrepreneurs remained poor until an exit. I'm sure they would love for that era to return, but thankfully there's just too much capital for such a thing to happen anytime soon.

CPLX 11y ago

The suggestion that VC's deserve a do-over and the ability to back out of a negotiated and executed purchase of stock from the founders is patently ludicrous absent clear evidence of fraud or deception in the transaction. They really have no shame do they.

mathattack 11y ago
I agree. If the stock goes up 10X, it's the founder's loss. (I've seen this happen to several folks)

AndrewKemendo 11y ago

“They hadn’t done anything. They got some press. They hadn’t built anything sustainable.” Yet Google Ventures put some portion of 8.6M into them well before any of that - 2 months after launch. I guess like everything the "traction and addressable market" pathway is only for the rest of us peons not in the bubble. [1]http://9to5mac.com/2014/03/14/secret-app-picks-up-8-6m-in-funding-from-google-ventures-other-notable-investors/ http://9to5mac.com/2014/03/14/secret-app-picks-up-8-6m-in-fu...

aresant 11y ago

the company was founded October '13 the series B was in March '14 where the founders took the infamous $6m So they wouldn't have qualified for long term cap gains right?

adventured 11y ago
In theory it should be straight up taxable income. They likely owe ~$1.5 million in taxes on the $3m, between state and federal.

deleted 11y ago

[deleted]

jpatokal 11y ago

> In that round, the two founders each wanted to take $3 million off the table for themselves, a practice that is commonplace for more mature companies, but less so for very young start-ups. > “It’s like a bank heist,” Mr. Maris said. “That’s not how you do a start-up.” As they say in Finnish, it's not the fool who sells, it's the fool who buys. My sympathy for VCs who signed this deal with the founders is pretty darn limited.

tsunamifury 11y ago

What unprofessional, borderline cry-baby, nonsense for Mr. Maris. You're a VC, you bellied up to the table, and if you wanted to dictate terms, then you should have invested in a second round. If not, then don't tut-tut founders who get a little share from a high quality product that happened to not be astronomically successful. So they took a few million off the table for their hard work -- well deserved.

olivercameron 11y ago

Bill Maris (The Google Ventures VC in this article) followed up with more thoughts on Secret: https://medium.com/gv-notes/a-few-thoughts-on-secret-3cb50a338fae https://medium.com/gv-notes/a-few-thoughts-on-secret-3cb50a3... "I want to correct and amend a few things. I wanted to let you know how my views had evolved since we spoke. I aspire to be someone that says when that’s the case and it is here. I hadn’t spoken to David Byttow when you and I chatted, and I should have done that. I’ve spoken to him now and have a better understanding of things."

bfstein 11y ago

One thing I haven't seen anyone mention in these comments yet is that Evan Spiegal and Bobby Murphy did the EXACT same thing after Snapchat's B round [1]. They each took out $10 million. It didn't demotivate them, nor did it misalign their incentives. That $10 million would now be worth upwards of $100 million in equity at their current valuation. Just like Secret, it's a deal that both sides agreed to; sometimes it works out better for the founders, sometimes for the VCs. [1] http://www.cnet.com/news/snapchat-founders-reportedly-pocket-20m-from-funding-deal/ http://www.cnet.com/news/snapchat-founders-reportedly-pocket...

tlogan 11y ago

What is point of this? Investment went south or that Byttow and Bader are scum? I do not know the whole story but it is not really cool for VCs to go to the press and slam their founders they supported. Do not take money from Google Ventures.

leeleelee 11y ago

I never used Secret, but I can't imagine how an app like that would ever make revenue. Maybe I'm just not creative when it comes to figuring out how to monetize these silly social apps. Can anybody explain what goes through the minds of investors and founders? How do you eventually make revenue with something like Secret?

pbiggar 11y ago
A lot of different social networks have tried different things (eg Facebook's tryst with currency), but it always comes down to ads, specifically "native" ads (ones which look like the content of the platform).

zomgbbq 11y ago

Are the founders legally obligated to return the $6MM they took off the table or is it a moral obligation? (Or is there no obligation whatsoever) And if it is a moral obligation, what would incentivize them to do so - is it to save their reputation in the future?