A new type of dealmaking is unnerving startup employees. Here are the questions to ask to make sure you don't get left out.

Varun Mohan is the founder of Windsurf, which made an unusual deal with Google after talks with OpenAI fell apart.Illustration by Thomas Fuller/SOPA Images/LightRocket via Getty ImagesA new kind of dealmaking sweeping Silicon Valley is dividing employees into haves and have-nots.Investors and founders say it is more important than ever for job candidates to do careful diligence.The most crucial thing to assess is how much you trust the founder, multiple investors said.A new kind of dealmaking is sweeping Silicon Valley, forcing employees to be vigilant about how much trust they are willing to put in startup founders.Over the past two years, instead of acquiring AI startups outright, Big Tech companies have been licensing their technology or making deals for top talent, with startup employees sometimes getting divided into separate camps of haves and have-nots. Those with the most desirable AI skills reap a windfall while those who remain are shrouded in uncertainty.That recently happened to Windsurf employees after the AI coding company was on the verge of being acquired by OpenAI for $3 billion, but was instead split in half. Google paid billions to hire Windsurf's CEO and top talent, and the hundreds of employees who remained were bought by another startup, Cognition.Unfortunately for startup employees, many investors expect these kinds of novel transactions to continue as the velocity of developments in AI makes companies unlikely to want to wait months or years for regulatory approval.Candidates need to ask tough questions about the founderGiven traditional M&A has mostly gone out the window, it is more important than ever for startup employees to do their homework, advises Steve Brotman, managing partner at Alpha Partners."In light of what we just saw with Windsurf, it's crucial to understand the ownership dynamics," Brotman said. " You don't want to be working 100-hour weeks only to realize your options are underwater or your exit upside is capped. And remember: companies that are transparent and deliberate about governance tend to be better long-term bets, both for your career and your equity.""Ask hard questions about runway, revenue, burn, and investor syndicate quality," Brotman continued. "Who's on the board? Are they structured for long-term growth or a quick flip?"The most important thing candidates should assess is how much they trust the founder, according to Deedy Das, an investor at Menlo Ventures."Nobody wants to talk about the fact that founders control almost everything that happens in a company, including how you get paid, when you get paid, how the equity vests, and when you can sell the equity," said Das. "It's everything, so having trust in your founder to do the right thing by the team is extremely important."Just as investors would typically research a founder before writing a check to one of their many portfolio companies, prospective employees should ask around about founders whom they could be tied to for years, said Hari Raghavan, cofounder and CEO of Autograph."They should be doing diligence on whether this is a standup person," said Raghavan. "Do your best to suss out, 'Are these guys going to take care of me?'"Raghavan suggests that founders should sign a written pledge agreeing to treat employees well in terms of stock options and exit scenarios."These are things that any good founder should be doing, and the vast majority of good ones do, but I think even just establishing that set of rules is a good idea," he said.Prospective employees should not be afraid to "interrogate" a founder on how they are thinking about an exit, according to Jake Saper, a general partner at Emergence Capital."Ask founders how they would weigh staying independent, a classic acquisition, or a licensing deal that carves out key people," Saper said. "Their answer tells you a lot about the journey you're signing up for."Scrutinizing the fine print has also become more important, said Saper."Make sure offer letters and stock agreements spell out vesting acceleration, treatment of options, and retention bonuses if only 'substantially all' of the team moves," Saper said. "Those clauses mattered at Inflection and Windsurf, and they will matter again."In 2024, Microsoft hired the founder of Inflection AI, Mustafa Suleyman, and some of the startup's staff to help lead its AI efforts.In June, Meta paid $14 billion for a 49 percent stake in the data labeling company Scale AI and hired its founder, Alexandr Wang, to run its Superintelligence group. Meta also hired some of the startup's researchers. Last week, Scale AI laid off 14% of its workforce, or 200 employees, and revealed it is unprofitable.Finally, Saper says to take a hard look at the underlying business model of a startup to make sure it can last."Startups with unique data feeds, embedded distribution or clear recurring revenue have leverage to stay independent," Saper said. "If a company's main asset is a brilliant but portable research team, you should assume Big Tech will come knocking."Read the original article on Business Insider

Comments

Business News

Parents could get £200 boost before the kids go back to school - here's how

Mirror

Comments

Business News

Parents could get £200 boost before the kids go back to school - here's how

Drivers can make their car use 'zero fuel' - without switching to an EV

Home Bargains fans 'running' for £1.50 item they 'didn't know you can buy in UK'

Child Benefit payments will stop for thousands of parents unless they act now

Tea, an app for women to safely talk about men they date, has been breached, user IDs exposed

Policy officially takes over for Murphy as president/CEO at Packers' shareholders meeting

Shoppers can save £100 on my favourite pizza oven that rivals Ooni and Ninja

Meta just hired the co-creator of ChatGPT in an escalating AI talent war with OpenAI

WWE SmackDown Results, Winners And Grades On July 25, 2025

Pantera, Amon Amarth Rock As ‘Heaviest Tour Of The Summer’ Continues

Today’s Wordle #1498 Hints, Clues And Answer For Saturday, July 26th

‘Fantastic Four: First Steps’ Review — Nothing Fantastic About This Dull MCU Snoozefest

Stephen Colbert Ratings Soar After ‘Late Show’ Is Cancelled

World Court’s Climate Change Opinion Could Alter Sustainability Reporting Debate

Friday, July 25. Russia’s War On Ukraine: News And Information From Ukraine

NHRA And Deep Blue Launch New Initiative To Accelerate Opportunity For Women In Motorsports

‘South Park’ Season 27 Media Reactions To The Donald Trump Episode

Salon owner 'ready' for key L'Oréal dispute hearing

European and Iranian diplomats meet in Istanbul as return of sanctions looms over nuclear deadlock

DWP benefits and HMRC payments to be issued early next month

Astronomer uses Gwyneth Paltrow, Coldplay frontman's ex-wife, as 'temporary' spokesperson in new promotional video

David Letterman On Colbert’s Firing: ‘This Is Pure Cowardice’

What To Watch This Weekend: New Shows And Movies To Stream On Netflix, Hulu, Prime Video, Apple TV And More

Change in Republicans’ Thinking Shifts Policy Support in Renewables

MLS Suspends Lionel Messi For Skipping All-Star Game

AI Action Plan Channels Rally Energy, Ignites U.S. Policy Debate

Celebration of Light’s funding woes a sign of trouble for arts and culture sector

New rail spur line aims to connect Coaldale to global markets

The President's Golden Share in U.S. Steel

Pickleball Pros forming World Pickleball Players Association Advisory Group

U.S. raises anti-dumping duties on softwood lumber above 20%

Thousands of retained firefighters owed pensions, union says

World's thirst for matcha dries up global supplies

Trump says Fed’s Powell is ready to start slashing interest rates

Louis Vuitton owner LVMH in talks to sell Marc Jacobs in deal that could fetch $1B: report

Sunny success at pub giant Mitchells & Butlers

ALEX BRUMMER: Banks face a fintech coup

Trump and Powell in Fed bust-up as tensions mount

ANNE ASHWORTH reveals the benefits of investing in UK firms

RAY MASSEY: New Aston Martin would leave Bond shaken and stirred!

Building products group Marshalls shares tumble as sales fall

Netflix is quietly searching for an exec to lead its video podcast efforts as it chases YouTube

Tea app that lets women post anonymous dating reviews was hit by a data breach that exposed 72K images

Microsoft employees react to CEO's 'enigma of success' memo with a mixture of suspicion, anger, and speculation

Are you a single mom? We want to hear from you about your challenges and life experiences

Corporate America's weird tariffs summer

Poker players call foul on Trump's tax and spending law

50 Timeless ‘80s Songs That Defined A Generation

UFC Abu Dhabi Fight Card: Odds, Prop Bets, Predictions And Picks

What We Know About David Ellison—Soon-To-Be Paramount Chief And Major Hollywood Honcho

New York Yankees Add 3B Ryan McMahon To Address Pressing Need

Coach X WNBA: A Stylish Play In The Brand’s Ongoing Reinvention

50 Essential ‘90s Songs Everyone Should Know

Mick Jagger And Keith Richards Get Rolling Stones Action Figures

Would Isak Signing Make Liverpool’s Transfer Window The Best Ever?

Mackage’s Latest “Protect Your Craft” Campaign Stars Dominik Livaković

Federal Judge Blocks Trump’s Birthright Citizenship Ban In Third Ruling Opposing President

Cenovus floated as potential competing bidder for hostile takeover target MEG Energy

Real-life ‘RoboCop’ makes debut in Shanghai — directing traffic at bustling intersection

Elon Musk hits back at Trump after president said he didn’t want to strip Tesla boss of subsidies