Why is this comment downvoted? It's the only one in the whole thread that has some proper information in it and not just emotional pitch fork grabbing.
Alupis is absolutely right, startups are volatile and it could have been worse. That this was legal means this was probably the only right option for the founders.
Making hires at an early stage is incredibly important, imagine this startup has only a few 100k in the bank. They can hire maybe two to three persons, and that's hoping they'll hit on more funding later in the year.
Imagine you were a founder of that company, and you had hire this COO, and then something changes, or a pivot comes through just when the COO is flown in. Your investors all say you should discharge him, so they can hire someone that might save the company.
How can you even suggest this is unethical? This guy goes work at a startup in a state where it is legal to fire someone at will.