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

forbes.com

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

#141

Post by djbusby »

code_biologist wrote: post #82
jrumbut wrote: post #73

Earlier quoted context omitted.

As the sibling comment points out, it's not like you can hire any lawyer off Craigslist and expect to be bulletproof. Lawyers can be an expensive rubber stamp on a deal that is absolutely not in your interest or be a chaos agent that makes you impossible to do business with. They can also make executing complex deals very simple (for you) or ward off sophisticated scammers. At least in my experience, it can be very h…

My company has spent six figures with two different blue chip startup law firms. Our board specified the firms. Those in the VC scene would recognize them. The quality of the work has varied from "decent if eye wateringly expensive" to "subpar", seemingly dependent on the associate that worked on it and if there was any other industry-wide phenomena occupying the firm's attention. I'd still suggest a lawyer for sure,…

I picked an individual who had their own PLLC but was "of council" to two other larger firms in the city.

Still was downtown rates but I got a lot of attention from the actual lawyer. And if things ever got real heavy they were my in-road to up-scale.

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

#142

Post by rationalist »

qingcharles wrote: post #138
epolanski wrote: post #10

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.

I was once really broke and sold my 50% share in a startup I'd built for, IIRC, £500. In retrospect, perhaps I came out the winner? This was it: https://dudefactory.com/ I went on to turn that £500 into approx $13.5m: https://torrentfreak.com/major-tv-torrent-site-thebox-bz-cal...

How do you make that much money as a private torrent tracker, advertising?

(Obligatory congrats)

Edit: and was running that site related to why you went to jail?

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

#143

Post by Centigonal »

worik wrote: post #99
arcticbull wrote: post #38

Earlier quoted context omitted.

I believe the usual path in this type of situation is to dual-class shares, so you can retain voting control while selling beneficial ownership to others. I suspect the PE group would have, you know, rejected this arrangement given their plan.

> the usual path in this type of situation is to dual-class shares Is that still tolerated by investors? Is it still legal? "Having your cake and eating it" is a really bad attitude

> "Having your cake and eating it" is a really bad attitude

Ray Dalio says the following in his book Principles:

“When faced with the choice between two things you need that are seemingly at odds, go slowly to figure out how you can have as much of both as possible. There is almost always a good path that you just haven't figured out yet, so look for it until you find it rather than settle for the choice that is then apparent to you.”

He credits this approach to helping his firm spearhead risk parity as well as other successes. Sometimes, trying to have your cake and eat it too leads to being able to do just that.

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

#144

Post by iambateman »

bhouston wrote: post #124
iambateman wrote: post #39

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 $…

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.

It’s hard to explain, but it’s…complicated.

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

#145

Post by morpheuskafka »

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.

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

#146

Post by gumby »

__loam wrote: post #129
dpiers wrote: post #58

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…

Yeah I've only ever heard he is a shady ass hole. He's definitely a coattail rider.

Please, the polite MBA term for this is "fast follower". Why do you hate MBAs?

Their schooling gives them greater freedom of action than you because they have learned to be free of pesky ethics.

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

#147

Post by s1artibartfast »

worik wrote: post #102
cabaalis wrote: post #19

Earlier quoted context omitted.

Hanging onto stock from a company I co-founded a few years ago has caused me tons of stress because that company constantly files for tax extensions forcing me to do so as well. I have other financial processes which rely upon timely processing of my completed tax filing, and every year it causes me trouble. So if something is thought to be worthless and about to fold, "just hang onto it" could cause a non-zero amoun…

Sympathy from me. It is not strange that tax laws favour the well healed lawyered up.

This isn't an us vs them situation. There is nothing wrong with filing a extension. If you don't like it, give the stock back

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

#148

Post by s1artibartfast »

__loam wrote: post #131
photonbeam wrote: post #111

Earlier quoted context omitted.

What does dead equity mean?

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.

Dead people made a lot of contributions to the world too.. They just aren't contributing any more.

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

#149

Post by s1artibartfast »

andrewstuart wrote: post #24
dustingetz wrote: post #5

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

>> VCs don't like dead equity Isn’t a VC investment dead equity?

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

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

#150

Post by hgsgm »

marricks wrote: post #115
cj wrote: post #7

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, r…

There's also the story Richard Branson wrote about in his memoir where the co-founder of Virgin was pro unionizing and his workers were too. Branson convinced (and lied to) his partner that no one in the company actually liked him and the union attempt would fail. Caused his co-founder to quietly quit and Branson to retain sole control. I agree, I imagine shady shit like this is quite common just not discussed.

At least he's eventually honest about being a monster.
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