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

forbes.com

221–230 of 239 posts

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

#221
post #151

Earlier quoted context omitted.

I feel like the story of the scorpion and the frog applies here. My solution is to try very, very hard not to engage with people I do not trust. My mantra is "good people do good things, bad people do bad things". If you don't want bad things to happen to you, stay away from people you know to be bad regardless of how tempting it may be to associate with them.

Money is pretty famous for turning good people bad.

I heard someone say a wonderfully relevant thing this morning: Money doesn't change people, it reveals them.

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

#222
post #71

Earlier quoted context omitted.

It was related to international distribution. I had negotiated royalties for international sales, but had neglected to cover the sale of the rights to sell internationally. So the company just sold the rights, of which I didn't get a piece, and the companies that bought the rights had no obligation to pay me anything.

This sounds like they sold something they never owned - i.e. "the right to sell without paying you royalty". Reminds me of the recent case where Disney tried to argue that in an acquisition, they bought only the rights, but not the obligations (royalty payments) that went with them [1]. Basically, writers were promised X% in royalty payments, but Disney argued they didn't buy that part of the contract, only the part…

The larger context is that what they bought was my entire business, along with all rights to the intellectual property. What I got was a sale price and defined ongoing royalties for the product I formed the company to create.

They did sell something they owned. I neglected to attach a method by which I'd get compensated for them selling that particular thing.

In the mindset of cutthroat business, they legitimately won. They 100% adhered to the terms of the sale, and it's not their fault that I left a loophole they could leverage.

My attorney did say that if I wanted to, a case could be made for a lawsuit -- but it would have been expensive and wouldn't have had high odds of success. I just wanted to move on.

This whole event was my first real business success, and the mistakes I made were legion. It taught me quite a lot -- including that I won't do business with anyone that I am nervous about doing business with. Contracts can only protect you so much.

Also, I feel the need to repeat... I did pretty well from this deal. I was angry when this happened, but with the passage of time, I see that even with this event, I came out of the deal better than I went into it. So I hesitate to even call it a "regret". It's more of a "learning experience".

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

#223
post #153
post #85

Earlier quoted context omitted.

I'm actually surprised it's not more common. If I buy meta stock I have zero expectation of being able to sway company decisions. I just care that if they make money I make money.

So why by stock and not a bond?

A bond is just a loan that is repayed with a fixed return. A stock is equity and can be worth a lot more. Stocks are riskier than bonds, but have a greater profit potential.

Which you prefer depends entirely on what your investment goal is.

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

#224

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)

It is also in Bloomberg, but it was a subscriber only line, so I found a free version of the same information.

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

#225
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…

You don’t need Yelp-For-Private-Equity. Sir, it’s a private equity firm. Screwing companies over is what they do.

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

#226

Earlier quoted context omitted.

> Having 51% control guarantees nothing. Maybe. But something (literally) doesn't add up in the original story. If the CEO had 51% and sold the 49%, there is no place for the PE firm to capture the 2%. Unless there is convertible debt or some such thing. Or the story is overly-simplified in some other way.

The CEO did not have 51%.

If he had less than the PE firm from the get-go, then he was never in control.

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

#227
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

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

#228
post #130

Earlier quoted context omitted.

[flagged]

We really have no idea how the case law is going to fall out on whether or not it is legal to train on copyrighted content. There is precedent in the US that lends itself to the idea that this would be considered fair use, such as Google Books. In the UK, when this was all happening, the UK government was in the middle of saying they planned to change copyright laws to explicitly allow it. ( https://www.allenovery.co…

I don't think the Google books case is a good analog here because the image model stuff runs counter to a few of the things that might make something fair use, particularly the point about affecting the market for the original work.

And even if it does turn out to be legal, you're still a piece of shit if you take an artist's work and train on it without their permission.

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