The actual title is "Element AI sold for $230-million as founders saw value <i>mostly</i> wiped out". This is an important difference, since the submitted title here implies they were entirely wiped out.<p>It looks like this company raised ~$250M, and sold for $230M. This isn't any sort of nefarious "founders got wiped out"; they sold for less money than they raised and this is the typical outcome in that situation.<p>Also, from the article:<p>> As part of the deal – which will see ServiceNow keep Element AI’s research scientists and patents and effectively abandon its business – the buyer has <i>agreed to pay US$10-million to key employees and consultants including Mr. Gagne and Dr. Bengio</i> as part of a retention plan.<p>This is the kind of "everyone got wiped out but the founders got an out-of-band parachute" that highlights an often-understated difference between "founders" and "just an employee". Even with a terrible outcome, founders and top executives can still manage to come out on top, and only employees <i>actually</i> get wiped out.
I don't know anything about this company. But I work at FAANG as an ML scientist and spent about 3 months this year working on a research project that demonstrated big performance improvements of a new tech. It got enough interest that it led to a new project that brings this to production.<p>This has led to countless headaches. The skills needed to solve these challenges are very different. My more academically minded colleagues don't seem to have the intuition for seeing around this corner and understanding what it takes to build something that actually works.<p>This is a long way of saying: if a company is founded by and ran by such academics, I can see how this would be a recipe for disaster when it came to actually building and shipping products.
Not sure what the angle should be here. The founders didn't manage to raise the company; it was soon to be bankrupt. Of course the founders would be wiped out.<p>Still, they have $300,000 worth of shares and "the buyer has agreed to pay US$10-million to key employees and consultants including Mr. Gagne and Dr. Bengio as part of a retention plan".<p>Business doesn't always work out. Getting a cool $1M after trying and failing is not the worst thing that could happen.
>Element AI invested heavily in hype and and earned international renown, largely due to its association with Dr. Bengio. It raised US$102-million in venture capital in 2017 just nine months after its founding, an unheard of amount for a new Canadian company, from international backers including Microsoft Corp., Intel Corp., Nvidia Corp., Tencent Holdings Ltd., Fidelity Investments, a Singaporean sovereign wealth fund and venture capital firms.<p>This has been bothering me for a while. Ridiculous sums of money invested purely on name recognition, in particular in 'AI', rather than allocating capital to people who actually at least have a product.
Well, nothing surprising here. Element AI raised about 260MM, failed to create a revenue trajectory so it sold itself on the merits of its IP to ServiceNow for 230MM. Of course the founders and employees will get wiped out. Investors are first in line to get paid.<p>If you’re a founder and you ever are doing a big round try to seek for secondary liquidity. It’s fair for founders to have some way to build financial stability when they are sacrificing so much. Secondary liquidity terms are way common nowadays than they used to be.<p>Element AI founders should have done that when they did their Series B and raised 150MM.<p>I know there are some purists that think that giving founders secondary liquidity can remove certain accountability, but honestly if you’re investing in a group of people and you believe giving them some reasonable path to partial liquidity pre-exit, you probably have some fundamental doubts on that investment and that group of people.
I feel that nowadays that’s basically a litmus test for investment strength.
Wow $200M funding for a startup with no products. Not even sure if they were serious in building a product or just cashing out the AI hype and academic credentials.
It’s funny to see this around the same time as this other thread where people are going through so much mental gymnastics to avoid obvious conclusions of how horrible it is to work for a startup,<p><a href="https://news.ycombinator.com/item?id=25493646" rel="nofollow">https://news.ycombinator.com/item?id=25493646</a>