The employee takes a risk, joining a new company, in many cases one that doesn’t have proven revenue or a secure future. They join for the mission, the chance to take a seat on a possible rocket ship, and to work with a founder or set of cofounders they believe are exceptional. And of course, they join for the upside—the belief that the equity in a company that they take on as part of their compensation will actually be worth something in the end, that the founders they’ve risked their careers for will advocate for as many of their people as possible in the event of an exit.

“If that social compact fails, the whole system fails,” said Daniel Dart, founder of Rock Yard Ventures. 

And this social contract has been under pressure in recent days and weeks, as multi-billion dollar acquihires take CEOs and cofounders away from the companies they’ve founded—leaving behind companies with uncertain futures and in many cases hundreds of employees or more. We’ve seen two notable cases in quick succession: Meta’s $14 billion deal for 49% of Scale AI, which moved Scale CEO and cofounder Alex Wang to Meta, and Google’s $2.4 billion acquihire of Windsurf, a deal that left many employees behind—who then soon would see the remains of their company acquired by Cognition. 

People are mad about Scale, sure—the company laid off about 200 staff members this week—but people are really incensed about Windsurf, a deal that excluded about 250 employees, fostering concerns not only about equity (in all senses of the word) but for what this means about the relationship between founders and their employees. 

“I think the cascading net effect of this sort of situation is that it’s actually going to change what those early conversations with employees are like at startups,” said Dart. 

To Amplitude CEO and cofounder Spenser Skates—who’s conducted both acquihires and acquisitions really recently—the Windsurf deal stands out as egregious. He likens it to a captain abandoning ship, comparing the situation to Francesco Schettino, who in 2012 fled the capsized Costa Concordia, leaving behind passengers and crew. 32 people died in the disaster. Incidents like Windsurf, Skates says, show why it’s more important than ever for employees to think hard about the founder they’re throwing their lot in with. 

“I think employees should ask the CEO and founders straight up: Are you going to leave? It’s crazy you have to do that,” said Skates. “But I think the character and integrity of the founders matters way more than ever.”

I asked Henry Shi, Super.com cofounder, if startup employees will start thinking differently about their hiring terms as deals like this happen more frequently. 

“Yes, but unfortunately I’m not sure if they have many options or leverage,” Shi wrote via email. “Especially given the market dynamic between labor and capital as we approach economic AGI, early employees may not have that much leverage—except by starting their own companies.”

Because equity is what a founder makes it.

We’ll see more of this as the M&A marketplace continues at “AI speed,” said David Shim, CEO and cofounder of Read.ai via email. And we have, in fact, seen deals of this ilk before, from Microsoft’s acquihire of Inflection to Amazon’s of Adept. And, in the end, the fact that social media was so abuzz may actually be a good thing for startup employees. It means people still want the innovation economy to benefit all its participants. 

Given that antitrust regulators don’t seem poised to police these kinds of deals anytime soon, the public reaction may indeed be one of the few guardrails. 

“What we saw with the Windsurf deal was the ecosystem getting up in arms about the fairness for employees, which should create some sense of comfort,” said Yohei Nakajima, general partner at Untapped Capital. “While breaking up companies isn’t necessarily bad, it’s important that everybody gets their fair share— and especially if these types of deals continue, I’d hope to see more standards around how these get treated.”

See you Monday,

Allie Garfinkle
X: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Venture Deals

- Hadrian, a Torrance, California-based AI-powered manufacturing company, raised $260 million in Series C funding. Founders Fund, Lux Capital, and Morgan Stanley led the round and were joined by Altimeter, 1789 Capital, Andreessen Horowitz, Construct Capital, 137 Ventures, and others.

- Lovable, a Stockholm-based AI-powered app-building platform, raised $200 million in Series A funding. Accel led the round and was joined by existing investors 20VC, byFounders, Creandum, Hummingbird, Visionaries Club, and others. 

- Bedrock Robotics, a San Francisco-based autonomous construction technology company, raised $80 million in seed and Series A funding. Eclipse and 8VC led the rounds, and were joined by Two Sigma Ventures, Valor Equity Partners, NVentures, Crossbeam Venture Partners, Raine Group and more. 

- Quandri, a Vancouver-based AI-enabled insurance servicing platform, raised $12 million in funding. Framework Venture Partners led the round and was joined by Intact Ventures and existing investors FUSE and Defined Capital. 

- StrongestLayer, a San Francisco-based cybersecurity company developing AI-native email security and human risk solutions, raised $5.2 million in seed funding. Sorenson Capital led the round and was joined by Recall Capital. 

- Confident Security, a San Francisco-based startup building provably private AI inference technology, raised $4.2M in seed funding. Decibel led the round and was joined by South Park Commons, Ex Ante, and Swyx.

- Fiber Elements, a Leoben, Austria-based startup specializing in automated basalt fiber manufacturing, raised €2.6 million ($3 million) in seed funding. LEA Partners and Amadeus APEX Technology Fund led the round. 

Private Equity

- Stonepeak invested $1.3 billion in Princeton Digital Group, a Singapore-based developer and operator of internet infrastructure. 

- KKR acquired a minority stake in SupplyHouse, an Melville, New York-based e-commerce distributor of HVAC, plumbing, and electrical products. Financial terms were not disclosed. 

- AIS, backed by Blue Delta Capital Partners, acquired Dorrean, a Reston, Virginia-based mission services and consulting provider to federal government agencies. Financial terms were not disclosed. 

Other

- Blue Owl Capital (NYSE: OWL) acquired South Reach Networks, a Miami-based telecommunications infrastructure provider, from Turning Rock Partners. Financial terms were not disclosed. 

- Hexaware Technologies acquired SMC Squared, a Plano, Tex.-based IT offshoring organization, for $120 million. 

- Vanta acquired Riskey, a Tel Aviv-based risk monitoring software company. Financial terms were not disclosed. 

FUNDS + FUNDS OF FUNDS

- Banyan, a New York City-based venture firm, raised $10 million for its first fund focused on AI startups. 

PEOPLE

- Advent International, a Boston-based private equity firm, hired Frank Roe as operating partner. Previously, he was the CEO of SmartBear.

- 65 Equity Partners, a Singapore-based private equity firm, hired Sean Murphy as partner and co-head of U.S. business. He previously was partner and co-head of Harvest Partners Structured Capital Fund.

- Madrona, a Seattle-based venture capital firm, promoted Sabrina Albert (Wu) to partner. She was previously a principal at the firm. 

- Battery, a Boston-based technology-focused investment firm, promoted Justin Rosner to partner. He previously was a principal at the firm.