Loyalty Is Dead In Tech - by Nikunj Kothari - Balancing Act

Nikunj Kothari, a VC at a boutique fund, points to a recurring acquihire pattern reshaping loyalty in tech: Microsoft paying Inflection $650M in licensing fees while absorbing its CEO and most of the team, Amazon doing the same with Adept, Google buying back the Character.AI founders and repeating the move with Windsurf and Hume. These deals skip a formal acquisition and its regulatory review, and carry no obligation to bring along anyone besides the people a buyer wants. Founders are also leaving the companies they built once an exit lands, which Kothari says undercuts the incentive for anyone else to stay.

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• The 2022 Adobe-Figma deal being blocked by regulators pushed Big Tech toward “acqui-hire” structures instead: license the technology, hire the CEO and top talent, leave everyone else behind.
• Two co-founders of a $12 billion startup recently returned to their previous employer, and a year earlier a CEO left his own $32 billion company for a competitor.
• Kothari contrasts this with Instagram’s 2012 sale to Facebook, where all 13 employees joined and the founders stayed six years, everyone who took the risk sharing in the outcome.
• He describes an unwritten obligation founders, employees, and investors used to honor toward each other, now treated as dead.
• Venture funds have also abandoned an older norm against backing competitors within the same portfolio category; one fund once forfeited a $21 million stake to avoid that conflict, while mega funds now back several rivals in the same space and let the market pick a winner.
• Kothari, who works at a smaller fund that can’t hedge this way, says he still looks for founders who treat the old obligation as real, even when moving slower costs them money.
• He closes with practical advice: ask a VC which competitors they’ve also funded, and ask what happened to employees at a founder’s previous company before signing anything.