6

I was hired 4 months back at a startup in an executive role with good stock options and a decent salary. During the interviews I was told the company is currently doing 'X' USD of monthly revenues and has money/run way for the next 12-18 months. I was sold on the opportunity, the business impact, growth potential, designation and the fact that I was referred here by one of my own investors (my startup is now closed) who is also the investor here.

Once I joined the company I found a lot of discrepancies. The numbers reported to me were wrong. Rather than 'X' amount of business they were doing '0.5X'. Also now the cash has started to dry up and my salary has been reduced by about 60% although I have been assured that once next round of funds are raised the deficit will be paid and the salary doubled.

Now the fund raise has started actively. What troubles me most is that the numbers reported to the investors are not just exaggerated, which I know happens, but the factor by which it is done and the casual and matter of fact approach of this all has got me stumped and deeply troubled. They are reporting that we are doing '9X to 10X' business rather than the actual 'X' amount. Does this happen on a regular basis ? Is this unethical or just plain illegal ? Yes the business is in a good sector and there is great room for growth. If it was just a salary cut for even a year I would not have minded but the fact that I am also being asked to lie to new investors as well as previous one who referred me here is what is troubling me deeply for the last 2 months.

I am very sure if the company persists and plays nicely there is huge demand for what we do but this mad rush has got me in serious questions about my future here. Should I leave ? If I leave , the startup may face questions from the investors why the key person has left in such a short while and so on Should I inform my investor who referred me here ? The reason I have been silent till now is 2 fold. One because of my great subordinates who really are good people and I do not want them to get harmed in any negative way if the company is unable to raise funds or if things come to light and the second reason is obviously the generic NDA I have signed. Yes the position is great and the work is actually very rewarding and challenging but these other factors have been affecting me ?

What should I do ? Please offer me your perspective . My since apologies if this was unclear or got too long but I am truly troubled and hence the rant.

Big Thanks

Edit: I was discussing this with one of my close friends and he told me that if I want to quit he can get me a job in the startup where he works for almost double my current salary. My concern is that because that startup is also in the same domain and market/industry, what if we cross paths sometime ? What if one acquires the other or has to collaborate ?

EDIT 2: I am also afraid that I may be labelled a job hopper for leaving so early since the market perception of the company is very nice and I am pretty confident they would be raising their next round of 6-8 million USD very soon. It may end up looking like there was something wrong with me.

|improve this question
  • 3
    Definitely unethical, almost definitely against whatever agreement they have. Even if they get out of the lurk and get big, this may cause problems with auditors down the line. I'm not familiar with all that so I'm writing a comment, not an answer. – rath Jan 25 at 11:17
  • 3
    I wouldn't be too worried about being labeled a jobhopper. It's a startup and likely fail, regardless of you leaving or not. – rath Jan 25 at 11:26
  • 2
    If they can't pay your originally promised salary now and their response is to promise they'll double it later, it's not hard to see why they're having financial difficulty. I'm not saying they're lying, per se, but they're clearly not great at keeping their promises. I wouldn't hold my breath on a happy outcome here. – Steve-O Jan 25 at 14:33
  • 2
    You seem to be indicating that it might be "okay" for them to lie because of the assured future growth and opportunity. Ask yourself: If the future was really that bright, why would they lave to lie to achieve it? Honesty about a bright future should be plenty to carry them over, that's how the startup game works. Dishonesty because of a theoretical bright future usually means the theory isn't valid. – dwizum Jan 25 at 14:42
  • 1
    Hi new user - could you drastically SHORTEN your question please? – Fattie Jan 25 at 15:07
11

"Is this illegal?" is a question for a lawyer. However, simply feeling the need to ask the question should raise some red flags.

Other red flags:

  • They lied to you (0.5X instead of X)
  • They aren't making payroll ("my salary has been reduced by about 60%")
  • They lie to new investors (They are reporting that we are doing '9X to 10X' business)

I have a question for you - if some clever investigative reporter learned all this and published it in the appropriate news outlets, how would you come out?

|improve this answer
8

This has more red flags than all of China.

Only one of two things are possible here:

  1. Gross incompetence
  2. Criminal malfeasance

Either way, get out NOW

There is no such thing as "exaggeration" when it comes to financial reporting, just degrees of the criminal code being violated.

Get out, and let the person who referred you know all about it. Document everything in case any questions of your behavior ever come up.

Have ZERO to do with the spread of false information and disassociate yourself as soon as possible.

This is a disaster waiting to unfold, don't be there when it does.

ADDITIONALLY

It may be wise to take what you know to an attorney, and then, if your attorney recommends it, to the appropriate law enforcement officials.

|improve this answer
  • 4
    +1 for "more red flags than all of China" – stannius Jan 25 at 21:12
7

The Dumpster is already on fire. You're basically asking whether, after the company burns down, people will be arrested. What you already know is so bad that you should have already made plans to leave. It can only get worse from here.

That you have something close to another job offer with more pay isn't even the final straw, you're already past that.

Jump ship to the new company and watch the dumpster burn from a safe distance.

|improve this answer

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.