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An engineer begins work at a 3rd-year startup. He inquires about how it is funded. His boss tells him, "You will never know that. Why do you want to know that? The funding is legitimate. That's all you need to know."
Is this unusual?
Is it unreasonable?
For the sake of simplicity, I am going to write my response as if you were the engineer in question.
Usually, you ask these kinds of questions before you join a startup, not after. And yes, the type of investors and the size of the investment can affect your decision to join such a startup in the first place.
"You will never know that. Why do you want to know that? The funding is legitimate. That's all you need to know."
Consider yourself warned.
You are working for a jerk. I'm not saying this person was wrong to keep that kind of information confidential. He wasn't necessarily. But he definitely could have been a lot more diplomatic in his response. There are ways you can say 'no' to someone without making them feel like crap for asking the question in the first place.
For all he knew, you were just curious, or maybe you wanted to help with the fundraising efforts. And even if you were not interested in helping with raising funds, being curious about the strategic direction and potential longevity of your company shouldn't be considered a sin.
In fledgeling startups where tech is a key component of the business model, full time engineers are often included in such high level discussions. For many, this inclusion is what keeps them working for the new startup over the long term, despite the fact that over time they could probably get a higher paying job at a larger and more stable company elsewhere.
Yes, this is unusual. Usually startup funding is either bootstrapped from the founders (sometimes with a “friends and family round”) or from a recognized funding firm. Usually the funding source is seen as something to crow about, get advisors from, etc. Secret funding doesn’t mean “the mob,” but it also doesn’t not mean the mob. Undisclosed amounts are not uncommon but undisclosed sources are, especially to employees.
Is it unreasonable? Well, he may have reasons to keep it secret but you also have reasons to know. Especially if you are getting equity, you should ask about funding and runway before joining a startup so you know who you're really working for and how long you might be there. Lack of clear forthcoming answers means “do not join” (assuming it's not this job or starvation). Depending on where you are, shareholders have the right to inspect financial documents (yes, even in a private company, look it up). If you’re not getting equity… Why are you joining a startup?
The form of the answer is arrogant and obnoxious, and that's cause for concern in and of itself, in my opinion.
This isn't quite the same context, but in my first summer internship everybody referred to our primary funder as "the sponsor" out of policy. I didn't learn who the sponsor was until I started full time a year later.
It was the NSA.
So I think there are legitimate reasons for caution around revealing funders, but they're rare and should always be at least somewhat concerning.
No, it is not unusual to not want to share clients to someone just starting. Yes, it is unusual to say it in that way, but it is also very possible no harm was meant by it.
I work for a start-up and could totally see the second in charge saying something this asinine. Not because it is a big secret, but because she likes to create the illusion of secrecy and being "in the know". However, she also cannot keep an actual secret to save her life so typically it involves being cloak-and-dagger for all of five minutes before spilling the beans.
Without knowing what kind of person your boss is, I cannot say this is the case, but I recommend looking at everything you DO know about their character to decide if you should be alarmed or not.
I have been involved in start-ups, and although I would not have answered the question using this exact phrasing (which seems hostile) I probably would not have given the employee this information.
Some employees possess skill sets that would lead them to think, "Hey, maybe I should solicit that investor to fund my own startup."
Investment contacts are a valuable resource. More than a few people sell them, or take referral fees for sharing them. Developing a solicitation plan takes time and effort; people spend money just to learn how to do this, and spend an inordinate amount of time and effort pitching people in elevators and at conferences to track potential investors down. The employee may think they are just engaged in friendly chatter, but they aren't. They are basically asking their boss to hand them an asset for free.
It was obviously a sensitive subject and you caught them off-guard. When you're coddling a business to get it off the ground you gain more than a vested interest, it essentially becomes your "baby". Some people refuse to divulge sensitive information, the smart ones just make you sign an iron clad non-compete. I am posting because I wanted to share two similar anecdotal shorts I thought of while reading your post...
I was helping investigate petty cash theft from an established retail business. After the owner and I had walked around his establishment to get an overview of operations, we settled at the location where the suspected theft was occurring. Considering myself privy to certain actions regarding the circumstances, I proceeded to open the drawer, in my mind, to see how easily it opened. Immediately the owner slammed it back shut. The action on either of our parts were never discussed.
On another occasion as a signmaker, early 2000s, I needed to run to the supply shop. To set this bizarre scene, I had been buying from this same man for a few years and we had gotten to know each other fairly well, so there's a certain level of comradery or idle banter that always went on to catch up with one another. I brought my 2 year old daughter with me this time, as she had gotten to the age where she and I could enjoy such things together. Just as we were finishing up, he said let me show you something, he seemed proud as he proceeded to show me an order he had just received of what looked to me like around 50 or so 1 ounce silver coins. Directly afterwards he opens up another drawer and pulls out this huge hand cannon revolver and proceeds to wave it not at me, but directly in front of my daughter's face and tell me he had something for anyone that wanted to steal from him! At the time I was overwhelmed and shocked, I just froze. Since that occasion I have come a long way in understanding exactly what was happening that day...so bizarre... Now that's an extreme of how funny people can be about their money!
As a startup owner - no, it's not "unusual" not to tell the exact source of funding but if the answer you got was the one in the quotes that's certainly not a nice way to put it.
The rationale behind not disclosing funding to a certain extent is that often funding entities come also with contacts for the early sales - those contacts are easy to "reverse engineer" in a connected world and are some of the most precious assets of the company.
To sum it up:
"Just know it's legitimate" -> jerky answer
"We are funded by a [i.e.] French private holding" -> reasonable answer
"We are funded by fund X " -> you really are trusted
Moreover, it's not unreasonable for a long list of reasons for funders not to want to be publicy involved. May be for example due to capital privacy or financing two similar/competing ventures .
Other answers have focussed on whether the source of funding is legitimate, or whether it comes from a source (e.g. the NSA) which could be ethically problematic.
There is a more fundamental reason to know the source of funding though. Startups by definition don't have sales and are not self-supporting. If you don't know the plans for a route to market, and you don't know whether your startup will get more funding when it's burnt through its current finances, then you don't know how secure your job is.
Every employee should be concerned about this. Might you end up losing your house because the company can't pay you next month? That's a totally valid thing to be worried about.
Also there is a general principle that if your job is not secure, then your salary should be correspondingly higher. It's the same principle as contracting, because you're taking a risk of being laid off at short notice and you need to be compensated appropriately for taking that risk. If you've taken a job at some salary which reflects you believing your job is safe, and you suddenly find that this is not the case, then it is entirely fair to request a re-evaluation of your salary. And if that is refused, they can reasonably expect you to be looking for an alternative gig, because they've misrepresented their company in the hiring process.
I've worked for a few startups, but never for one that didn't actively publicize who provided their funding. I can only speak for Silicon Valley, where I spent most of my career, but there, where you get your funding says a great deal about your company. Some VC firms are more important/more respected than others. Some VCs are very focused on certain technologies. Some VCs are known for riskier funding. And so on. Who is backing your company matters to future investors, future employees, and future clients. In Silicon Valley, if a startup isn't telling you where the funding is coming from, I'd consider that to be a big red flag. Of course, it could also be some super secret awesome thing, but if you know it's not, then definitely a red flag.
There is nothing unusual about not sharing a companies financial information with staff who have no need to know. There are so many potential issues to doing so that it would make no sense.
