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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?

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    Comments are not for extended discussion; this conversation has been moved to chat.
    – Kilisi
    Jul 29 at 9:10
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    Can you look at the companies details on companies house (Or your countries equivalent) Jul 29 at 20:34
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    Some answers could require knowledge of the country you are speaking of. Jul 29 at 22:46
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    An important detail: do you get equity and options in this startup? If you do, then in order to value them you need some idea of the cap table and roughly who the investors are.
    – pjc50
    Jul 30 at 13:02
  • What country is this in? Jul 30 at 22:44

10 Answers 10

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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.

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    "Usually, you ask these kinds of questions before you join a startup" I agree with that but you should still be able to get an answer in order to know if you want to stay or not. Btw, if you quit after getting the info, looks like you were trying to leave anyways since a concerned person would have looked for this info before joining.
    – PowerCat
    Jul 28 at 9:18
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    'You are working for a jerk."....and possibly a dishonest one.
    – Ken Zein
    Jul 29 at 19:25
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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?

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    Nice answer. it seems that there is something to hide if they don't want to tell anything, looks unethical to me.
    – PowerCat
    Jul 28 at 9:17
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    I don't think everyone working for a start-up gets equity. But certainly you're foolish to work for a start-up without having some idea of its funding and how it plans to make money. You can normally find a lot of information from sources such as official filings, the business press, and specialist business information services (often these sources aren't free, but the information is available to anyone who pays). So if the managers refuse to give you publicly-available data, that's a bit odd.
    – Stuart F
    Jul 28 at 11:17
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    I wasn't thinking "the mob." I was actually thinking some government intelligence agency's skunkworks. Jul 28 at 18:40
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    I was just reading how Juul's company early-on got big money from a Tobacco company and tried to keep it quiet for employee moral. To them "Big Tobacco" was close enough to the mob. Jul 28 at 21:38
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    Instead of asking funding sources, I go higher and ask about their revenue model. It tells me where they're at and whether they actually have a revenue stream.
    – Nelson
    Jul 28 at 23:14
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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.

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    surprising you found out it was the NSA. I'd have expected that fact to be covered by all kind of NDAs and security clauses. Just like some of the projects at former employers I had which were related to national security and defense agencies. Never did find out more than that (and then generally because the nature of the project made it obvious that it was defense related).
    – jwenting
    Jul 29 at 7:40
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    @jwenting The product itself wasn't classified, ie, it wasn't itself a defense system. Certainly we were told as employees always to refer to "the sponsor", and everyone up to the president and board members did so. And this was almost 30 years ago, so I have to admit I don't have my NDA at hand to check any more. Jul 29 at 8:20
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    interesting. Also not sure an NDA would even be valid after that long. Such things tend to have a limited expiration time by law :)
    – jwenting
    Jul 29 at 9:05
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    @jwenting not for employers like the NSA Mi5 Mi6 etc Jul 29 at 20:33
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    @Neuromancer Just to clarify, I was not employed by the NSA or any other such agency, and I never received a security clearance or came anywhere close to the Official Secrets Act or it's equivalent. I worked for a private startup that was making a product for sale to general high performance computing customers, and that start up had a fair bit of it's initial funding from that one agency, who preferred to keep it's involvement as low key as possible. Jul 29 at 20:51
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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.

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  • So in short,it might not be unusual but it certainly is unreasonable.
    – TooTea
    Jul 28 at 19:09
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    @TooTea It's not unreasonable - in the early stages, some startups do like to be tight-lipped about their funding.
    – sfxedit
    Jul 29 at 0:16
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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.

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    Bullshit. I've worked for multiple startups. Nobody has ever hidden the funders from the employees. They were actively sitting on our board. Many times they were actively in the office a few days a quarter. Any founder not willing to give his employees the information (we're not asking to set up a lunch with them, just give them the names of the funds) is not legitamate. Jul 28 at 19:01
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    Nobody is asking the boss for the names of all investors. "Me,my brother and two rich Saudi guys" would be a perfectly good answer without any of the risks.
    – TooTea
    Jul 28 at 19:06
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    @GabeSechan You are probably projecting from a certain type of consumer-focused tech startup to startups in general. And even for tech startups your point would be much more true for second and subsequent rounds of funding (which are trumpeted publicly as a marketing measure and to validate the value of the founders' shares as much as anything else) than for pre-seed funding.
    – tbrookside
    Jul 28 at 19:12
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    @TooTea OP's question doesn't supply a lot of detail. "You will never know that" sounds to me like they want by the "Well I know a guy who knows a guy" stage and got to the "OK, what guys?" stage.
    – tbrookside
    Jul 28 at 19:14
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    @tbrookside I'm assuming that OP's goal is just to judge the long-term funding prospects of the startup and possible geopolitical and ethical aspects. Saying "that's above your security clearance" or "just some guys from the recreational substances business" gets all the important points across without involving any personal data.
    – TooTea
    Jul 28 at 21:01
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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!

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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 .

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    Or maybe the funding contract has an NDA? Almost every contract I've ever reviewed had some NDA associated with it. It takes a while before the company has to make its founding public and an NDA is perfectly enforceable at a very early stage.
    – Mefitico
    Jul 29 at 13:13
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    @Mefitico: Sure, but typically in that scenario you could still say, "We are funded by a venture capitalist. Their identity is under NDA."
    – Brian
    Jul 29 at 20:12
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    @Brian : In some cases, which often are a result of poor contract writing and interpretation, rather than an actually meaningful clause, it is not uncommon for contracts with non-disclosure clauses to specify that the existence of the contract itself is under NDA, thus preventing even an answer such as "We are funded by a non-disclosable venture capitalist", as this effectively informs the third party of the existence of both a "venture capitalist", and an "NDA agreement" with this party, along with the "funding" nature of the agreement.
    – Mefitico
    Jul 29 at 20:17
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    @Brian - that's exactly what we have. Take the money but do not disclose who we are. And it's a very "plain" startup, certainly not a defense market... Jul 29 at 21:53
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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.

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  • Yes, legitimacy is not really the issue. It's how reliable is their funding. Is it going to dry up in a week or a month ? Is it something an employee can rely on to do those trivial things like eat and sleep under a roof.
    – StephenG
    Jul 30 at 21:09
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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.

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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.

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    Having worked in a few start-ups I would want to know where the money is coming from, to get an idea if they will be willing to invest further, what their exit strategy is, etc. Those all have concrete effects on working there. Jul 28 at 7:04
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    @mattfreake also, to evaluate the risk that next month there will be no money left to pay for my salary.
    – SJuan76
    Jul 28 at 9:23
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    @JoeStrazzere perhaps, in some locales giving information like that can have it public knowledge pretty quick, or end up in a competitors hands. Which can lead to many things including attempted hijacking of your funding. In some industries giving any financial data away would get you sacked, or could get the company blacklisted. Lots of cons, no pro's.
    – Kilisi
    Jul 28 at 10:47
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    The "pro" is that employees may be unwilling to work for you if they don't have some reassurance that the company has even a short-term future. If you're asking people to join (and often receive some of their compensation in the form of equity) a business that's losing money, they're reasonably going to want to know details of the plans to either obtain more investment or become profitable before the cash runs out. Jul 28 at 20:25
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    @Kilisi So you’re agreeing with me that knowing about the funding is helpful, and that hiding the source of funding puts the applicant in a position of having to guess? In other words, the reason to hide the funding would be if the funding is dodgy. In other words, funding being hidden is itself a warning sign — contrary to what your answer and subsequent comments say. Jul 29 at 15:31

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