If I agree to sell you my car for $5,000 then you show up with the money and give it to me and take the car, I don't get to change my mind later and get mad that you didn't give me more and call you immoral.
A lot of startup exits seem to take the form of you then selling the car to someone for a break even amount, who just happens to also pay you individually an extra $5,000 on the side.
Is it a good deal for you? Yes. Is it a scummy move? Yes.
One of my startups sold for about $25-40MM depending on whether you count pre- or post-earnout. The typical engineer got maybe a quarter of a percent of options on common stock. You’d think that would net out to $62.5K but we had a messy cap table. Various investments’ preferred status ate deeply into what remained for common stockholders.
Even if there were no cap table issues, the engineers wouldn’t have been happy, because they hung their hopes and dreams on a multi-hundred-million dollar exit. We experienced 90%+ engineer turnover over the next six months. (We got by just fine.)
Rule of thumb: do not join a startup for the money.
But on the other hand, if you’d agreed to sell me your car at a price under what you might be able to get elsewhere—maybe because I was financially struggling and you were doing me a friendly favour—you’d probably be pretty miffed if I won the lottery and still demanded you stick to your offer…
They chose not to, which would seem to indicate they weren't miffed. Nobody forced them to do anything. It's not immoral to ask someone for an accommodation and accept it.
The investors didn't give him the money as a friendly favor to help him it out. It was an investment. Presumably they make a lot of them and understand the risks involved in doing so. If you're going to get hurt feelings whenever one of your investments doesn't pay off, you're not cut out to be an investor.
