When should startups start to care about where they get their money?

What are you willing to give up?
What are you willing to give up?
Image: AP/Josh Reynolds
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There’s a suddenly inconvenient truth about Softbank’s Vision Fund.

The $100 billion fund, which revolutionized the way Silicon Valley thinks about fundraising, has written checks of $1 billion or more to a dozen-plus Silicon Valley startups including Uber, SoFi, and WeWork. The inconvenient part: nearly half of the fund is made up of money from Saudi Arabia.

“We are the creators of Softbank Vision Fund,” Saudi crown prince Mohammed bin Salman told Bloomberg in a recent interview, referring to the $45 billion his country’s Public Investment Fund (PIF) had committed to the $100 billion Softbank investment vehicle. “Without the PIF, there will be no SoftBank Vision Fund.”

As it became clearer that the Saudi government may have played a role in the death of journalist Jamal Khashoggi, Silicon Valley decided to take a stand. Uber CEO Dara Khosrowshahi, AOL co-founder Steve Case, and Google Cloud CEO Diane Greene are three of the many executives who decided to no longer attend the so-called “Davos in the Desert” conference in Riyadh this week. Softbank founder and CEO Masayoshi Son also stayed away from the summit.

But even before the death of Khashoggi, Saudi Arabia was no stranger to human rights abuses. The country has a history of funding terrorism, restricting the independent media, jailing human rights activists, and punishing its citizens inhumanely—none of which Silicon Valley seemed to mind before. Though it’s admirable that startup founders and corporate executives are getting more comfortable becoming activists, none, save for Richard Branson, are actually giving the Saudis their money back.

On the other end of the spectrum, a number of startups including the social-media management platform Buffer and the interactive content developer Arkadium have spent millions of dollars this year to buy out their investors to regain total control over their companies.

“Institutional investors have a time frame and a window in which they expect a return,” says Arkadium CEO Jessica Rovello. “That timeframe becomes an outsized voice on the strategic direction of the business, which doesn’t always equate to the right thing for our customers or employees.”

For Rovello, the decision to take back total control of her company came down to values. “We want to be an example for purpose-driven companies that value long-term impact over ‘growth at all costs’ mindsets,” she says.

But not all companies are in the financial place to be able to buy out their investors or bootstrap their way into existence. Without venture capital, many startups simply would not have the resources to bring their ideas to life or challenge rich incumbents.

But even if we assume that outside funding is necessary to grow a business—which definitely isn’t the case for all of them—founders and venture capitalists need to reflect on whose money they’re willing to take.

“It is time for all of us in the startup and VC sector to do a deep dive on our investor base and ask… who are our investors and can we be proud of them? And do we want to work for them?” writes Fred Wilson, the co-founder of Union Square Ventures. “Not all money is the same. The people that come with it and who are behind it matter. That has always been the case and remains the case and we are reminded of it from time to time. Like right now.”

Accepting investment in exchange for equity is a compromise of control for any founder, but it should not also be a compromise of values.