First, when you "pivot" after losing a fight for a market and take an A round of funding, you failed. Not all failures are fatal, but the word "pivot" isn't a magic startup 1-up mushroom.
Second, whatever you want to call it, nobody is better off not selling if Gowalla 2012 was destined to fail anyways. It is among other things (very) hard to retain talent at a company facing (at best) a heavily dilutive future round just to keep the lights on for a (very) uncertain new product.
Ultimately though, I'm just repelled by the idea that people think operators owe it to financiers to go down with the ship. I think the real issue cuts in rather the other direction: founder-operators who kowtow to VC partners to preserve their reputations and future fundability, come what may to the employees they recruited to their doomed company.
First, when you "pivot" after losing a fight for a market and take an A round of funding, you failed.
The product failed. You (and your investors) might take the lessons of that failure forward and enjoy wild success with a different product. The question is whether the team has a new idea to pivot to, and whether the investor has confidence that the team will do better the second time around. I don't know the facts of the Gowalla situation, but suppose the 'new idea' here was that while the Gowalla product didn't make sense on its own, it could be combined with Facebook to create a profitable feature for them. If so, the investors who helped create that value should not be cut out of the deal.
Second, whatever you want to call it, nobody is better off not selling if Gowalla 2012 was destined to fail anyways.
Just because Gowalla had no value as an independent company doesn't mean the company had no value. Obviously Facebook valued something about it, and like anything else, a company is worth what someone is willing to pay for it. Now maybe Facebook just really valued the founders' skills and work ethic, in which case I'd agree with you. But maybe they want the founders to reproduce Gowalla as a Facebook feature, in which case the total price they pay to acquire that expertise should in fairness be distributed to the shareholders and not just to the founders. In the software business there is a fuzzy line between a talent acquisition and a straight-up acquisition.
Who cares how well the second go-round is going to go? The company burned $N MM on the first product; it is $N MM in the hole on the next product. What rational top-tier engineer stays on to do a next product with extra dilution overhead, when there's hundreds of excellent next products to do without that dilution?
You're pretending like the company and the product are just abstractions. That's one of the perils of thinking about startups in the airless vacuum of Hacker News. In reality, you run out of money, you have to get more, and the more times you hit the money dispenser, the lower your upside.
Here you run off the end of the moralizing cliff, because whatever it is you think the founders should do, top engineers aren't idiots, and financiers have no moral claim on them --- the opposite is true, in fact, since most startup engineers are morally investors in the company as well having sacrificed market salaries in exchange for options.
Which places the founding team in a bit of a pickle, since not only do they have the prospect of a reduced upside, but they are also on a path towards losing the engineering talent they'll need to differentiate their product.
This is one of the problems with the VC model of product development. It shoots your company out of a cannon. It's awfully hard to course-correct. It's a good reason to bootstrap (I recommend consulting): consulting gigs actually are magic 1-up mushrooms for product startups.
Remember, we're talking about founders here, officers of the company with a fiduciary duty to shareholders. It's one thing to hire a top employee away---he's bound by whatever IP clause is in his employment contract, but beyond that he has no duty to the company. It's another thing entirely to acquire a company's IP assets indirectly by hiring the founders via a big equity package, leaving the shareholders pennies on the dollar. I don't know that that's the case here at all, I'm just saying that it raises the issue. Obviously it matters how much they got. If it was a $500K incentive, no problem. But $50M would be a problem. Somewhere in between those numbers a line gets crossed, and it becomes an ethical (and perhaps legal) issue.
When the primary asset of the company is its team, the investors lose both their moral and practical claim on the value of those "assets".
Morally, it is wrong (and without foundation in contract law) to prevent an employee of a company from finding more gainful employment somewhere else simply to maximize the value of your investment. While it's true that every retention policy of every company is designed precisely to keep employees from finding better offers, those are carrot policies, never sticks (the sticks tend to get shot down in court).
Practically, there's no effective way to compensate investors for the value of the team, because every dollar you don't give the team decreases the likelihood of retaining team members, which is the whole point of making a talent acquisition.
All of this is a long way of making a simple point.
Gowalla lost. Its investors knew it might lose when they made their investment. Trying to claw ROI back from the value of the individual employees on the market is simply not a reasonable investor goal.
Your assertion that employees are never under a moral or contractual obligation to their employers is simply wrong. An employee in a sensitive position, under a non-compete, cannot take trade secrets from his employer and give them to another company. This is both immoral and illegal, and contrary to your statement, sometimes the 'stick' is enforced.
Even if you were right about employees, as I noted above, the situation is very different for founders. It is morally (and in extreme cases legally) wrong to accept a payoff in order to circumvent the investors to whom you have a legal and ethical duty as corporate officers.
If I invest $10M in Startup X to develop and market Cool Service, and a year later the founders accept a $50M stock package from Company Y so that it can offer Cool Service, and I'm left with nothing, then "trying to claw ROI back" is absolutely a reasonable goal. (I'm not saying this was the situation with Gowalla, only that your position that it's never justified seems extreme.)
First, when you "pivot" after losing a fight for a market and take an A round of funding, you failed. Not all failures are fatal, but the word "pivot" isn't a magic startup 1-up mushroom.
Second, whatever you want to call it, nobody is better off not selling if Gowalla 2012 was destined to fail anyways. It is among other things (very) hard to retain talent at a company facing (at best) a heavily dilutive future round just to keep the lights on for a (very) uncertain new product.
Ultimately though, I'm just repelled by the idea that people think operators owe it to financiers to go down with the ship. I think the real issue cuts in rather the other direction: founder-operators who kowtow to VC partners to preserve their reputations and future fundability, come what may to the employees they recruited to their doomed company.