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The Windsurf and Scale deals underscore a fragile reality for startup employees

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The employee takes a risk, joining a new company, in many cases one that doesn’t have proven revenue or a secure future. They join for the mission, the chance to take a seat on a possible rocket ship, and to work with a founder or set of cofounders they believe are exceptional. And of course, they join for the upside—the belief that the equity in a company that they take on as part of their compensation will actually be worth something in the end, that the founders they’ve risked their careers for will advocate for as many of their people as possible in the event of an exit.

“If that social compact fails, the whole system fails,” said Daniel Dart, founder of Rock Yard Ventures. 

And this social contract has been under pressure in recent days and weeks, as multi-billion dollar acquihires take CEOs and cofounders away from the companies they’ve founded—leaving behind companies with uncertain futures and in many cases hundreds of employees or more. We’ve seen two notable cases in quick succession: Meta’s $14 billion deal for 49% of Scale AI, which moved Scale CEO and cofounder Alex Wang to Meta, and Google’s $2.4 billion acquihire of Windsurf, a deal that left many employees behind—who then soon would see the remains of their company acquired by Cognition. 

People are mad about Scale, sure—the company laid off about 200 staff members this week—but people are really incensed about Windsurf, a deal that excluded about 250 employees, fostering concerns not only about equity (in all senses of the word) but for what this means about the relationship between founders and their employees. 

“I think the cascading net effect of this sort of situation is that it’s actually going to change what those early conversations with employees are like at startups,” said Dart. 

To Amplitude CEO and cofounder Spenser Skates—who’s conducted both acquihires and acquisitions really recently—the Windsurf deal stands out as egregious. He likens it to a captain abandoning ship, comparing the situation to Francesco Schettino, who in 2012 fled the capsized Costa Concordia, leaving behind passengers and crew. 32 people died in the disaster. Incidents like Windsurf, Skates says, show why it’s more important than ever for employees to think hard about the founder they’re throwing their lot in with. 

“I think employees should ask the CEO and founders straight up: Are you going to leave? It’s crazy you have to do that,” said Skates. “But I think the character and integrity of the founders matters way more than ever.”

I asked Henry Shi, Super.com cofounder, if startup employees will start thinking differently about their hiring terms as deals like this happen more frequently. 

“Yes, but unfortunately I’m not sure if they have many options or leverage,” Shi wrote via email. “Especially given the market dynamic between labor and capital as we approach economic AGI, early employees may not have that much leverage—except by starting their own companies.”

Because equity is what a founder makes it.

We’ll see more of this as the M&A marketplace continues at “AI speed,” said David Shim, CEO and cofounder of Read.ai via email. And we have, in fact, seen deals of this ilk before, from Microsoft’s acquihire of Inflection to Amazon’s of Adept. And, in the end, the fact that social media was so abuzz may actually be a good thing for startup employees. It means people still want the innovation economy to benefit all its participants. 

Given that antitrust regulators don’t seem poised to police these kinds of deals anytime soon, the public reaction may indeed be one of the few guardrails. 

“What we saw with the Windsurf deal was the ecosystem getting up in arms about the fairness for employees, which should create some sense of comfort,” said Yohei Nakajima, general partner at Untapped Capital. “While breaking up companies isn’t necessarily bad, it’s important that everybody gets their fair share— and especially if these types of deals continue, I’d hope to see more standards around how these get treated.”

See you Monday,

Allie Garfinkle
X:
@agarfinks
Email: alexandra.garfinkle@fortune.com
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Sara Braun curated the deals section of today’s newsletter. Subscribe here.

Venture Deals

Hadrian, a Torrance, California-based AI-powered manufacturing company, raised $260 million in Series C funding. Founders Fund, Lux Capital, and Morgan Stanley led the round and were joined by Altimeter, 1789 Capital, Andreessen Horowitz, Construct Capital, 137 Ventures, and others.

Lovable, a Stockholm-based AI-powered app-building platform, raised $200 million in Series A funding. Accel led the round and was joined by existing investors 20VC, byFounders, Creandum, Hummingbird, Visionaries Club, and others. 

Bedrock Robotics, a San Francisco-based autonomous construction technology company, raised $80 million in seed and Series A funding. Eclipse and 8VC led the rounds, and were joined by Two Sigma Ventures, Valor Equity Partners, NVentures, Crossbeam Venture Partners, Raine Group and more. 

Quandri, a Vancouver-based AI-enabled insurance servicing platform, raised $12 million in funding. Framework Venture Partners led the round and was joined by Intact Ventures and existing investors FUSE and Defined Capital. 

StrongestLayer, a San Francisco-based cybersecurity company developing AI-native email security and human risk solutions, raised $5.2 million in seed funding. Sorenson Capital led the round and was joined by Recall Capital. 

Confident Security, a San Francisco-based startup building provably private AI inference technology, raised $4.2M in seed funding. Decibel led the round and was joined by South Park Commons, Ex Ante, and Swyx.

Fiber Elements, a Leoben, Austria-based startup specializing in automated basalt fiber manufacturing, raised €2.6 million ($3 million) in seed funding. LEA Partners and Amadeus APEX Technology Fund led the round. 

Private Equity

Stonepeak invested $1.3 billion in Princeton Digital Group, a Singapore-based developer and operator of internet infrastructure. 

KKR acquired a minority stake in SupplyHouse, an Melville, New York-based e-commerce distributor of HVAC, plumbing, and electrical products. Financial terms were not disclosed. 

AIS, backed by Blue Delta Capital Partners, acquired Dorrean, a Reston, Virginia-based mission services and consulting provider to federal government agencies. Financial terms were not disclosed. 

Other

– Blue Owl Capital (NYSE: OWL) acquired South Reach Networks, a Miami-based telecommunications infrastructure provider, from Turning Rock Partners. Financial terms were not disclosed. 

Hexaware Technologies acquired SMC Squared, a Plano, Tex.-based IT offshoring organization, for $120 million. 

Vanta acquired Riskey, a Tel Aviv-based risk monitoring software company. Financial terms were not disclosed. 

FUNDS + FUNDS OF FUNDS

Banyan, a New York City-based venture firm, raised $10 million for its first fund focused on AI startups. 

PEOPLE

Advent International, a Boston-based private equity firm, hired Frank Roe as operating partner. Previously, he was the CEO of SmartBear.

65 Equity Partners, a Singapore-based private equity firm, hired Sean Murphy as partner and co-head of U.S. business. He previously was partner and co-head of Harvest Partners Structured Capital Fund.

Madrona, a Seattle-based venture capital firm, promoted Sabrina Albert (Wu) to partner. She was previously a principal at the firm. 

Battery, a Boston-based technology-focused investment firm, promoted Justin Rosner to partner. He previously was a principal at the firm.



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Mark Zuckerberg says the ‘most important thing’ he built at Harvard was a prank website

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For Mark Zuckerberg, the most significant creation from his two years at Harvard University wasn’t the precursor to a global social network, but a prank website that nearly got him expelled.

The Meta CEO said in a 2017 commencement address at his alma mater that the controversial site, Facemash, was “the most important thing I built in my time here” for one simple reason: it led him to his wife, Priscilla Chan.

“Without Facemash I wouldn’t have met Priscilla, and she’s the most important person in my life,” Zuckerberg said during the speech.

In 2003, Zuckerberg, then a sophomore, created Facemash by hacking into Harvard’s online student directories and using the photos to create a site where users could rank students’ attractiveness. The site went viral, but it was quickly shut down by the university. Zuckerberg was called before Harvard’s Administrative Board, facing accusations of breaching security, violating copyrights, and infringing on individual privacy.

“Everyone thought I was going to get kicked out,” Zuckerberg recalled in his speech. “My parents came to help me pack. My friends threw me a going-away party.”

It was at this party, thrown by friends who believed his expulsion was imminent, where he met Chan, another Harvard undergraduate. “We met in line for the bathroom in the Pfoho Belltower, and in what must be one of the all time romantic lines, I said: ‘I’m going to get kicked out in three days, so we need to go on a date quickly,’” Zuckerberg said.

Chan, who described her now-husband to The New Yorker as “this nerdy guy who was just a little bit out there,” went on the date with him. Zuckerberg did not get expelled from Harvard after all, but he did famously drop out the following year to focus on building Facebook.

While the 2010 film The Social Network portrayed Facemash as a critical stepping stone to the creation of Facebook, Zuckerberg himself has downplayed its technical or conceptual importance.

“And, you know, that movie made it seem like Facemash was so important to creating Facebook. It wasn’t,” he said during his commencement speech. But he did confirm that the series of events it set in motion—the administrative hearing, the “going-away” party, the line for the bathroom—ultimately connected him with the mother of his three children.

Chan, for her part, went on to graduate from Harvard in 2007, taught science, and then attended medical school at the University of California, San Francisco, becoming a pediatrician.

She and Zuckerberg got married in 2012, and in 2015, they co-founded the Chan Zuckerberg Initiative, a philanthropic organization focused on leveraging technology to address major world challenges in health, education, and science. Chan serves as co-CEO of the initiative, which has pledged to give away 99% of the couple’s shares in Meta Platforms to fund its work.

You can watch the entirety of Zuckerberg’s Harvard commencement speech below:

For this story, Fortune journalists used generative AI as a research tool. An editor verified the accuracy of the information before publishing. 



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Senate Dems’ plan to fix Obamacare premiums adds nearly $300 billion to deficit, CRFB says

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The Committee for a Responsible Federal Budget (CRFB) is a nonpartisan watchdog that regularly estimates how much the U.S. Congress is adding to the $38 trillion national debt.

With enhanced Affordable Care Act (ACA) subsidies due to expire within days, some Senate Democrats are scrambling to protect millions of Americans from getting the unpleasant holiday gift of spiking health insurance premiums. The CRFB says there’s just one problem with the plan: It’s not funded.

“With the national debt as large as the economy and interest payments costing $1 trillion annually, it is absurd to suggest adding hundreds of billions more to the debt,” CRFB President Maya MacGuineas wrote in a statement on Friday afternoon.

The proposal, backed by members of the Senate Democratic caucus, would fully extend the enhanced ACA subsidies for three years, from 2026 through 2028, with no additional income limits on who can qualify. Those subsidies, originally boosted during the pandemic and later renewed, were designed to lower premiums and prevent coverage losses for middle‑ and lower‑income households purchasing insurance on the ACA exchanges.

CRFB estimated that even this three‑year extension alone would add roughly $300 billion to federal deficits over the next decade, largely because the federal government would continue to shoulder a larger share of premium costs while enrollment and subsidy amounts remain elevated. If Congress ultimately moves to make the enhanced subsidies permanent—as many advocates have urged—the total cost could swell to nearly $550 billion in additional borrowing over the next decade.

Reversing recent guardrails

MacGuineas called the Senate bill “far worse than even a debt-financed extension” as it would roll back several “program integrity” measures that were enacted as part of a 2025 reconciliation law and were intended to tighten oversight of ACA subsidies. On top of that, it would be funded by borrowing even more. “This is a bad idea made worse,” MacGuineas added.

The watchdog group’s central critique is that the new Senate plan does not attempt to offset its costs through spending cuts or new revenue and, in their view, goes beyond a simple extension by expanding the underlying subsidy structure.

The legislation would permanently repeal restrictions that eliminated subsidies for certain groups enrolling during special enrollment periods and would scrap rules requiring full repayment of excess advance subsidies and stricter verification of eligibility and tax reconciliation. The bill would also nullify portions of a 2025 federal regulation that loosened limits on the actuarial value of exchange plans and altered how subsidies are calculated, effectively reshaping how generous plans can be and how federal support is determined. CRFB warned these reversals would increase costs further while weakening safeguards designed to reduce misuse and error in the subsidy system.

MacGuineas said that any subsidy extension should be paired with broader reforms to curb health spending and reduce overall borrowing. In her view, lawmakers are missing a chance to redesign ACA support in a way that lowers premiums while also improving the long‑term budget outlook.

The debate over ACA subsidies recently contributed to a government funding standoff, and CRFB argued that the new Senate bill reflects a political compromise that prioritizes short‑term relief over long‑term fiscal responsibility.

“After a pointless government shutdown over this issue, it is beyond disappointing that this is the preferred solution to such an important issue,” MacGuineas wrote.

The off-year elections cast the government shutdown and cost-of-living arguments in a different light. Democrats made stunning gains and almost flipped a deep-red district in Tennessee as politicians from the far left and center coalesced around “affordability.”

Senate Minority Leader Chuck Schumer is reportedly smelling blood in the water and doubling down on the theme heading into the pivotal midterm elections of 2026. President Donald Trump is scheduled to visit Pennsylvania soon to discuss pocketbook anxieties. But he is repeating predecessor Joe Biden’s habit of dismissing inflation, despite widespread evidence to the contrary.

“We fixed inflation, and we fixed almost everything,” Trump said in a Tuesday cabinet meeting, in which he also dismissed affordability as a “hoax” pushed by Democrats.​

Lawmakers on both sides of the aisle now face a politically fraught choice: allow premiums to jump sharply—including in swing states like Pennsylvania where ACA enrollees face double‑digit increases—or pass an expensive subsidy extension that would, as CRFB calculates, explode the deficit without addressing underlying health care costs.



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Netflix–Warner Bros. deal sets up $72 billion antitrust test

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Netflix Inc. has won the heated takeover battle for Warner Bros. Discovery Inc. Now it must convince global antitrust regulators that the deal won’t give it an illegal advantage in the streaming market. 

The $72 billion tie-up joins the world’s dominant paid streaming service with one of Hollywood’s most iconic movie studios. It would reshape the market for online video content by combining the No. 1 streaming player with the No. 4 service HBO Max and its blockbuster hits such as Game Of ThronesFriends, and the DC Universe comics characters franchise.  

That could raise red flags for global antitrust regulators over concerns that Netflix would have too much control over the streaming market. The company faces a lengthy Justice Department review and a possible US lawsuit seeking to block the deal if it doesn’t adopt some remedies to get it cleared, analysts said.

“Netflix will have an uphill climb unless it agrees to divest HBO Max as well as additional behavioral commitments — particularly on licensing content,” said Bloomberg Intelligence analyst Jennifer Rie. “The streaming overlap is significant,” she added, saying the argument that “the market should be viewed more broadly is a tough one to win.”

By choosing Netflix, Warner Bros. has jilted another bidder, Paramount Skydance Corp., a move that risks touching off a political battle in Washington. Paramount is backed by the world’s second-richest man, Larry Ellison, and his son, David Ellison, and the company has touted their longstanding close ties to President Donald Trump. Their acquisition of Paramount, which closed in August, has won public praise from Trump. 

Comcast Corp. also made a bid for Warner Bros., looking to merge it with its NBCUniversal division.

The Justice Department’s antitrust division, which would review the transaction in the US, could argue that the deal is illegal on its face because the combined market share would put Netflix well over a 30% threshold.

The White House, the Justice Department and Comcast didn’t immediately respond to requests for comment. 

US lawmakers from both parties, including Republican Representative Darrell Issa and Democratic Senator Elizabeth Warren have already faulted the transaction — which would create a global streaming giant with 450 million users — as harmful to consumers.

“This deal looks like an anti-monopoly nightmare,” Warren said after the Netflix announcement. Utah Senator Mike Lee, a Republican, said in a social media post earlier this week that a Warner Bros.-Netflix tie-up would raise more serious competition questions “than any transaction I’ve seen in about a decade.”

European Union regulators are also likely to subject the Netflix proposal to an intensive review amid pressure from legislators. In the UK, the deal has already drawn scrutiny before the announcement, with House of Lords member Baroness Luciana Berger pressing the government on how the transaction would impact competition and consumer prices.

The combined company could raise prices and broadly impact “culture, film, cinemas and theater releases,”said Andreas Schwab, a leading member of the European Parliament on competition issues, after the announcement.

Paramount has sought to frame the Netflix deal as a non-starter. “The simple truth is that a deal with Netflix as the buyer likely will never close, due to antitrust and regulatory challenges in the United States and in most jurisdictions abroad,” Paramount’s antitrust lawyers wrote to their counterparts at Warner Bros. on Dec. 1.

Appealing directly to Trump could help Netflix avoid intense antitrust scrutiny, New Street Research’s Blair Levin wrote in a note on Friday. Levin said it’s possible that Trump could come to see the benefit of switching from a pro-Paramount position to a pro-Netflix position. “And if he does so, we believe the DOJ will follow suit,” Levin wrote.

Netflix co-Chief Executive Officer Ted Sarandos had dinner with Trump at the president’s Mar-a-Lago resort in Florida last December, a move other CEOs made after the election in order to win over the administration. In a call with investors Friday morning, Sarandos said that he’s “highly confident in the regulatory process,” contending the deal favors consumers, workers and innovation. 

“Our plans here are to work really closely with all the appropriate governments and regulators, but really confident that we’re going to get all the necessary approvals that we need,” he said.

Netflix will likely argue to regulators that other video services such as Google’s YouTube and ByteDance Ltd.’s TikTok should be included in any analysis of the market, which would dramatically shrink the company’s perceived dominance.

The US Federal Communications Commission, which regulates the transfer of broadcast-TV licenses, isn’t expected to play a role in the deal, as neither hold such licenses. Warner Bros. plans to spin off its cable TV division, which includes channels such as CNN, TBS and TNT, before the sale.

Even if antitrust reviews just focus on streaming, Netflix believes it will ultimately prevail, pointing to Amazon.com Inc.’s Prime and Walt Disney Co. as other major competitors, according to people familiar with the company’s thinking. 

Netflix is expected to argue that more than 75% of HBO Max subscribers already subscribe to Netflix, making them complementary offerings rather than competitors, said the people, who asked not to be named discussing confidential deliberations. The company is expected to make the case that reducing its content costs through owning Warner Bros., eliminating redundant back-end technology and bundling Netflix with Max will yield lower prices.



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