The interesting part of the story is not that they refused to fund the company. It's that they refused, and expected the CEO to continue to work at it.
If that signal truly meant there would be no follow on round, why would you expect the CEO to not throw in the towel as well? I've neve been in that situation - anyone out there who's been there care to comment on what it's like to face the world after your lead investors bail?
I can't comment on the situation, but I think throwing the towel as a CEO is the wrong decision. Just because you don't have an upcoming round, your duty as a CEO is to the company in any condition that it's in, come hell or or high water. I would even argue that a CEO is almost married to the company.
Throwing in the towel when the going gets tough seems like a spineless move.
Clearly there has to be some point at which the CEO calls it quits. Having a death-warrant placed on your funding seems like it might be one of those times - again, I'd love to hear from someone who has been there.
As founder and CEO, the point at which you call it quits should be the point at which the company officially declares bankruptcy. That's your duty as CEO.
If that signal truly meant there would be no follow on round, why would you expect the CEO to not throw in the towel as well? I've neve been in that situation - anyone out there who's been there care to comment on what it's like to face the world after your lead investors bail?