Seems to me like the last sentence explains it all:
The part that Neary left out in his letter? According to sources after Pugh departed he gave employees an ultimatum: 24 hours to decide if they were in or out for the long haul, even if that meant no more salary without a new fundraise, which seemed unlikely. Given that binary choice, they elected to abandon ship.
Sounds like less of a war story and more of a fatal leadership mistake. There was no "war" - Rather than inspiring his team, he gave a frantic ultimatum.
Sadly ironic name, hopefully he can pull it together.
In November they fired a key employee, then the CEO demanded a loyalty oath of all remaining members that they would stay for 6 months or get out. They had 48 hours to accept the loyalty oath or leave. All accepted.
It seems it was then that they began the total rewrite of the front and back end of the system.
On this last Monday, after 5 months of an unpaid overtime, they finished that complete rewrite death march. On Tuesday they had a token pizza party.
There is no other reward for completion of this death march or the roughly six months of loyalty.
On Wednesday they are back to the grind. A co-founder, having fulfilled his vow to stay through the six month rewrite, resigns. The rest of the employees are told by the CEO they must take another loyalty oath and this time be willing to work without pay because there is no income. This time they get 24 hours not 48 to answer. The entire team chooses to reject the new loyalty oath and thus "resigns", but it is also possible they were basically forced out for refusing the oath.
Even without the oath, mass resignations are quite common at the end of a death march. So far this story is straight predictable right out of Edward Yourdon. Yourdon is also correct that death marches are the rule not the exception with start ups. Given how many products and start ups are destroyed because of management driving death marches, they may in fact even be responsible for the largest waste of capital in the industry today. Business as usual though.
Now we get to the strange parts of the story.
During all this going on, the same CEO only the week before was emailing journalists and telling them that the company was doing well and picking up several hundred new customers per week.
The CEO then writes a letter to investors blaming the co-founder for not being loyal, doesn't mention the new loyalty oath, and goes on to say the company is in excellent shape with new customers coming in every day.
This is all quite strange with a number of unaddressed questions. Among them:
With all these new customers why was the team told to accept no pay or get out?
The team spent the last six months sacrificing their lives and successfully rebuilt the entire product. They succeeded. The CEO during that time period has successfully extracted only 50% of the loyalty oaths he demanded. This seems his major accomplishment. He completely failed to secure financing needed to keep the company afloat. What exactly has he been doing during this time while others sacrificed? It is clear what the developers have been doing, but him not so much.
They offer a free product and a $50 paid product. I don't think it was mentioned anywhere that those hundreds of new customers were paying customers. Maybe they just signed up to try the product then never came back.
It sounds like the CEO wasn't very good at communicating with his team OR his investors (or presumably customers), which was the fundamental problem.
However, when the money runs out, all sorts of bad things happen. Asking people to continue without pay, advancing expenses to the company, etc. are not things you'd do starting from the start, but it's at least understandable why people do this after investing a lot into a project, and why people feel some kind of personal betrayal when they are willing to go on and do that kind of thing but other people aren't.
He paints a bad picture of the fist guy who left but it looks like the first guy stuck around and help finish the re-write so he can't be the villain that he's portrayed to be.
From what I could gather there, it seems that, while they're signing up people, they need more investment to keep going, and no one believes that they'll be able to raise more investment any time soon. And it might be true. Signing up 200 free accounts per week may translate in to $0/month revenue (or -$x/month if you count expenses), so 'signups per week' isn't a great metric to judge on, although it's the only one we've been given.
Mint started out as not profitable in any way, and I believe at their IPO (which was ~18 months later) they had an ARPU of something like 35-40$ per annum.
You need to reach a critical mass in users before you can take action on certain potential profit centers. It's different for every industry and every business, but there's some things that would be more trouble than they're worth at 25k users but start making you a lot of money at 100k users.
Mint is pretty solidly B2C. B2C companies generally shoot for 3 orders of magnitude (if not more) users than B2B. I agree if revenue is mainly due to leadgen (say, a mortgage market), a B2C product ends up looking more like a B2B product (once leads are qualified) in terms of ARPU and sales strategy, but Mint was in the shallow end of that pool.
Also, Mint never IPO'd; they sold to Intuit (the "old" competitor in their field, with Quicken) for about $200mm. Nice money, but it was argued by a lot of people that they could have hit $1-2b in an IPO. We'll never know.
