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So if I'm reading this correctly, the VC makes $27m and the original founders and team who worked an entire year on the project make $0. Is this correct?

There is more than one takeaway in this story.

How do you get that?

By my estimate (http://news.ycombinator.com/item?id=4879046), they should have seen a reasonable payout. As was explained in the blog post, TechForward sold all the company's assets except the lawsuit. So the original shareholdings should all be in place, minus whatever additional equity they had to sell to the investors to get the small amount of additional money needed for the lawsuit.

You are almost certainly not reading this correctly.

I doubt you're reading that correctly.

Yeah, I was mildly sympathetic until it got to the part where they said in passing "oh, unfortunately, we just sort of liquidated the company."

You're forgetting the legal cost AND the risk of not getting paid the VC took.

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