Specifically, in the case of the article, spinning off the redundant employees leaving them in a new firm with no product and no revenue sounds like a cruelly dystopian option. And if the company was willing to put money into it, I'm pretty sure most employees would prefer that as a severance package instead.
In this case I expect he might have made a spot for those employees working on a different product, but that's not certain - technologies & skills were different & the vertical markets were completely different.
And in this specific case, the two staff thought it was an amazing opportunity for them - I think their short-term salary went up & they got a lot more flexibility plus potential upside if they could grow the business even slowly. Obviously some downsides in terms of benefits, etc. But even if it didn't work out it would have been a pretty good line item on their resume. :)
Possibly, but I think the employee should be given a choice. If even just 1% of laid-off people took the choice and succeeded, the entire economy would clearly benefit.
In the B2B space, the costs of switching vendors/products is often a really big deal. Spinning the product off released him from the obligation (allowing him to focus on more promising products), and avoided (most of?) the pain for his clients.
I worked for an employer who did exactly that when one of the new product/business they'd built wasn't growing (enough?) to warrant more investment. So he set up a couple of the developers working on the product with the rights to the product and helped work out new contracts with the existing handful of clients (it was large enterprise software). There was enough revenue (maintenance contracts) to support the two guys, and so the existing customers were taken care of in terms of maintenance. Worked out pretty well for everyone as far as I know.