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Discussion (65 Comments)Read Original on HackerNews
Look, Iām not promoting fraud at all, but having been doing seed raising for the last eight months, there have been many times where I thought the only way to compete was by fudging the numbers (because everyone else is, basically). Itās one of several reasons I left this game and am pursuing non-traditional means of funding now.
VCs are looking for a long-tail, if you have a 1% chance at 5B - 1T market, this is more interesting and impactful than 10% chance at 5M market.
And yes, 1% chance of success is considered to be unrealistic by common sense standards.
Fudging actual numbers is a dangerous and illegal game to play and never pays off, except in the edge cases (e.g., Enron... but usually you have to pay the Piper).
I don't know the details of her situation, what else she could have done to protect her investments, or how common an experience that was, but there were many comments in agreement under her post, so I'm just curious if it's widespread.
But yes lots of ways to lose money with even less recourse
But this study validates a lot of feelings Iāve had over the last several months. Thereās a ton of people that never get caught, of course.
If I ever win the lottery, I'm going to create the Joseph Welch Foundation. The foundation will give monetary awards to people who have demonstrably pushed back against corruption, lies, and bullshit.
For those who don't recognize the name, Joseph Welch is who said "Have you no sense of decency, sir, at long last, have you left no sense of decency?" to Joseph McCarthy.
Too few people remember Welch. McCarthy was the asshole but his name is remembered more. I see this as an error we have made with our societal memory. It would be better to remember Welch, and only remember McCarthy as "that red scare guy".
My thinking is that the post-ZIRP era, with its more limited funding, will probably require a lot more honesty, transparency, and vetting from founders. āCasting a wide netā makes more sense when funding comes cheap and easy.
Wasn't the SEC essentially gutted to the point it's basically toothless right now?
But there is a clear line that gets crossed if you start actually making a database of millions of synthetic users and that's what happened with 'Frank' that sold to JP Morgan and eventually the founder was prosecuted
I like Ed Zitron's reporting on the AI industry (though I disagree with him on AI's potential capabilities).
I wonder how much of AI-related revenue are because of accounting fiction rather than actual cash.
Either way, I think the stock market is as disconnected as it has ever been with actually ground reality of the US economy and industry.
Even some users are just bots... (At least their behavior is/are)
https://youtube.com/shorts/VpyLcfDsmNg
"But your honor! I need to look presentable to the jury when they're convicting me of rampant fraud!"
If she were really clever she would recruit a social media army of all the weird conspiracy theorists who think "medbeds" are real.
Of course now we know that a drop of capillary blood containing interstitial fluid and a random mix of venous and arterial blood is unsuitable for most blood tests. At least you will have googled that if you're an Elon stan preparing to tell me how they're not comparable.
You might need to qualify that a bit harder or someone could quite easily point out that all of these worthless shitdribblers cause actual damage to humans. They all lie, they all continue to claim that they hold the future in their feeble sticky hands. Just to take, take, take. You seem fixated on lying being a problem but only one of these two liars causes you to feel that her case is different? Maybe the difference between the two is in the lie of the beholder.
I think that's BS. User metrics are usually very explicitly defined (e.g. monthly or daily active users have always been clearly defined wherever I've worked, even if just for the sole reason that people collecting those numbers need to know what to count). User quality is definitely a gray area and estimating bot percentage has become increasingly difficult, but user metrics are not some ill-defined, fuzzy math notion.
I may be wrong! But I am definitely giving such claims the side-eye
As part of due diligence, the buyer/investor should ask how these numbers are calculated and make their own judgement. Unfortunately I believe startups select for those who dance the border of deceptive and foolish.
I think thatās well within the bounds of what most people would consider to be a ālieā. The legal system has more specific definitions, though.
That was all I needed to know about what was wrong about valley culture.
This would accurately describe a some of the startups I've worked at. ;-P
Everyone does this at every level, from Execs down to middle managers, for every possible metric.
I presented all the evidence to the investors when I was leaving, and I was told that they'd rather let the startup die a natural death than suffer the "reputational harm" that'd come from going after the charlatan. ĀÆ\_(ć)_/ĀÆ
There's no need to beat around any bushes.
When your business culture rewards lying or theft then you have a real ethical problem that signals the need for strong regulatory reform and severe criminal penalties. These sanctions should be retroactively applied for all those who assumed they would be able to dance away scot-free. Asset confiscation, prison time, large financial fines should be distributed to all those liars and thieves, especially the ones who constructed the systems that used algorithmic adjustments to help destroy society or create surveillance operations that could be used against ordinary citizens in violation of privacy.
The paper's concept of 'deep faƧading' follows the same pattern. When a product fails to generate sustainable value or revenue in the market, founders create fake metrics to protect the book returns of early investors and attract the next round of funding. Instead of being driven by real customer value, the company's valuation is inflated by the next investor's moneyācreating a multi-level pyramid.
The successful hot potato is WeWork, handed off to SoftBank and public market retail investors. The failed one is Theranos.
They could actually audit the companies they invest in, and go after the frauds. The Nikola example is a great one--if anyone had looked carefully behind the marketing the fraud should have been obvious. But by and large they don't, really. Seems to be a tacit endorsement of the behavior.
That being said -- for my own co. I did not fudge numbers at all. In fact I understated them sometimes. We raised less money than our competitors, which probably hurt us, but we also got very high quality investors that are not a giant pain to work with and are not idiots. Those investors in turn introduced me to others and to our current CEO (hired to replace myself, was my idea in part) and they're all high quality.
I'll take it. Working with shitty people sucks, and my guess is the people you get when you bullshit are themselves bullshitters and assholes.
I could have bullshitted like mad and raised stupid money during the COVID era fund raising bubble. I'd be left with shitty people though, and a waterfall you'd never clear, so you'd never see an exit unless you went insanely vertical.
The last part is a nuance a lot of people don't get: raise too much and/or on too high of a valuation and you will never clear the waterfall unless you get an 0.000001% super-unicorn outlier growth curve. Every $1M in valuation means you have to go into more and more rarefied air to see a good exit. At that point you're basically gambling. Gambling is a tax on people who can't do math.
Talk about every other countries ethics while being the number one thief through narrative capture