Posted by iamnothere 14 hours ago
Look, I’m 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). It’s 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 think the investors believe the business is sound. It's just a way to get it for a better price.
Of course, if the business is a unicorn, none of this applies.
There is publicly performed theater around VCs which is pretty consistent, taught in incubators, etc., etc. So that's how they manage set and setting (grooming) for the marks. Internally there are certain tells, that they must act a certain way. There are arbitrary character tests and whatnot which provoke a "culture" if you will, similarly to how computer languages and tech stacks form distinctive cultures if left unchecked; there could be self-selecting pressures (for these behaviors) as well. This is unsurprising to me as someone who analyzed voting patterns, and was asked numerous times variations on the question "is it something in the water or 'new car smell'?" (I don't have an answer for that question.)
However VCs are much more stovepiped and cliquish concerning their actual selection process than people realize, I've heard it publicly described as "mafia like" by someone who I worked for and whose name many would recognize. I don't understand why this person, like so many others, invested so much effort... enough to get some serious butthurt IMO.
It's a distraction, it effectively destroyed a different company I was working for.
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 I’ve had over the last several months. There’s 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".
The era of "I'm too rich / popular / influential / 'important' to prosecute" must end.
It does sound like you might be giving / have given up though? Fuck that.
Now there’s a disgusting game.
The occasional lottery ticket does not particularly affect my budget, so I buy one now and then with the intent to use it for good should I win.
If you do that, given enough time, you will be awarding people that learnt how to game the award. Back to corruption, lies and bullshit.
Have some fucking hope, man.
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.
"But your honor! I need to look presentable to the jury when they're convicting me of rampant fraud!"
Even some users are just bots... (At least their behavior is/are)
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.
Everyone in diagnostic medicine knows this (they've been dealing with this problem since the glucose finger prick test). That's why no biotech VC ever invested in Theranos and they had to get tech VCs and fancy board members like Henry Kissinger. A cursory glance at the proposal by someone qualified would have shut that down immediately, but tech VCs don't do due diligence anymore.
That's the point. As yet uninvented tests and reagents are the same kind of line of BS as "let's make the rocket bigger." While I have the advantage of having a mother who is an immunologist and did in fact work in developing diagnostics, all it really takes to call shenanigans is a knowledge of project management and critical path analysis. By the time you're launching 15 or 25 starship missions to refuel one on its way to the moon, the whole project is irrelevant.
That's also the entirety of the biotech VC industry, except even more so.
Biotech startups require far more capital to make it to market than tech startups, so biotech VCs take the role of early stage funding for R&D. Then the startup IPOs (with zero revenue and unlimited scientific risk) and uses that to fund its clinical trials, while the investors dump their stock. Then, because ramping up manufacturing and quality control takes even more money, the biotech startup sells out to a pharmaceutical company once its passed its trials or the results are promising enough to take the risk, closing the financing loop. Most of these startups stop existing before they even earn a single dollar in revenue, either because they fail or they're acquired by someone who can actually manufacture and distribute their product at scale. This has been the way of the industry for at least the last 20-30 years ever since the small molecule cliff hit like a brick wall.
So, the VC industry whose standard operating procedure is to unload companies onto public investors long before anyone even knows whether the drug or device would work, wouldn't touch Theranos with a thirty foot pole.
They hope they can cash out before the bubble bursts, whatever that bubble is.
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 that’s well within the bounds of what most people would consider to be a “lie”. The legal system has more specific definitions, though.
That was all I needed to know about what was wrong about valley culture.
Wasn't the SEC essentially gutted to the point it's basically toothless right now?
Why and how would it be in the public or shareholder interest?
Im unaware if any public market where similar reductions in reporting led to significant, positive, outcomes. FTSE is the common example. They had a similar “reform” circa ‘14 and FTSE companies continue to generally under perform while the LSE continues to lose listings.
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.
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. “Casting a wide net” makes more sense when funding comes cheap and easy.