Yes, I can attest to this. I did some work for a famous VC firm at one point, won’t name any names. I didn’t see any actual fraud but the grey zone was alive and well. From time to time they’d send me a pitch deck to evaluate, and my response was always don’t invest, due to basic problems in the business plan or claims made. Yet, they always invested in one case because they simply “liked the team” – this is a very common justification for farming out money. I realized after that I just wasn’t cut out for modern day VC work. Actual likelihood of a business succeeding is not especially important – they routinely value other factors higher.
One unfortunate aspect of this is the open secret that you’re much more likely to get money if the company is or appears to be founded by a woman. There has been an explosion in software/tech startups with female CEOs but male “technical co-founders”, which are in reality founded by the men. It’s cynical and corrosive but an inevitable consequence of the times we live in. It’s also the elephant in the room nobody will bring up w.r.t. Holmes. Why did so many people invest so much in her? A large part is surely because they were all desperate to be able to say they were investing in a female startup founder. The social pressure on VCs to do so is immense and there are very few to pick from.
Hubert Knobscratch
2 years ago
I’ve worked at an AIM Listed company in the UK, originally launched with VC money.
I think most start-ups with high tech are like this. What they forget is the vested interest from those in a similar field in keeping things as they are.
The tech was good and about 15 years ahead of where other BIG companies are today – but the ability of the replacement directors concerned to deliver it was woeful.
Directors were paid incredible amounts of money for what were in reality – average people.
Today, anything that’s green, high tech etc… gets grant money almost without question, patents fast tracked etc… no problems with funding. An ex work colleague is counting on this stupidity to keep his start up going.
Another ex-work colleague was at a start up doing green stuff. The MD is paying himself £640K p.a. they don’t make any profit, and they employ less than 35 people….
I know someone else placing senior IT exec/professionals in AI start-ups. The VCs have told him “David – consider the sums available for this work infinite….”
With cash so freely available, it’s not a question of “is there fraud”, more of a question of “how much fraud is there?”
Susan Marshall
2 years ago
The people who have been harmed here are not the VCs but those whose results are not true. How many have died because of this scandle.
I don’t think the man in the street is very worried about the rich being taken for a ride but they should be worried by the collateral damage to ordinary people.
J Bryant
2 years ago
Interesting article.
Can anyone recommend a good book about how the VC industry really works? I can always search my library catalogue but I’d prefer a recommendation to get started.
Jeffrey Chongsathien
2 years ago
The root problem is central banks printing currency to keep the economic Ponzi scheme. The widespread fraud is the inevitable result of corrupt society with everyone looking to get a piece of pie.
CHASING UNICORNS. An excellent movie on this very topic.
Hugh Marcus
2 years ago
Very Interesting, those of us who’ve started small businesses & slogged long hours to try & turn a profit often look on amazed at these companies that seem to come from nowhere, make nothing, (apart from a lot of noise) and yet are ‘valued’ in millions of dollars. I guess the emperor only looks naked if you’re not up close
Yes, I can attest to this. I did some work for a famous VC firm at one point, won’t name any names. I didn’t see any actual fraud but the grey zone was alive and well. From time to time they’d send me a pitch deck to evaluate, and my response was always don’t invest, due to basic problems in the business plan or claims made. Yet, they always invested in one case because they simply “liked the team” – this is a very common justification for farming out money. I realized after that I just wasn’t cut out for modern day VC work. Actual likelihood of a business succeeding is not especially important – they routinely value other factors higher.
One unfortunate aspect of this is the open secret that you’re much more likely to get money if the company is or appears to be founded by a woman. There has been an explosion in software/tech startups with female CEOs but male “technical co-founders”, which are in reality founded by the men. It’s cynical and corrosive but an inevitable consequence of the times we live in. It’s also the elephant in the room nobody will bring up w.r.t. Holmes. Why did so many people invest so much in her? A large part is surely because they were all desperate to be able to say they were investing in a female startup founder. The social pressure on VCs to do so is immense and there are very few to pick from.
I’ve worked at an AIM Listed company in the UK, originally launched with VC money.
I think most start-ups with high tech are like this. What they forget is the vested interest from those in a similar field in keeping things as they are.
The tech was good and about 15 years ahead of where other BIG companies are today – but the ability of the replacement directors concerned to deliver it was woeful.
Directors were paid incredible amounts of money for what were in reality – average people.
Today, anything that’s green, high tech etc… gets grant money almost without question, patents fast tracked etc… no problems with funding. An ex work colleague is counting on this stupidity to keep his start up going.
Another ex-work colleague was at a start up doing green stuff. The MD is paying himself £640K p.a. they don’t make any profit, and they employ less than 35 people….
I know someone else placing senior IT exec/professionals in AI start-ups. The VCs have told him “David – consider the sums available for this work infinite….”
With cash so freely available, it’s not a question of “is there fraud”, more of a question of “how much fraud is there?”
The people who have been harmed here are not the VCs but those whose results are not true. How many have died because of this scandle.
I don’t think the man in the street is very worried about the rich being taken for a ride but they should be worried by the collateral damage to ordinary people.
Interesting article.
Can anyone recommend a good book about how the VC industry really works? I can always search my library catalogue but I’d prefer a recommendation to get started.
The root problem is central banks printing currency to keep the economic Ponzi scheme. The widespread fraud is the inevitable result of corrupt society with everyone looking to get a piece of pie.
https://youtu.be/fznLsuY2L30
How can something that doesn’t exist be worth a billion dollars?
CHASING UNICORNS. An excellent movie on this very topic.
Very Interesting, those of us who’ve started small businesses & slogged long hours to try & turn a profit often look on amazed at these companies that seem to come from nowhere, make nothing, (apart from a lot of noise) and yet are ‘valued’ in millions of dollars. I guess the emperor only looks naked if you’re not up close