News for hackers. Stuff that matters.

A comment on The red flags and magic numbers that investors look for in startup's metrics. Parent comment

Re:The red flags and magic numbers that investors look for i... by freehunter on Friday November 02, 2018 @02:39PM (#18365540)
Lots of what startups do is some kind of fraud. Whether you're defrauding investors like `resters idea or defrauding users like Reddit's early days (each employee had multiple accounts to make it seem more active than it was) the trick is just not to get caught.

Of course, defrauding investors has a far higher likelihood of getting you into serious legal trouble than defrauding users. And with this one, even if you don't get caught, if it doesn't work out properly you are fucked.

But hey, if it does work, it'll make a great story to tell at your IPO celebration party over a glass of champagne.

[ Parent | on HN ]
Re:The red flags and magic numbers that investors look for i... by Wowfunhappy on Friday November 02, 2018 @04:01PM (#18366235)
Curious... is this fraud? It's certainly duplicitous, but are laws being broken?
[ Parent | on HN ]
Re:The red flags and magic numbers that investors look for i... by freehunter on Friday November 02, 2018 @04:56PM (#18366675)
It certainly would be fraud [1] the question is, would it be illegal? Not all fraud is illegal, and not all illegal fraud is prosecuted as such (or at all). Even if it's not illegal, if the startup owner told the investor that they were growing rapidly and used these figures to show that, the investor could sue after the fact for civil fraud and the founder would have a hard time explaining why it shouldn't be. The only reason to grow headcount and increase burn rate to unsustainable levels and offset those expenses in the books right before an investor presentation would be to give the investor a misleading view of your company.

You'd be at the very least inviting a lawsuit... that is, if you got caught.

[1]

"Fraud involves misrepresenting facts for the specific purpose of gaining something that may not have been provided without the deception."

https://www.investopedia.com/terms/f/fraud.asp

[ Parent | on HN ]
Re:The red flags and magic numbers that investors look for i... by dragonwriter on Friday November 02, 2018 @05:08PM (#18366779)
> Even if it's not illegal, if the startup owner told the investor that they were growing rapidly and used these figures to show that, the investor could sue after the fact for civil fraud and the founder would have a hard time explaining why it shouldn't be.

Civil fraud is illegal, so if it is not illegal, it is not civil fraud.

[ Parent | on HN ]
Re:The red flags and magic numbers that investors look for i... by mattmanser on Saturday November 03, 2018 @06:34AM (#18369543)
He was asking if Reddit was fraudulent.

It wasn't.

Please learn the meaning of such serious words before you start throwing them around.

[ Parent | on HN ]
Re:The red flags and magic numbers that investors look for i... by engineeringwoke on Saturday November 03, 2018 @05:54AM (#18369448)
White collar crime in America? That's rich
[ Parent | on HN ]
Re:The red flags and magic numbers that investors look for i... by Fnoord on Saturday November 03, 2018 @06:52AM (#18369608)
Makes me wonder how many projects on Kickstarter are some kind of fraud.
[ Parent | on HN ]