There's a bit of a phenomenon in Sydney (possibly elsewhere, I wouldn't know) of companies doing this.
I call them VC-bait or grant-bait. There's a handful of grants you can get for startups here, so they'll get all of those, get some free hosting from Microsoft, put up a landing page etc. If they're lucky they'll get a few tens of thousands from private investors, then fall over a few months later.
I'm not sure if it's intentional or if people are just clueless, but in any case they make a bit of money, pad out the CV a bit and move on. I wouldn't got so far as to say they're defrauding investors
It depends what your goals are. If your goals are to create a source of income (profit) for the foreseeable future then VC money is antithetical to your long term viability. Taking VC money means you're locked into continually delivering on growth.
Of course it won't work out in the long run, but in the short term it might be fun and it'll employ some people for a few years. When the money runs out everybody can jump ship to other, equally nonviable, startups and do it over again.