8 ms·

Losing our business – we didn’t see it coming

193 points by schwuk 10y ago

brianwawok 10y ago
I literally do not understand. What is the other side of the story? Why would someone go through all this trouble of a fake investment? Clearing buying 10% of a company for 200k with no check is a game that only lasts for a few weeks???
- beachstartup 10y ago
  there's nothing to "understand". you assume there is a logic to their actions. there isn't. the guy was a scammy bullshit artist, a wannabe business man who talked his way into others' confidence, and probably has mental issues. these people are out there, and you need to watch out for them. on a side note, it takes guts to post a story like this. most people don't admit when they are taken like this. they're lucky he didn't try to steal money from them directly.
  - wingerlang 10y ago
    I think he is asking how that guy cashed in on this. And I believe the answer was that these guys basically displayed affiliate links that gave him cash when clicked.
    - sedeki 10y ago
      No, I don't think "Simon" meant to cash in at all. As the parent post said: probably mental issues. These nutjobs aren't looking to get to rich, as much as pretending/be perceived to be rich.
    - beachstartup 10y ago
      yeah, hence > lucky he didn't try to steal money from them directly
  - gnaritas 10y ago
    There was logic to his actions, he stole their ad revenues and kept the money while dangling a carrot of big investment to keep them from noticing. Scammy bullshit artists still have goals.
    - VLM 10y ago
      Something relevant to keep in mind is the scammer is not obligated to have a one track mind. He has 25K of their money, as far as I can tell still has it and based on the guys history has run this many times. He can run this scheme in parallel perhaps 10 companies and for 9 he disappears and the tenth he spends 250K and owns a chunk of a "4M company". Note that he ran for the hills when he got in over his head and figured out that giving a "4M company" that folds when it loses 25K is probably not a good use of 250K. Some other company will be getting that 250K.
- gwern 10y ago
  There's at least one possible motive: they never got the money from the ads he was selling on their behalf, which were affiliate links. So he kept all the revenue from that. The longer they kept his ads enabled, the more ad revenue he could steal. Of course, when the mark finally figures it out, they can sue him for fraud... at least, if they still have money for lawyers. One way to distract them and stop them from checking the invoices or raising capital for lawyers is to drag out a fake investment. Seems to've worked. The startup went out of business and he kept all the money. Given how much they told him and were friendly with him, and as part of the due diligence, he probably knew pretty exactly how much they had left in the bank and were burning per month.
- baking 10y ago
  Presumably, collecting money from advertisers, not paying expenses (rent, employees, invoices) and stalling the inevitable by proposing ever increasing investments.
- compiler-guy 10y ago
  The sales scam is A) sell the ad-space to random companies B) collect the money from the advertisers C) don't pay the host The investment scam is: Eventually own the web site without paying for it. Risk? Low: the owners don't have any money to pursue a legal judgement. It looks like he is getting away with it.
- codingdave 10y ago
  The Simon guy never got to the last step, which almost certainly would have involved some variation on them just having to pay some closing fees to make the deal go through. It is a scam... just conning them until they say, "Oh, sure, for 350K, we can pay 10K in fees." And he runs away with that check.
- epicaricacy 10y ago
  They ran his ads for weeks. He got all the advertising revenue.
- kev-reframed 10y ago
  I have been wondering this for a long time. Looking at the way he positioned himself it is almost as if he just wanted to feel important. He came into our building and told them he would become a sponsor. So right away we were seeing his company name next to the door and events he was organising - putting him above everyone else in here. Then we later find that he has been organising events within the building and setting himself up as an investor. So he is getting people to speak up to him and pitch to him and make him feel important. Perhaps because my business partner and I treat people equally the money he was offering had to keep going up until he felt we viewed him in an way that was important or necessary. perhaps he was waiting for us to be unreasonable so he could have a fight and pull out dramatically and no one would have to know he didnt have the cash, but we weren't unreasonable. I hear he was already faking evidence that he had paid his other invoices he owed. I don't really understand what his game is and he wasn't charismatic at all, like I picture a con man to be. I'll let someone else work it out and focus on building
dexwiz 10y ago
The revolving door of employees is a big red flag. If you cannot keep employees, you are either 1) an asshole or 2) doing something shady. Either way, they are not someone you want involved in your business.
themgt 10y ago
That week was fraught, as it was the week of a major conference that we were working with. It was the first time we were displaying adverts on someone else’s site through our system, but we couldn’t trust Simon — we had no guarantee that he wouldn’t try and display something malicious. We had to rebuild the ad system from scratch to ensure that no one could maliciously inject adverts onto our system. It was too much of a risk to leave it in the control of Simon. Once we got control over the ad system we realised that the adverts were affiliate links, i.e. not unique to us. The companies advertising had no idea they were advertising on our site. We had no relationship with them. It slowly dawned on us that the financial forecasts we were basing the raise on were useless. It was based on information from Simon on adverts that were not real, and deals that did not exist. The financial model was broken. I'm sorry but ... what? They ran a company for "a couple years" with at least a handful of staff, and let this one guy come in and overnight effectively take over an utterly critical part of the business even though "He hasn’t paid any of his invoices. We were expecting around £25k from him" And then they depend on the same individual both to finance and to provide the financial forecasts justifying their must-have funding round, and after it blows up they say "we didn’t see it coming"
- simonswords82 10y ago
  AND they forgot to discount his invoices until right at the last minute. I respect the author's transparency but there are a huge number of lessons to be learned here before jumping head first in to any other new business startup that relies on other people's money to launch.
  - robtaylor 10y ago
    On their about page "In 2015, Reframed.TV exceeded investment expectations with no commercial revenue." No details of the metrics but that itself would be an interesting post considering the staff numbers and investment.
    - deleted 10y ago
      [deleted]
binarymax 10y ago
Surprised HMRC hadn't caught up with them, preventing them from being directors or secretaries on any other companies.
- simonswords82 10y ago
  I've seen so many so called Phoenix companies (https://en.wikipedia.org/wiki/Phoenix_company https://en.wikipedia.org/wiki/Phoenix_company) spun up out of the ashes of "insolvent" companies that leave behind unpaid employees, suppliers etc that it doesn't surprise me nobody has caught up with the ad sales guy. This guy is ridiculously easy to find on the Companies House website if anybody else wants to avoid doing business with him. All five of his registered companies are dissolved: https://beta.companieshouse.gov.uk/officers/bJDe8K2KIPyGpgvpWIY0yFipPGg/appointments https://beta.companieshouse.gov.uk/officers/bJDe8K2KIPyGpgvp...
  - robtaylor 10y ago
    "Country of residence Grate Britian" errrr!
krmmalik 10y ago
Sorry to hear that man. At least you took it on the chin and dealt with it. Its all part of the learning experience. These kind of stories are unfortunately far too common but its like a rite of passage for each of us. I feel bad for your staff, but hopefully they'll find something soon.
nullcipher 10y ago
Why do companies wait till the dying moments before informing employees? I have seen many articles now which read like 'we went to back to the drawing board to realize that we have to close down in 2 days. Our bank was empty'. Is this just dramatization? I cannot believe people can run business without something so basic. Like paratroopers jumping out of an aeroplane and then saying 'we checked before hitting the ground, only to realize we had no parachutes'.
- simonswords82 10y ago
  When a founder doesn't know that they don't have money to pay their employees it's unforgivable. When a founder concludes they might have to fight to save their company and might not be able to pay employees in X months time that's an entirely different proposition. You can be upfront with your employees and hope that they stick around. Or you can keep quiet and do everything necessary to save the company and hope the employees never need to know. It's a gamble either way but I suspect the majority of founders opt for keeping quiet in the hope they can snatch success from the jaws of defeat.
  - WillPostForFood 10y ago
    > When a founder doesn't know that they don't have money to pay their employees it's unforgivable. This is a constant state for a startup, from day 1. You always have a runway of some length at which point you know you can't pay your employees. The question is when you start to warn about the runway running out. It's much more grey than you suggest. 2 days warning is unconscionable, IMO. But do you need to start warning employees at 120 days? 90 days? 60 days?
  - gwbas1c 10y ago
    It's not just to keep the employees. Telling an investor "I only have 1 week's worth of paychecks" is a recipe to loose control of a startup.
- pessimizer 10y ago
  Why would they tell employees? They're not going to be held personally responsible for not paying them; it's the fault of a mailbox in Delaware.
qaq 10y ago
OK sorry if this sounds harsh but it seems if your whole revenue model is based on selling ads it would be a good idea to really understand the ad market.
boxcardavin 10y ago
A bizarre story that should be a reminder to everyone that your gut will often point in the direction of a problem. Also, the article is written as a reminder, a warning, to not overuse commas when I type.
- kev-reframed 10y ago
  in, real, life, I speak, like, William Shatner. I think my writing should reflect that
arkad 10y ago
[OT] My mind somehow associated "Amanda Wood" with "Jessica Hyde". Where is Jessica Hyde?
- jessaustin 10y ago
  s/Amanda/Angela/
- ux-app 10y ago
  A reference from Utopia. An amazing TV show you should go and watch.
iamleppert 10y ago
I wouldn't discount the guy completely and frame him as the "bad guy" here. Most of the ad sales industry guys are very similar to this guy. They operate in a realm going from deal to deal, sometimes only a single deal separates them from extreme success and utter destruction. Sadly, this guy seems to have a grouping on the negative side of things and might have been just starting out in the ads business himself. I would have even given him another chance, after he's been humbled a bit. Just make sure you have cash up front when dealing with these kinds of people -- they shouldn't be discounted immediately, rather just treat them like an untrustworthy child. Just goes to show you shouldn't bank on any one deal coming through. As the management of a company, its your job to have not only one deal in the works, but preferably multiple deals, so called "deal flow" or "sales/prospect pipeline". You should be in constant prospect mode, and never give any one prospect any significant portion of your time. It's not like it takes a lot of effort to just talk to people. I realize its time consuming, but what we're you guys doing in between talking to this guy? You should have been working on other deals. That way if one doesn't work out, you can rely on the others and leverage them until your own bullshit wears out. This is the proverbial case of "all eggs in one basket".
- zellyn 10y ago
  I think faking a phone call to your lawyer is pretty unforgivable…
- woah 10y ago
  The guy literally lied about everything, including his name.
- mcphage 10y ago
  > I would have even given him another chance What value would there possibly be in giving him another chance? I mean, in this case it wasn't possible because he managed to tank the company on the way out, but had they managed to survive him, what would they possibly get out of working with him again?
mtrycz 10y ago
"due diligence", "due diligence", "due diligence" I mean, I know it's a term, but the literal meaning... If they had been diligent where/when diligence was due, all of this was evitable. Also, they should really do some legal action on the guy. Not because of revenge, but to try to save others from future actions of the con man. Public shaming is just not so stylish.
- caminante 10y ago
  As pointed out by others upthread [0], the founders likely don't have money and neither does the con. Thus, legal action's a negative NPV project. We're only hearing one side, and it doesn't sound like the management had a paper trail. [0] https://news.ycombinator.com/item?id=12204279 https://news.ycombinator.com/item?id=12204279
- kev-reframed 10y ago
  I'll take that. We weren't dilligent enough. That's another reason I'm not going after him legally. He tricked us, it's my fault for not being dilligent enough. There is someone going after him legally (We were not the only people involved) and they have a stronger case, so I have given them all of the information that I have. I agree public shaming is crass - an investor of ours was going to write the story if I did not and he is far more prominent than me. I expected this story to only be read by my friends locally so they could be forewarned about him, not do business with him. I was also telling the story individually to my friends. So I posted it on my facebook feed, it somehow ended up here
Disruptive_Dave 10y ago
"Just because you can doesn't mean you should" is what comes to mind for me when reading this. It also reminds me of how often, in the past two years, I've had to push younger founders to adapt a more pessimistic (I call it realistic) view of the business world than they naturally have. A deal is on the table - start by asking how it could fall apart, where the holes are, what's wrong with it. If you're owning/operating a business, you should have a nice healthy dollop of distrust in almost all your doings. That could solve so many of these "problems" that are simply born of naivete.
johnwheeler 10y ago
This article is damage control for the author's naiveté. The problem: Reframed did the due diligence after talking to Simon and seeking additional investment. It's also not clear if Reframed ever provided any real value, but it's clear they we're willing to take real money and assign themselves a $4M valuation. That might not be a sham straightaway, but it's probably one in the making--good intentions aside. Your investors will rightfully blame you if you get them scammed. You're expected to be competent enough to protect them because that's part of your job as "The Management". Thank goodness the deal stopped dead in its tracks before more people got hurt.
- WhitneyLand 10y ago
  Totally disagree that this is "damage control". It had all the signs of a good faith postmortem that others can learn from.
  - johnwheeler 10y ago
    I do think the author told himself he was writing it in good faith, but it was hard for me to see where he took direct responsibility for the outcome. I read it as more blame-shifting to Simon, and since this Simon character doesn't have a voice in this, we can't see the whole picture.
    - gwbas1c 10y ago
      Honestly, the story doesn't add up. Unless I misinterpreted the article, the Simon Incident happened so fast that there's no way that the company had more than a few weeks of operational budget in the bank when it started working with Simon. What I learned when I tried to run a startup is that some people just live in their imaginations when they try to run a business. It's easy in software, because, in a way, software is living in one's imagination. I think the company was more desperate than the article lets on.
    - kev-reframed 10y ago
      Hi, We have taken responsibility for what went on. Simon was not the cause of the downfall of the business. The fact that we could not monetise and didn't have a commercial business was not his fault. We have said that to each of our investors in person. We have still maintained a good relationship with all of them and they were involved in our board meetings around this (as they have all of our board meetings) right the way through the business. The reason I wrote the article is not to say I didn't do anything wrong - obviously we were terribly naive in many aspects of the business and far too trusting. I didn't expect this many people to read it, I thought my friends would read it locally and be forewarned about getting involved (I only posted it on facebook to my friends). Turns out it got more attention
barkingcat 10y ago
Due diligence is to be done prior to contract or prior to entering into agreement. The poster learned that, but it's too late.
cloudjacker 10y ago
ex-google loooool I never thought about it but you could totally say that even here in SF and get a lot of irrational clout and respect
cloudjacker 10y ago
what did you do at google "stuff and thangs.js"
ChuckMcM 10y ago
Interesting discussion here, slamming both Reframed and Simon. If you are reading this and wondering, the Simon character in this play follows a very common pattern for the "Ad Fraudster." This particular con takes advantage of two victims, a web site which thinks it can make money with advertising, and advertising networks who have excess advertising to sell. One convinces the web site to host the javascript that will fetch ads from the network (they do that with an ads API call or when they are super bold they ask the web site to host a script that will fetch the script from the ad site and run it (yes people actually do this)) Then our fraudster drives traffic to the web site (botnets, click farms, what have you) to generate traffic and ad clicks. Which they collect from the ad agencies (and if they add affiliate tags affilliate fees) but tell the web site that it will take "90 days for the transactions to settle given everyone wants to limit click fraud." Now depending on how much work they want to do and how much organic traffic the website gets, they can leech thousands of dollars a day off a web site. They feed fraudulent traffic in that keeps clicking on their ads, they spew affiliate cookies like confetti, and try to gather that revenue, and they sometimes "mirror" back to the actual advertiser network (taking one click on one ad and tell several networks it was a click on their ad) And here is the sad bit, while its fraud, if the advertiser gets upset they go after the web site, if the web site is upset they go after the advertiser, if everyone starts yelling our fraudster just moves on with all the cash they have pocketed.
tag2 10y ago
It's difficult to see the logic that some of these guys have with their "investment" cons. I really wonder the psychology of someone who'd go through a fake investment proposal like this. Do they just want to feel important? I recall a similar incident with someone on HN that I have saved from a few years back: http://www.shaf.co/post/75399291209/the-fake-vc-eccentric-german-millionaire-and-the http://www.shaf.co/post/75399291209/the-fake-vc-eccentric-ge...
- jarsin 10y ago
  I was introduced to the world of fake house offers sometime ago. I could not believe that there are people in this world that literally have no job or nothing and go put offers on expensive houses. After it happened to me twice one of the title workers told me they see it everyday and many of these people do it repeatedly.
ebarock 10y ago
For me it sounds so strange a company that does not does a basic "due diligence". Even with people that I've just met I will do my personal due diligence. We live in days that "trust" is something that you acquire after a time, not something that you suppose that others may have.
- PhantomGremlin 10y ago
  it sounds so strange a company that does not does a basic "due diligence" This applies to government relations as well. Ronald Reagan made a big deal about this in his dealings with Gorby. https://en.wikipedia.org/wiki/Trust,_but_verify https://en.wikipedia.org/wiki/Trust,_but_verify
apatters 10y ago
I think the most important lesson here is that you need to have really good accounts receivable to survive in business. In a small business AR is a founder/owner-level concern. You should spend some portion of your time personally making sure you get paid--on time! If you manage your receivables actively then you become aware very quickly if someone doesn't pay on time. This flushes out fraudsters, keeps you directly connected to your cashflow situation, and gives you early warning signs of any possible financial problems. These are the ways that actively managing AR mitigates risk. It also carries a lot of upside. People who pay you regularly are some of the best people you can partner with. When someone's paid you on time for years it's a very big sign that they can be trusted (and have money!). And when you're directly involved in collecting money from those people you inevitably end up having discussions with them that are very frank and carry real stakes. If these discussions are successful that is another sign they could make a good partner. If one of the founders at Reframed had stayed directly involved with AR on some level this story would have had a much better outcome. Simon would not have been a vendor for long. They would have found a new vendor and learned through direct experience whether that vendor could be a good partner/investor or not. The other acronym I never let go of is HR. If I remember correctly Bill Gates was personally involved in Microsoft's first 500 hires!
- greghendershott 10y ago
  Exactly. I actually used Quicken in my startup's early days. Naively. And fortuitously. Even after we switched to real accounting software, I would focus first and mostly on the cash flow statement and similar metrics. Many things might someday be cash -- an invoiced sale, an A/R balance, an investment term sheet. Or they might not. Meanwhile they're only promises or futures -- worth nothing if the company abends due to a SIGKILL. A small business is very much an exercise in blocking I/O. :)
exolymph 10y ago
A comment from one of my Facebook friends: "No offense to the guy or his partners, but his whole story is like an advertisement not to invest with his next venture. Maybe the next one down the line." I agree.
marian111 10y ago
This is my testimony about the good work of a man who helped me..My name is Marian Christ. and I am based in London , UK. My life is back!!! After 8 years of marriage, my husband left me with our three children. I felt like my life was about to end,and was falling apart. Thanks to a spell caster called papa Justus who i met online. On one faithful day, as I was browsing through the internet, I was searching for a good spell caster that can solve my problems. I came across series of testimonies about this particular spell caster. Some people testified that he brought their Ex lover back, some testified that he restores womb, some testified that he can cast a spell to stop divorce and so on. There was one particular testimony I saw, it was about a woman called Grace,she testified about how papa Justus brought back her Ex lover in less than 72 hours and at the end of her testimony she drop papa Justus e-mail address. After reading all these,I decided to give papa a try. I contacted him via email and explained my problems to him. In just 3 days, my husband came back to me. We solved our issues, and we are even happier than before. papa Justus is really a talented and gifted man and i will not stop publishing him because he is a wonderful man…If you have a problem and you are looking for a real and genuine spell caster to solve that problem for you. Try the great papa Justus today, he might be the answer to your problems. Here’s his contact: drabeljustustemple@gmail.com Thank you great Justus. Contact him for the following: (1)If you want your ex back. (2) if you always have bad dreams. (3)You want to be promoted in your office. (4)You want women/men to run after you. (5)If you want a child. (6)[You want to be rich. (7)You want to tie your husband/wife to be yours forever. (8)If you need financial assistance. (9)Herbal care 10)Help bringing people out of prison (11)Marriage Spells (12)Miracle Spells (13)Beauty Spells (14)PROPHECY CHARM (15)Attraction Spells (16)Evil Eye Spells (17)Kissing Spell (18)Remove Sickness Spells (19)ELECTION WINNING SPELLS (20)SUCCESS IN EXAMS SPELLS (21) Charm to get who to love you. (22)Business spell. (23) Find your long lost family. Contact him today on: drabeljustustemple@gmail.com http://www.justushealinghome.com http://www.justushealinghome.com +2347033354868. You can also CONTACT HIM ON whats-app on the same phone number
marian111 10y ago
This is my testimony about the good work of a man who helped me..My name is Marian Christ. and I am based in London , UK. My life is back!!! After 8 years of marriage, my husband left me with our three children. I felt like my life was about to end,and was falling apart. Thanks to a spell caster called papa Justus who i met online. On one faithful day, as I was browsing through the internet, I was searching for a good spell caster that can solve my problems. I came across series of testimonies about this particular spell caster. Some people testified that he brought their Ex lover back, some testified that he restores womb, some testified that he can cast a spell to stop divorce and so on. There was one particular testimony I saw, it was about a woman called Grace,she testified about how papa Justus brought back her Ex lover in less than 72 hours and at the end of her testimony she drop papa Justus e-mail address. After reading all these,I decided to give papa a try. I contacted him via email and explained my problems to him. In just 3 days, my husband came back to me. We solved our issues, and we are even happier than before. papa Justus is really a talented and gifted man and i will not stop publishing him because he is a wonderful man…If you have a problem and you are looking for a real and genuine spell caster to solve that problem for you. Try the great papa Justus today, he might be the answer to your problems. Here’s his contact: drabeljustustemple@gmail.com Thank you great Justus. Contact him for the following: (1)If you want your ex back. (2) if you always have bad dreams. (3)You want to be promoted in your office. (4)You want women/men to run after you. (5)If you want a child. (6)[You want to be rich. (7)You want to tie your husband/wife to be yours forever. (8)If you need financial assistance. (9)Herbal care 10)Help bringing people out of prison (11)Marriage Spells (12)Miracle Spells (13)Beauty Spells (14)PROPHECY CHARM (15)Attraction Spells (16)Evil Eye Spells (17)Kissing Spell (18)Remove Sickness Spells (19)ELECTION WINNING SPELLS (20)SUCCESS IN EXAMS SPELLS (21) Charm to get who to love you. (22)Business spell. (23) Find your long lost family. Contact him today on: drabeljustustemple@gmail.com http://www.justushealinghome.com http://www.justushealinghome.com +2347033354868. You can also CONTACT HIM ON whats-app on the same phone number
seesomesense 10y ago
SUMMARY Dealt with a scammer. Told the board that he wanted to invest a fortune. Failed to do due diligence. The scammer failed to pay his bills or invest. Became insolvent. DO DUE DILIGENCE EARLY
seesomesense 10y ago
Too many red flags around management actions. I would avoid their next start up.

193 points by schwuk 10y ago

I literally do not understand. What is the other side of the story? Why would someone go through all this trouble of a fake investment? Clearing buying 10% of a company for 200k with no check is a game that only lasts for a few weeks???

beachstartup 10y ago
there's nothing to "understand". you assume there is a logic to their actions. there isn't. the guy was a scammy bullshit artist, a wannabe business man who talked his way into others' confidence, and probably has mental issues. these people are out there, and you need to watch out for them. on a side note, it takes guts to post a story like this. most people don't admit when they are taken like this. they're lucky he didn't try to steal money from them directly.
- wingerlang 10y ago
  I think he is asking how that guy cashed in on this. And I believe the answer was that these guys basically displayed affiliate links that gave him cash when clicked.
  - sedeki 10y ago
    No, I don't think "Simon" meant to cash in at all. As the parent post said: probably mental issues. These nutjobs aren't looking to get to rich, as much as pretending/be perceived to be rich.
  - beachstartup 10y ago
    yeah, hence > lucky he didn't try to steal money from them directly
- gnaritas 10y ago
  There was logic to his actions, he stole their ad revenues and kept the money while dangling a carrot of big investment to keep them from noticing. Scammy bullshit artists still have goals.
  - VLM 10y ago
    Something relevant to keep in mind is the scammer is not obligated to have a one track mind. He has 25K of their money, as far as I can tell still has it and based on the guys history has run this many times. He can run this scheme in parallel perhaps 10 companies and for 9 he disappears and the tenth he spends 250K and owns a chunk of a "4M company". Note that he ran for the hills when he got in over his head and figured out that giving a "4M company" that folds when it loses 25K is probably not a good use of 250K. Some other company will be getting that 250K.
gwern 10y ago
There's at least one possible motive: they never got the money from the ads he was selling on their behalf, which were affiliate links. So he kept all the revenue from that. The longer they kept his ads enabled, the more ad revenue he could steal. Of course, when the mark finally figures it out, they can sue him for fraud... at least, if they still have money for lawyers. One way to distract them and stop them from checking the invoices or raising capital for lawyers is to drag out a fake investment. Seems to've worked. The startup went out of business and he kept all the money. Given how much they told him and were friendly with him, and as part of the due diligence, he probably knew pretty exactly how much they had left in the bank and were burning per month.
baking 10y ago
Presumably, collecting money from advertisers, not paying expenses (rent, employees, invoices) and stalling the inevitable by proposing ever increasing investments.
compiler-guy 10y ago
The sales scam is A) sell the ad-space to random companies B) collect the money from the advertisers C) don't pay the host The investment scam is: Eventually own the web site without paying for it. Risk? Low: the owners don't have any money to pursue a legal judgement. It looks like he is getting away with it.
codingdave 10y ago
The Simon guy never got to the last step, which almost certainly would have involved some variation on them just having to pay some closing fees to make the deal go through. It is a scam... just conning them until they say, "Oh, sure, for 350K, we can pay 10K in fees." And he runs away with that check.
epicaricacy 10y ago
They ran his ads for weeks. He got all the advertising revenue.
kev-reframed 10y ago
I have been wondering this for a long time. Looking at the way he positioned himself it is almost as if he just wanted to feel important. He came into our building and told them he would become a sponsor. So right away we were seeing his company name next to the door and events he was organising - putting him above everyone else in here. Then we later find that he has been organising events within the building and setting himself up as an investor. So he is getting people to speak up to him and pitch to him and make him feel important. Perhaps because my business partner and I treat people equally the money he was offering had to keep going up until he felt we viewed him in an way that was important or necessary. perhaps he was waiting for us to be unreasonable so he could have a fight and pull out dramatically and no one would have to know he didnt have the cash, but we weren't unreasonable. I hear he was already faking evidence that he had paid his other invoices he owed. I don't really understand what his game is and he wasn't charismatic at all, like I picture a con man to be. I'll let someone else work it out and focus on building

dexwiz 10y ago

The revolving door of employees is a big red flag. If you cannot keep employees, you are either 1) an asshole or 2) doing something shady. Either way, they are not someone you want involved in your business.

themgt 10y ago

That week was fraught, as it was the week of a major conference that we were working with. It was the first time we were displaying adverts on someone else’s site through our system, but we couldn’t trust Simon — we had no guarantee that he wouldn’t try and display something malicious. We had to rebuild the ad system from scratch to ensure that no one could maliciously inject adverts onto our system. It was too much of a risk to leave it in the control of Simon. Once we got control over the ad system we realised that the adverts were affiliate links, i.e. not unique to us. The companies advertising had no idea they were advertising on our site. We had no relationship with them. It slowly dawned on us that the financial forecasts we were basing the raise on were useless. It was based on information from Simon on adverts that were not real, and deals that did not exist. The financial model was broken. I'm sorry but ... what? They ran a company for "a couple years" with at least a handful of staff, and let this one guy come in and overnight effectively take over an utterly critical part of the business even though "He hasn’t paid any of his invoices. We were expecting around £25k from him" And then they depend on the same individual both to finance and to provide the financial forecasts justifying their must-have funding round, and after it blows up they say "we didn’t see it coming"

simonswords82 10y ago
AND they forgot to discount his invoices until right at the last minute. I respect the author's transparency but there are a huge number of lessons to be learned here before jumping head first in to any other new business startup that relies on other people's money to launch.
- robtaylor 10y ago
  On their about page "In 2015, Reframed.TV exceeded investment expectations with no commercial revenue." No details of the metrics but that itself would be an interesting post considering the staff numbers and investment.
  - deleted 10y ago
    [deleted]

binarymax 10y ago

Surprised HMRC hadn't caught up with them, preventing them from being directors or secretaries on any other companies.

simonswords82 10y ago
I've seen so many so called Phoenix companies (https://en.wikipedia.org/wiki/Phoenix_company https://en.wikipedia.org/wiki/Phoenix_company) spun up out of the ashes of "insolvent" companies that leave behind unpaid employees, suppliers etc that it doesn't surprise me nobody has caught up with the ad sales guy. This guy is ridiculously easy to find on the Companies House website if anybody else wants to avoid doing business with him. All five of his registered companies are dissolved: https://beta.companieshouse.gov.uk/officers/bJDe8K2KIPyGpgvpWIY0yFipPGg/appointments https://beta.companieshouse.gov.uk/officers/bJDe8K2KIPyGpgvp...
- robtaylor 10y ago
  "Country of residence Grate Britian" errrr!

krmmalik 10y ago

Sorry to hear that man. At least you took it on the chin and dealt with it. Its all part of the learning experience. These kind of stories are unfortunately far too common but its like a rite of passage for each of us. I feel bad for your staff, but hopefully they'll find something soon.

nullcipher 10y ago

Why do companies wait till the dying moments before informing employees? I have seen many articles now which read like 'we went to back to the drawing board to realize that we have to close down in 2 days. Our bank was empty'. Is this just dramatization? I cannot believe people can run business without something so basic. Like paratroopers jumping out of an aeroplane and then saying 'we checked before hitting the ground, only to realize we had no parachutes'.

simonswords82 10y ago
When a founder doesn't know that they don't have money to pay their employees it's unforgivable. When a founder concludes they might have to fight to save their company and might not be able to pay employees in X months time that's an entirely different proposition. You can be upfront with your employees and hope that they stick around. Or you can keep quiet and do everything necessary to save the company and hope the employees never need to know. It's a gamble either way but I suspect the majority of founders opt for keeping quiet in the hope they can snatch success from the jaws of defeat.
- WillPostForFood 10y ago
  > When a founder doesn't know that they don't have money to pay their employees it's unforgivable. This is a constant state for a startup, from day 1. You always have a runway of some length at which point you know you can't pay your employees. The question is when you start to warn about the runway running out. It's much more grey than you suggest. 2 days warning is unconscionable, IMO. But do you need to start warning employees at 120 days? 90 days? 60 days?
- gwbas1c 10y ago
  It's not just to keep the employees. Telling an investor "I only have 1 week's worth of paychecks" is a recipe to loose control of a startup.
pessimizer 10y ago
Why would they tell employees? They're not going to be held personally responsible for not paying them; it's the fault of a mailbox in Delaware.

qaq 10y ago

OK sorry if this sounds harsh but it seems if your whole revenue model is based on selling ads it would be a good idea to really understand the ad market.

boxcardavin 10y ago

A bizarre story that should be a reminder to everyone that your gut will often point in the direction of a problem. Also, the article is written as a reminder, a warning, to not overuse commas when I type.

kev-reframed 10y ago
in, real, life, I speak, like, William Shatner. I think my writing should reflect that

arkad 10y ago

[OT] My mind somehow associated "Amanda Wood" with "Jessica Hyde". Where is Jessica Hyde?

jessaustin 10y ago
s/Amanda/Angela/
ux-app 10y ago
A reference from Utopia. An amazing TV show you should go and watch.

iamleppert 10y ago

I wouldn't discount the guy completely and frame him as the "bad guy" here. Most of the ad sales industry guys are very similar to this guy. They operate in a realm going from deal to deal, sometimes only a single deal separates them from extreme success and utter destruction. Sadly, this guy seems to have a grouping on the negative side of things and might have been just starting out in the ads business himself. I would have even given him another chance, after he's been humbled a bit. Just make sure you have cash up front when dealing with these kinds of people -- they shouldn't be discounted immediately, rather just treat them like an untrustworthy child. Just goes to show you shouldn't bank on any one deal coming through. As the management of a company, its your job to have not only one deal in the works, but preferably multiple deals, so called "deal flow" or "sales/prospect pipeline". You should be in constant prospect mode, and never give any one prospect any significant portion of your time. It's not like it takes a lot of effort to just talk to people. I realize its time consuming, but what we're you guys doing in between talking to this guy? You should have been working on other deals. That way if one doesn't work out, you can rely on the others and leverage them until your own bullshit wears out. This is the proverbial case of "all eggs in one basket".

zellyn 10y ago
I think faking a phone call to your lawyer is pretty unforgivable…
woah 10y ago
The guy literally lied about everything, including his name.
mcphage 10y ago
> I would have even given him another chance What value would there possibly be in giving him another chance? I mean, in this case it wasn't possible because he managed to tank the company on the way out, but had they managed to survive him, what would they possibly get out of working with him again?

mtrycz 10y ago

"due diligence", "due diligence", "due diligence" I mean, I know it's a term, but the literal meaning... If they had been diligent where/when diligence was due, all of this was evitable. Also, they should really do some legal action on the guy. Not because of revenge, but to try to save others from future actions of the con man. Public shaming is just not so stylish.

caminante 10y ago
As pointed out by others upthread [0], the founders likely don't have money and neither does the con. Thus, legal action's a negative NPV project. We're only hearing one side, and it doesn't sound like the management had a paper trail. [0] https://news.ycombinator.com/item?id=12204279 https://news.ycombinator.com/item?id=12204279
kev-reframed 10y ago
I'll take that. We weren't dilligent enough. That's another reason I'm not going after him legally. He tricked us, it's my fault for not being dilligent enough. There is someone going after him legally (We were not the only people involved) and they have a stronger case, so I have given them all of the information that I have. I agree public shaming is crass - an investor of ours was going to write the story if I did not and he is far more prominent than me. I expected this story to only be read by my friends locally so they could be forewarned about him, not do business with him. I was also telling the story individually to my friends. So I posted it on my facebook feed, it somehow ended up here

Disruptive_Dave 10y ago

"Just because you can doesn't mean you should" is what comes to mind for me when reading this. It also reminds me of how often, in the past two years, I've had to push younger founders to adapt a more pessimistic (I call it realistic) view of the business world than they naturally have. A deal is on the table - start by asking how it could fall apart, where the holes are, what's wrong with it. If you're owning/operating a business, you should have a nice healthy dollop of distrust in almost all your doings. That could solve so many of these "problems" that are simply born of naivete.

johnwheeler 10y ago

This article is damage control for the author's naiveté. The problem: Reframed did the due diligence after talking to Simon and seeking additional investment. It's also not clear if Reframed ever provided any real value, but it's clear they we're willing to take real money and assign themselves a $4M valuation. That might not be a sham straightaway, but it's probably one in the making--good intentions aside. Your investors will rightfully blame you if you get them scammed. You're expected to be competent enough to protect them because that's part of your job as "The Management". Thank goodness the deal stopped dead in its tracks before more people got hurt.

WhitneyLand 10y ago
Totally disagree that this is "damage control". It had all the signs of a good faith postmortem that others can learn from.
- johnwheeler 10y ago
  I do think the author told himself he was writing it in good faith, but it was hard for me to see where he took direct responsibility for the outcome. I read it as more blame-shifting to Simon, and since this Simon character doesn't have a voice in this, we can't see the whole picture.
  - gwbas1c 10y ago
    Honestly, the story doesn't add up. Unless I misinterpreted the article, the Simon Incident happened so fast that there's no way that the company had more than a few weeks of operational budget in the bank when it started working with Simon. What I learned when I tried to run a startup is that some people just live in their imaginations when they try to run a business. It's easy in software, because, in a way, software is living in one's imagination. I think the company was more desperate than the article lets on.
  - kev-reframed 10y ago
    Hi, We have taken responsibility for what went on. Simon was not the cause of the downfall of the business. The fact that we could not monetise and didn't have a commercial business was not his fault. We have said that to each of our investors in person. We have still maintained a good relationship with all of them and they were involved in our board meetings around this (as they have all of our board meetings) right the way through the business. The reason I wrote the article is not to say I didn't do anything wrong - obviously we were terribly naive in many aspects of the business and far too trusting. I didn't expect this many people to read it, I thought my friends would read it locally and be forewarned about getting involved (I only posted it on facebook to my friends). Turns out it got more attention

barkingcat 10y ago

Due diligence is to be done prior to contract or prior to entering into agreement. The poster learned that, but it's too late.

cloudjacker 10y ago

ex-google loooool I never thought about it but you could totally say that even here in SF and get a lot of irrational clout and respect

cloudjacker 10y ago

what did you do at google "stuff and thangs.js"

ChuckMcM 10y ago

Interesting discussion here, slamming both Reframed and Simon. If you are reading this and wondering, the Simon character in this play follows a very common pattern for the "Ad Fraudster." This particular con takes advantage of two victims, a web site which thinks it can make money with advertising, and advertising networks who have excess advertising to sell. One convinces the web site to host the javascript that will fetch ads from the network (they do that with an ads API call or when they are super bold they ask the web site to host a script that will fetch the script from the ad site and run it (yes people actually do this)) Then our fraudster drives traffic to the web site (botnets, click farms, what have you) to generate traffic and ad clicks. Which they collect from the ad agencies (and if they add affiliate tags affilliate fees) but tell the web site that it will take "90 days for the transactions to settle given everyone wants to limit click fraud." Now depending on how much work they want to do and how much organic traffic the website gets, they can leech thousands of dollars a day off a web site. They feed fraudulent traffic in that keeps clicking on their ads, they spew affiliate cookies like confetti, and try to gather that revenue, and they sometimes "mirror" back to the actual advertiser network (taking one click on one ad and tell several networks it was a click on their ad) And here is the sad bit, while its fraud, if the advertiser gets upset they go after the web site, if the web site is upset they go after the advertiser, if everyone starts yelling our fraudster just moves on with all the cash they have pocketed.

tag2 10y ago

It's difficult to see the logic that some of these guys have with their "investment" cons. I really wonder the psychology of someone who'd go through a fake investment proposal like this. Do they just want to feel important? I recall a similar incident with someone on HN that I have saved from a few years back: http://www.shaf.co/post/75399291209/the-fake-vc-eccentric-german-millionaire-and-the http://www.shaf.co/post/75399291209/the-fake-vc-eccentric-ge...

jarsin 10y ago
I was introduced to the world of fake house offers sometime ago. I could not believe that there are people in this world that literally have no job or nothing and go put offers on expensive houses. After it happened to me twice one of the title workers told me they see it everyday and many of these people do it repeatedly.

ebarock 10y ago

For me it sounds so strange a company that does not does a basic "due diligence". Even with people that I've just met I will do my personal due diligence. We live in days that "trust" is something that you acquire after a time, not something that you suppose that others may have.

PhantomGremlin 10y ago
it sounds so strange a company that does not does a basic "due diligence" This applies to government relations as well. Ronald Reagan made a big deal about this in his dealings with Gorby. https://en.wikipedia.org/wiki/Trust,_but_verify https://en.wikipedia.org/wiki/Trust,_but_verify

apatters 10y ago

I think the most important lesson here is that you need to have really good accounts receivable to survive in business. In a small business AR is a founder/owner-level concern. You should spend some portion of your time personally making sure you get paid--on time! If you manage your receivables actively then you become aware very quickly if someone doesn't pay on time. This flushes out fraudsters, keeps you directly connected to your cashflow situation, and gives you early warning signs of any possible financial problems. These are the ways that actively managing AR mitigates risk. It also carries a lot of upside. People who pay you regularly are some of the best people you can partner with. When someone's paid you on time for years it's a very big sign that they can be trusted (and have money!). And when you're directly involved in collecting money from those people you inevitably end up having discussions with them that are very frank and carry real stakes. If these discussions are successful that is another sign they could make a good partner. If one of the founders at Reframed had stayed directly involved with AR on some level this story would have had a much better outcome. Simon would not have been a vendor for long. They would have found a new vendor and learned through direct experience whether that vendor could be a good partner/investor or not. The other acronym I never let go of is HR. If I remember correctly Bill Gates was personally involved in Microsoft's first 500 hires!

greghendershott 10y ago
Exactly. I actually used Quicken in my startup's early days. Naively. And fortuitously. Even after we switched to real accounting software, I would focus first and mostly on the cash flow statement and similar metrics. Many things might someday be cash -- an invoiced sale, an A/R balance, an investment term sheet. Or they might not. Meanwhile they're only promises or futures -- worth nothing if the company abends due to a SIGKILL. A small business is very much an exercise in blocking I/O. :)

exolymph 10y ago

A comment from one of my Facebook friends: "No offense to the guy or his partners, but his whole story is like an advertisement not to invest with his next venture. Maybe the next one down the line." I agree.

marian111 10y ago

This is my testimony about the good work of a man who helped me..My name is Marian Christ. and I am based in London , UK. My life is back!!! After 8 years of marriage, my husband left me with our three children. I felt like my life was about to end,and was falling apart. Thanks to a spell caster called papa Justus who i met online. On one faithful day, as I was browsing through the internet, I was searching for a good spell caster that can solve my problems. I came across series of testimonies about this particular spell caster. Some people testified that he brought their Ex lover back, some testified that he restores womb, some testified that he can cast a spell to stop divorce and so on. There was one particular testimony I saw, it was about a woman called Grace,she testified about how papa Justus brought back her Ex lover in less than 72 hours and at the end of her testimony she drop papa Justus e-mail address. After reading all these,I decided to give papa a try. I contacted him via email and explained my problems to him. In just 3 days, my husband came back to me. We solved our issues, and we are even happier than before. papa Justus is really a talented and gifted man and i will not stop publishing him because he is a wonderful man…If you have a problem and you are looking for a real and genuine spell caster to solve that problem for you. Try the great papa Justus today, he might be the answer to your problems. Here’s his contact: drabeljustustemple@gmail.com Thank you great Justus. Contact him for the following: (1)If you want your ex back. (2) if you always have bad dreams. (3)You want to be promoted in your office. (4)You want women/men to run after you. (5)If you want a child. (6)[You want to be rich. (7)You want to tie your husband/wife to be yours forever. (8)If you need financial assistance. (9)Herbal care 10)Help bringing people out of prison (11)Marriage Spells (12)Miracle Spells (13)Beauty Spells (14)PROPHECY CHARM (15)Attraction Spells (16)Evil Eye Spells (17)Kissing Spell (18)Remove Sickness Spells (19)ELECTION WINNING SPELLS (20)SUCCESS IN EXAMS SPELLS (21) Charm to get who to love you. (22)Business spell. (23) Find your long lost family. Contact him today on: drabeljustustemple@gmail.com http://www.justushealinghome.com http://www.justushealinghome.com +2347033354868. You can also CONTACT HIM ON whats-app on the same phone number

marian111 10y ago

seesomesense 10y ago

SUMMARY Dealt with a scammer. Told the board that he wanted to invest a fortune. Failed to do due diligence. The scammer failed to pay his bills or invest. Became insolvent. DO DUE DILIGENCE EARLY

seesomesense 10y ago

Too many red flags around management actions. I would avoid their next start up.