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> continuing to operate a failed enterprise with no intention, let alone hope, of actually turning it into a successful business sounds like fraud if you're doi

> continuing to operate a failed enterprise with no intention, let alone hope, of actually turning it into a successful business sounds like fraud if you're doing it with other people's money. How is this not "heads I win, tails you lose"? The investor exchanged $ for % of the company. At the time of the $ for % trade, the founder probably had every intention of succeeding beyond everyone's wildest dreams. The seller's intent was never fraudulent, and buyer's remorse isn't fraud. More to the point, keeping the company in-tact for as long as possible in hope of an aqui-hire is a justifiable end-game for a company in failure mode. If the VC wanted control over the failure mode end-game, they should've written that into the "$ for %" contract. PG even has an essay encouraging founders to adopt this mindset: http://www.paulgraham.com/die.html http://www.paulgraham.com/die.html "Startups rarely die in mid keystroke. So keep typing!" If the founder legitimately believes that the company will go under and there's no chance of an aqui-hire or similar out, then maybe possibly it's fraud. But calling it fraud when a business fails and a founder makes a judgement call to "not stop typing"? Seems like "I get your money if you win, and sue you if you lose".

murbard2 10y ago
> How is this not "heads I win, tails you lose"? Because the investor will not have 100% recovery rate.
- throwaway729 10y ago
  > Because the investor will not have 100% recovery rate. Says who? At which point in time is it "obvious" that there's "no intention, let alone hope, of actually turning it into a successful business"? If you and I judge that point in time to be different, does that constitute fraud on the part of the person who's being less conservative? What if that person the investor? Presumably the founder also owns part of the company... Futhermore, even "unsuccessful" ventures can have a greater than 100% recovery rate from a given point in time. An aqui-hire that loses investor money isn't a "successful" businesses, but it can end up losing a lot less cash than a company that folds a month or two before the deal is cut. What if you force my hand and we fold but leaked confidential documents from BigCorp. indicate that if we had waited three weeks my company would've been aqui-hired for 1500% of the value of the liquidated assets? Does that make you guilty of fraud? And if not, then why is it fraud when you turn the tables? Basically, it's really difficult for me to imagine any scenario in which the facts and intentions of all actors are clear enough to trigger koolba's scenario. And even then, it's still possible for a failed business to make it over the 100% recovery rate at the point in time when the investor things the plug should be pulled.
stale2002 10y ago
Because it is their company. They own it. They can do whatever they want with THEIR investment, including firing the CEO and putting someone else in charge to give back their money.
- throwaway729 10y ago
  > They own it Or, much more likely, they only own a part of it. Maybe even a minority of it. > including firing the CEO Maybe the can. And if they can, and they think that's the best course of action, then they should definitely do that. It's a must cleaner solution that waiting and then crying "fraud" over a difference of opinion on the future of the company.

murbard2 10y ago

> How is this not "heads I win, tails you lose"? Because the investor will not have 100% recovery rate.

throwaway729 10y ago
> Because the investor will not have 100% recovery rate. Says who? At which point in time is it "obvious" that there's "no intention, let alone hope, of actually turning it into a successful business"? If you and I judge that point in time to be different, does that constitute fraud on the part of the person who's being less conservative? What if that person the investor? Presumably the founder also owns part of the company... Futhermore, even "unsuccessful" ventures can have a greater than 100% recovery rate from a given point in time. An aqui-hire that loses investor money isn't a "successful" businesses, but it can end up losing a lot less cash than a company that folds a month or two before the deal is cut. What if you force my hand and we fold but leaked confidential documents from BigCorp. indicate that if we had waited three weeks my company would've been aqui-hired for 1500% of the value of the liquidated assets? Does that make you guilty of fraud? And if not, then why is it fraud when you turn the tables? Basically, it's really difficult for me to imagine any scenario in which the facts and intentions of all actors are clear enough to trigger koolba's scenario. And even then, it's still possible for a failed business to make it over the 100% recovery rate at the point in time when the investor things the plug should be pulled.

stale2002 10y ago

Because it is their company. They own it. They can do whatever they want with THEIR investment, including firing the CEO and putting someone else in charge to give back their money.

throwaway729 10y ago
> They own it Or, much more likely, they only own a part of it. Maybe even a minority of it. > including firing the CEO Maybe the can. And if they can, and they think that's the best course of action, then they should definitely do that. It's a must cleaner solution that waiting and then crying "fraud" over a difference of opinion on the future of the company.