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#truth on the don’t trust a contract detail mentioned I've known people who claimed to be from a VC fund that had $10MM raise out of $50MM and was making inves

#truth on the don’t trust a contract detail mentioned I've known people who claimed to be from a VC fund that had $10MM raise out of $50MM and was making investments. In reality they had no money raised but signed $11.5MM in investments with startups. It's a crazy world out there. Vet your investors.

logicallee 9y ago
I don't understand your story. Why would they sign investments they can't pay for?
- chrisabrams 9y ago
  You're trying to think rationally against an irrational situation :O
  - logicallee 9y ago
    Something was going through their head. For comparison, how many people who are poor enter terms to buy hundreds of millions of dollars of property without having any mortgage or ability to pay or any expectation other than "wheeeeee - that was fun." I'd wager approximately zero. There is more to the above story. As described, these VC's wasted tons of their own time. How did they even have offices?
    - EGreg 9y ago
      I toured some apartments without the ability to afford them. Perhaps these VCs were expecting money to come in but in the end their fund fell apart?
      - logicallee 9y ago
        Touring is very different from signing! OP said "had no money raised but signed $11.5MM in investments with startups". maybe they mispoke.
    - charlesdm 9y ago
      There are ways to acquire assets without putting any money down yourself, so definitely possible, though not very easy. An example: say you acquire a company worth $10m and have no money in the bank. You could pay 50% of it in stock ("you'll be part of an amazing growth story, and the $5m stock you get today will be worth $50m in 5 to 10 years") and then go borrow $5m from a bank (or go through an equity investor) to fund the other 50% of the acquisition price. But often you'll need a binding LoI to get a loan. Doesn't always work, but if you're someone who is well connected then it's quite doable. I've seen it done. Another person that comes to mind is David Baazov: https://www.forbes.com/sites/nathanvardi/2014/12/01/the-king-of-online-gambling-is-34/#3c34859d396f https://www.forbes.com/sites/nathanvardi/2014/12/01/the-king.... He aligned things well and put deals together, and ended up making a ton of money because of it.
- bluesteel44 9y ago
  Free option? Vanity? You get to know the books, the team, etc. And if before you ("VC") haven't been figured out the startup gets traction, you can find money to get in (maybe).
  - _e 9y ago
    I think you hit it with the free option. They are syndicating their investment as soon as they have some sort of agreement and they probably have some contigencies that allow them to get out for any reason in the event they can't find investors.
- PeterisP 9y ago
  Probably they intended to use and demo the signed investments to "sell" their fund / raise the money.
  - godzillabrennus 9y ago
    Bingo! They thought they could raise the money once they had the portfolio.

logicallee 9y ago

I don't understand your story. Why would they sign investments they can't pay for?

chrisabrams 9y ago
You're trying to think rationally against an irrational situation :O
- logicallee 9y ago
  Something was going through their head. For comparison, how many people who are poor enter terms to buy hundreds of millions of dollars of property without having any mortgage or ability to pay or any expectation other than "wheeeeee - that was fun." I'd wager approximately zero. There is more to the above story. As described, these VC's wasted tons of their own time. How did they even have offices?
  - EGreg 9y ago
    I toured some apartments without the ability to afford them. Perhaps these VCs were expecting money to come in but in the end their fund fell apart?
    - logicallee 9y ago
      Touring is very different from signing! OP said "had no money raised but signed $11.5MM in investments with startups". maybe they mispoke.
  - charlesdm 9y ago
    There are ways to acquire assets without putting any money down yourself, so definitely possible, though not very easy. An example: say you acquire a company worth $10m and have no money in the bank. You could pay 50% of it in stock ("you'll be part of an amazing growth story, and the $5m stock you get today will be worth $50m in 5 to 10 years") and then go borrow $5m from a bank (or go through an equity investor) to fund the other 50% of the acquisition price. But often you'll need a binding LoI to get a loan. Doesn't always work, but if you're someone who is well connected then it's quite doable. I've seen it done. Another person that comes to mind is David Baazov: https://www.forbes.com/sites/nathanvardi/2014/12/01/the-king-of-online-gambling-is-34/#3c34859d396f https://www.forbes.com/sites/nathanvardi/2014/12/01/the-king.... He aligned things well and put deals together, and ended up making a ton of money because of it.
bluesteel44 9y ago
Free option? Vanity? You get to know the books, the team, etc. And if before you ("VC") haven't been figured out the startup gets traction, you can find money to get in (maybe).
- _e 9y ago
  I think you hit it with the free option. They are syndicating their investment as soon as they have some sort of agreement and they probably have some contigencies that allow them to get out for any reason in the event they can't find investors.
PeterisP 9y ago
Probably they intended to use and demo the signed investments to "sell" their fund / raise the money.
- godzillabrennus 9y ago
  Bingo! They thought they could raise the money once they had the portfolio.