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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 employ

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.

Wowfunhappy 8y ago
Curious... is this fraud? It's certainly duplicitous, but are laws being broken?
- freehunter 8y ago
  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 https://www.investopedia.com/terms/f/fraud.asp
  - dragonwriter 8y ago
    > 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.
  - mattmanser 8y ago
    He was asking if Reddit was fraudulent. It wasn't. Please learn the meaning of such serious words before you start throwing them around.
- engineeringwoke 8y ago
  White collar crime in America? That's rich
Fnoord 8y ago
Makes me wonder how many projects on Kickstarter are some kind of fraud.

Wowfunhappy 8y ago

Curious... is this fraud? It's certainly duplicitous, but are laws being broken?

freehunter 8y ago
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 https://www.investopedia.com/terms/f/fraud.asp
- dragonwriter 8y ago
  > 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.
- mattmanser 8y ago
  He was asking if Reddit was fraudulent. It wasn't. Please learn the meaning of such serious words before you start throwing them around.
engineeringwoke 8y ago
White collar crime in America? That's rich

Fnoord 8y ago

Makes me wonder how many projects on Kickstarter are some kind of fraud.