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> This means that the company will either need to keep raising money to buy out earlier investors ... Isn't this the literal definition of a Ponzi scheme? Isn'
by dvt 7y ago
> This means that the company will either need to keep raising money to buy out earlier investors ...
Isn't this the literal definition of a Ponzi scheme? Isn't using new money to pay old investors technically illegal?
- AmericanChopper 7y agoNo. A Ponzi scheme uses money from new investors to pay returns to old ones. Generating liquidity for investors to sell equity is not at all similar.
- jrumbut 7y agoIn a Ponzi scheme there isn't an actual business occurring, or only the facade of one. If they make money, they can stop raising from investors. The line can be a little fuzzy, since some Ponzi schemers pretend to be an honest business and some real businesses end up being, functionally, a Ponzi scheme.
- dvt 7y agoMakes sense, thanks for the clarification!