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The only thing more frustrating than an ethically challenged business is the investment that came its way instead of going to legitimate start-ups that may die

by edw519 16y ago

The only thing more frustrating than an ethically challenged business is the investment that came its way instead of going to legitimate start-ups that may die on the vine for lack of capital.

zoomzoom 16y ago
Who is to say that ethically challenged businesses cannot be legitimate targets for investors? I hate these sites, but my bet is that they pay off for investors as well as your average YC company...Investors are in the business of making money, not making judgements about ethics. Legal challenges are the ones that matter to a business, not ethical ones.
- pavel_lishin 16y ago
  Maybe we should change that.
  - zoomzoom 16y ago
    The question is: how? The sentiment (in the US, at least) still seems to be towards less regulation at the moment. Enforcing ethics as well as laws would seem to require even more regulation, unless you have a magic potion that will convince all business directors to self-regulate all at once!
    - watchandwait 16y ago
      Regulations are only as ethical as the regulator -- just ask Bernie Madoff's victims how well that worked. Indeed, more regulation leads to a false sense of security, and certainly stifles innovation. Better to have the market, and market players like TechCrunch, sort out this type of low-level malfeasance.
      - zoomzoom 16y ago
        I am definitely not advocating more regulation, only pointing out that laws and ethics are not the same thing. The parent of the above post is the one suggesting to "change that" (implying more regulation) and I am answering that comment. I agree that this kind of "malfeasance" is not really worth any more attention from regulators.
      - pavel_lishin 16y ago
        But then you'd have to have a financial reward system in place that rewards ethical firms. I don't know how you would do that.
        dantheman 16y ago
        It's called refusing to do business with people who are ethically challenged.
    - lsc 16y ago
      reputation. If we socially scorn businesspeople who only focus on extracting value without adding any, if programmers who work at those sorts of companies feel ashamed rather than proud, we won't eliminate the behavior, but we can certainly make it more expensive.
- cabinguy 16y ago
  Your not going to get very far.
- mitel007 16y ago
  "Investors are in the business of making money, not making judgements about ethics. Legal challenges are the ones that matter to a business, not ethical ones." That may be how things are, but that doesn't mean they have to be. There's no law of nature or 'business' that dictates that is how it should be, like there's no other weay. It's all a human choice. Some people choose to act this way. How can we change this? Simple, don't interact with folks that choose to act this way.
jordanmessina 16y ago
Who is to say the "legitimate" startup deserves the money in the first place? The way I see it, if you're legitimate you should be at break even, investment isn't to dig a company out of a hole but rather to accelerate growth and development. I remember the Twilio CEO saying on Mixergy that they needed investment because without it they wouldn't have been able to grow/build as fast. They didn't need it to stay alive, but they wouldn't be where they are now without it. If a startup dies because of a lack of capital that's their own fault and they probably didn't have a company worth investing in in the first place.
- prodigal_erik 16y ago
  Nobody breaks even on day one, it takes time and resources to get there. Why shouldn't any of it come from investors? YC's premise is that there are good potential founders who don't even have enough capital to live on for the first few months.
  - jordanmessina 16y ago
    YC isn't the same as VC. I should have been a little more clear in my first comment. It's not like I think angels or incubators that make small investments are making bad investments in these young companies. I went through an incubator with my first company, so I know first hand giving those opportunities is priceless. We're talking about VC funding here. No company goes after VC on day one. All these companies that get millions in series whatever rounds are mature and have some revenue coming in, or at least a plan to turn their userbase into dollars. If a company is mature enough to seek VC funding and also needs that investment to dig themselves out of a hole, then I don't think they're worth investing in. That's all I'm saying, hopefully it makes sense.
  - arethuza 16y ago
    "Nobody breaks even on day one" When I co-founded a company we boostrapped by finding a contracting client who we managed to negotiate with so that they would pay us immediately in cash before the end of the month. So for the first few months we still managed to pay our salaries, make a profit and we had no overheads as we were working on the client site. After we had some cash in the bank we got an office and purchased our own kit so we could work off site (the client wasn't bothered as long as the work got done). Eventually we got to the point where we decided to focus on product development and we got VC money and moved to only having product related revenue. So yes, I think we did break even on day one.
nikcub 16y ago
WooMe hasn't raised a round in three years. The company they originally invested in is very different to the company you see today. Give the investors the benefit of doubt. That site is a total mess now - full of ads, spam and upsell. It is totally unusable.

by edw519 16y ago

The only thing more frustrating than an ethically challenged business is the investment that came its way instead of going to legitimate start-ups that may die on the vine for lack of capital.

zoomzoom 16y ago

Who is to say that ethically challenged businesses cannot be legitimate targets for investors? I hate these sites, but my bet is that they pay off for investors as well as your average YC company...Investors are in the business of making money, not making judgements about ethics. Legal challenges are the ones that matter to a business, not ethical ones.

pavel_lishin 16y ago
Maybe we should change that.
- zoomzoom 16y ago
  The question is: how? The sentiment (in the US, at least) still seems to be towards less regulation at the moment. Enforcing ethics as well as laws would seem to require even more regulation, unless you have a magic potion that will convince all business directors to self-regulate all at once!
  - watchandwait 16y ago
    Regulations are only as ethical as the regulator -- just ask Bernie Madoff's victims how well that worked. Indeed, more regulation leads to a false sense of security, and certainly stifles innovation. Better to have the market, and market players like TechCrunch, sort out this type of low-level malfeasance.
    - zoomzoom 16y ago
      I am definitely not advocating more regulation, only pointing out that laws and ethics are not the same thing. The parent of the above post is the one suggesting to "change that" (implying more regulation) and I am answering that comment. I agree that this kind of "malfeasance" is not really worth any more attention from regulators.
    - pavel_lishin 16y ago
      But then you'd have to have a financial reward system in place that rewards ethical firms. I don't know how you would do that.
      - dantheman 16y ago
        It's called refusing to do business with people who are ethically challenged.
  - lsc 16y ago
    reputation. If we socially scorn businesspeople who only focus on extracting value without adding any, if programmers who work at those sorts of companies feel ashamed rather than proud, we won't eliminate the behavior, but we can certainly make it more expensive.
cabinguy 16y ago
Your not going to get very far.
mitel007 16y ago
"Investors are in the business of making money, not making judgements about ethics. Legal challenges are the ones that matter to a business, not ethical ones." That may be how things are, but that doesn't mean they have to be. There's no law of nature or 'business' that dictates that is how it should be, like there's no other weay. It's all a human choice. Some people choose to act this way. How can we change this? Simple, don't interact with folks that choose to act this way.

jordanmessina 16y ago

Who is to say the "legitimate" startup deserves the money in the first place? The way I see it, if you're legitimate you should be at break even, investment isn't to dig a company out of a hole but rather to accelerate growth and development. I remember the Twilio CEO saying on Mixergy that they needed investment because without it they wouldn't have been able to grow/build as fast. They didn't need it to stay alive, but they wouldn't be where they are now without it. If a startup dies because of a lack of capital that's their own fault and they probably didn't have a company worth investing in in the first place.

prodigal_erik 16y ago
Nobody breaks even on day one, it takes time and resources to get there. Why shouldn't any of it come from investors? YC's premise is that there are good potential founders who don't even have enough capital to live on for the first few months.
- jordanmessina 16y ago
  YC isn't the same as VC. I should have been a little more clear in my first comment. It's not like I think angels or incubators that make small investments are making bad investments in these young companies. I went through an incubator with my first company, so I know first hand giving those opportunities is priceless. We're talking about VC funding here. No company goes after VC on day one. All these companies that get millions in series whatever rounds are mature and have some revenue coming in, or at least a plan to turn their userbase into dollars. If a company is mature enough to seek VC funding and also needs that investment to dig themselves out of a hole, then I don't think they're worth investing in. That's all I'm saying, hopefully it makes sense.
- arethuza 16y ago
  "Nobody breaks even on day one" When I co-founded a company we boostrapped by finding a contracting client who we managed to negotiate with so that they would pay us immediately in cash before the end of the month. So for the first few months we still managed to pay our salaries, make a profit and we had no overheads as we were working on the client site. After we had some cash in the bank we got an office and purchased our own kit so we could work off site (the client wasn't bothered as long as the work got done). Eventually we got to the point where we decided to focus on product development and we got VC money and moved to only having product related revenue. So yes, I think we did break even on day one.

nikcub 16y ago

WooMe hasn't raised a round in three years. The company they originally invested in is very different to the company you see today. Give the investors the benefit of doubt. That site is a total mess now - full of ads, spam and upsell. It is totally unusable.