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It’s ridiculous! In multiple active cases we find out VC wired tens of millions of dollars without an iota of diligence to find out if the receiving party had l

It’s ridiculous! In multiple active cases we find out VC wired tens of millions of dollars without an iota of diligence to find out if the receiving party had legit books. Then VC cries foul and is 100% the victim. Shouldn’t there be some legal onus on VC to perform due diligence? The moral for the legit startups out there is: be super duper clear and intentional with VC and meticulously document all the steps else you might find yourself in lawsuits for misrepresenting this and that to the apparently infallible VC.

tootie 5y ago
Especially if you read the anecdote about Google Ventures. Apparently they did a bare minimum amount of diligence (went to get their blood tested at a Walgreens) and the fraud was obvious right away.
- omarhaneef 5y ago
  Wasn’t that at a much later stage?
omarhaneef 5y ago
In this case, it doesn’t sound like books were cooked. That would be motivated by falsifying past sales. In this case the future sales didn’t materialize. What diligence would have saved you? You would have to learn enough about how blood tests work to conclude that it was not likely they had achieved it. You could have passed on the investment unless they trusted you with the trade secret I suppose. I’m not saying I have the right answer, but I am saying that it’s not as simple as checking the books.
- nradov 5y ago
  You can learn yourself, or you can ask an expert. There were plenty of physiologists who could have told investors that it was simply impossible to assay accurate blood levels for most analytes based on a few drops of interstitial fluid. This was well known in the scientific community at the time.
- shrimpx 5y ago
  Sorry. This blurb made me think cooked books: > Notably, the company told prospective investors in 2014 that the company was on track to break even and generate $100 million in revenue. It brought in little more than $100,000 for that period. Even if there was no cooking, how can they miss the mark by 1000x? How can VC be like “oh shit we were deceived. They said 100 million and it was 100 thousand.” It’s not rocket science to look at the operations of a company to determine if their claims are off by 1000x. Edit: spelling.

tootie 5y ago

Especially if you read the anecdote about Google Ventures. Apparently they did a bare minimum amount of diligence (went to get their blood tested at a Walgreens) and the fraud was obvious right away.

omarhaneef 5y ago
Wasn’t that at a much later stage?

omarhaneef 5y ago

In this case, it doesn’t sound like books were cooked. That would be motivated by falsifying past sales. In this case the future sales didn’t materialize. What diligence would have saved you? You would have to learn enough about how blood tests work to conclude that it was not likely they had achieved it. You could have passed on the investment unless they trusted you with the trade secret I suppose. I’m not saying I have the right answer, but I am saying that it’s not as simple as checking the books.

nradov 5y ago
You can learn yourself, or you can ask an expert. There were plenty of physiologists who could have told investors that it was simply impossible to assay accurate blood levels for most analytes based on a few drops of interstitial fluid. This was well known in the scientific community at the time.
shrimpx 5y ago
Sorry. This blurb made me think cooked books: > Notably, the company told prospective investors in 2014 that the company was on track to break even and generate $100 million in revenue. It brought in little more than $100,000 for that period. Even if there was no cooking, how can they miss the mark by 1000x? How can VC be like “oh shit we were deceived. They said 100 million and it was 100 thousand.” It’s not rocket science to look at the operations of a company to determine if their claims are off by 1000x. Edit: spelling.