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I still contend that many of these types of "startups" are merely elaborate ponzi schemes. Actually, I think a lot of businesses are just that.

Ekaros 5y ago
They are not even ponzi schemes. They are blackholes, which if they are lucky are IPOed/sold to greater fools...
- mmazing 5y ago
  Right, but, the owners end up pocketing a substantial portion of investor money. Look at WeWork. If you need 10 rounds of funding to keep running, your profit model is "obtain investor money". (Probably controversial, but IMO 3 rounds of funding is pretty sus.)
edanm 5y ago
> Actually, I think a lot of businesses are just that. Can you explain what you mean by that? People often say this and I never really understand what they mean. Most businesses which aren't unicorns just sell stuff for money. What's a ponzi scheme about it? I also think calling these startups ponzi schemes is disingenuous. They are not lying about anything - they're offering a very clear, risky bet to people, which some people are taking up. That's their choice. (If they are lying or committing fraud, then obviously that's a different story).
- mmazing 5y ago
  I've known several entrepreneurs in my life that simply lived off investor money and never really got anything out the door. They would come up with a new idea, get money, and then botch the execution, over and over. I've been a part of companies where the owners cashed out millions of dollars after round 3 of funding where the business never really sustained itself, yet continued to receive funding. In the end, both examples didn't really mind if the business failed, because they already got their massive paycheck from it. To me, that's some sort of legal ponzi scheme.
  - edanm 5y ago
    I mean, those are bad investment that those investors probably shouldn't have made. But that's really on the investors, unless the founders were somehow lying about what they were doing. > I've been a part of companies where the owners cashed out millions of dollars after round 3 of funding where the business never really sustained itself, yet continued to receive funding. Just as an example, founders don't cash out without the investors knowing about it. It's a negotiation in which the investors knowingly decide that it's worth paying millions to founders in order to get a piece of the company. That might be wrong! It might be a bad investment. But it is in no way fraud, and there is no reason at all to feel bad for those investors - we're not even talking about retail investors, we're talking about investors who pay lawyers and accountants 10s of thousands to do due diligence on companies, and who negotiate for a living. That is nothing at all like a ponzi scheme (again, unless someone is lying somewhere along the way / committing fraud).
    - mmazing 5y ago
      Yeah, I guess I don't mean that my examples are explicit ponzi schemes, but merely similar. I certainly wouldn't say they are fraud. I think my examples are instances where people are good at selling an idea and not having full intention of executing well after receiving financing. I'm certain that some percentage of entrepreneurs actively think "If I can just sell my idea to investors, I can get rich regardless of whether the idea works or not." That's my ponzi scheme analog.
dang 5y ago
Could you please stop posting flamebait and/or unsubstantive comments to HN? You've been doing it repeatedly, unfortunately, and it goes against what we're trying for here. If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.
- deleted 5y ago
  [deleted]
- mmazing 5y ago
  I genuinely thought it would spark an interesting discussion about how certain businesses are run, that is related to this article. Can you please clarify what is wrong with that exactly? I've been a part of this site for like 10 years, and I think that any site that invites public comments is bound to have controversial topics come up. Further, I do my damn best to be respectful on this website, so your blanket characterization of my comments is unfair.
  - dang 5y ago
    It's just that the comment was a generic, shallow dismissal with no actual information in it. Also arguably name-calling, since "ponzi scheme" has morphed a pretty generic pejorative. I appreciate that you put effort into being respectful on this website! That of course counts for a lot, in fact it's the most important thing. It's just that generic/unsubstantive comments are a separate issue.
    - mmazing 5y ago
      Also, my comment was definitely not a dismissal of the person I was replying to, it was intended to agree with them. Clearly, that wasn't clear. Text is hard to convey tone and context. :)
    - mmazing 5y ago
      I get it, it's a problem that I have where I tend to rely on responses to fully flesh out my ideas. I would love to have a bullet proof fully reasoned human readable argument, but many times it's hard to translate abstract thoughts into text. Will try to do better, I really enjoy this site and the content/discussion in comments.

Ekaros 5y ago

They are not even ponzi schemes. They are blackholes, which if they are lucky are IPOed/sold to greater fools...

mmazing 5y ago
Right, but, the owners end up pocketing a substantial portion of investor money. Look at WeWork. If you need 10 rounds of funding to keep running, your profit model is "obtain investor money". (Probably controversial, but IMO 3 rounds of funding is pretty sus.)

edanm 5y ago

> Actually, I think a lot of businesses are just that. Can you explain what you mean by that? People often say this and I never really understand what they mean. Most businesses which aren't unicorns just sell stuff for money. What's a ponzi scheme about it? I also think calling these startups ponzi schemes is disingenuous. They are not lying about anything - they're offering a very clear, risky bet to people, which some people are taking up. That's their choice. (If they are lying or committing fraud, then obviously that's a different story).

mmazing 5y ago
I've known several entrepreneurs in my life that simply lived off investor money and never really got anything out the door. They would come up with a new idea, get money, and then botch the execution, over and over. I've been a part of companies where the owners cashed out millions of dollars after round 3 of funding where the business never really sustained itself, yet continued to receive funding. In the end, both examples didn't really mind if the business failed, because they already got their massive paycheck from it. To me, that's some sort of legal ponzi scheme.
- edanm 5y ago
  I mean, those are bad investment that those investors probably shouldn't have made. But that's really on the investors, unless the founders were somehow lying about what they were doing. > I've been a part of companies where the owners cashed out millions of dollars after round 3 of funding where the business never really sustained itself, yet continued to receive funding. Just as an example, founders don't cash out without the investors knowing about it. It's a negotiation in which the investors knowingly decide that it's worth paying millions to founders in order to get a piece of the company. That might be wrong! It might be a bad investment. But it is in no way fraud, and there is no reason at all to feel bad for those investors - we're not even talking about retail investors, we're talking about investors who pay lawyers and accountants 10s of thousands to do due diligence on companies, and who negotiate for a living. That is nothing at all like a ponzi scheme (again, unless someone is lying somewhere along the way / committing fraud).
  - mmazing 5y ago
    Yeah, I guess I don't mean that my examples are explicit ponzi schemes, but merely similar. I certainly wouldn't say they are fraud. I think my examples are instances where people are good at selling an idea and not having full intention of executing well after receiving financing. I'm certain that some percentage of entrepreneurs actively think "If I can just sell my idea to investors, I can get rich regardless of whether the idea works or not." That's my ponzi scheme analog.

dang 5y ago

Could you please stop posting flamebait and/or unsubstantive comments to HN? You've been doing it repeatedly, unfortunately, and it goes against what we're trying for here. If you wouldn't mind reviewing https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html and taking the intended spirit of the site more to heart, we'd be grateful.

deleted 5y ago
[deleted]
mmazing 5y ago
I genuinely thought it would spark an interesting discussion about how certain businesses are run, that is related to this article. Can you please clarify what is wrong with that exactly? I've been a part of this site for like 10 years, and I think that any site that invites public comments is bound to have controversial topics come up. Further, I do my damn best to be respectful on this website, so your blanket characterization of my comments is unfair.
- dang 5y ago
  It's just that the comment was a generic, shallow dismissal with no actual information in it. Also arguably name-calling, since "ponzi scheme" has morphed a pretty generic pejorative. I appreciate that you put effort into being respectful on this website! That of course counts for a lot, in fact it's the most important thing. It's just that generic/unsubstantive comments are a separate issue.
  - mmazing 5y ago
    Also, my comment was definitely not a dismissal of the person I was replying to, it was intended to agree with them. Clearly, that wasn't clear. Text is hard to convey tone and context. :)
  - mmazing 5y ago
    I get it, it's a problem that I have where I tend to rely on responses to fully flesh out my ideas. I would love to have a bullet proof fully reasoned human readable argument, but many times it's hard to translate abstract thoughts into text. Will try to do better, I really enjoy this site and the content/discussion in comments.