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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

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.

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.