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> I'm not sure what the solution is, but the fine line between positive framing and intentionally misleading investors is crossed way too much, and in the long

by hrunt 4y ago

> I'm not sure what the solution is, but the fine line between positive framing and intentionally misleading investors is crossed way too much, and in the long run, it hurts both the founder and investor community. The solution for out-and-out fraud ought to be prison time. This does not sound like a case of "exaggerating metrics"; JPM alleges that the founder knowingly created false metrics and used them to misrepresent the company's value. To be fair, SV is littered with stories of this tactic being successfully used, too. Two that come to mind immediately are Ashley Madison's lady bots and Reddit's use of fake users in its early days to make the community look larger than it was.

fairity 4y ago
Agree that outright fraud should be punished. But, I think it's the more insidious forms of misrepresentation that cause most of the harm. Things like: exaggerating core KPI's by 1-20%, including organic traffic in the denominator of CPA, amortizing sales & marketing expenses, calculating retention based on self-selected cohorts, etc. As a case study, take a look at Talkspace's SPAC (https://finance.yahoo.com/quote/TALK/financials?p=TALK https://finance.yahoo.com/quote/TALK/financials?p=TALK). There's no way this company got to public markets at a $1b valuation without serious misrepresentation of their marketing performance.
neilv 4y ago
Early Reddit's comments were suspiciously too smart/clever. When telling people about Reddit early on, I'd warn them that I suspected Reddit was using professional writers as shills (but that that wasn't entirely a negative). Gaming the karma and other facets of the system was pretty much always a sport. Then it got popular, and by then it seemed third-party astroturfing/shilling and gaming owned the front page.
x0x0 4y ago
Ashley Madison is, afaik, a Toronto company. Not sure how that's getting blamed on the valley.

by hrunt 4y ago

fairity 4y ago

Agree that outright fraud should be punished. But, I think it's the more insidious forms of misrepresentation that cause most of the harm. Things like: exaggerating core KPI's by 1-20%, including organic traffic in the denominator of CPA, amortizing sales & marketing expenses, calculating retention based on self-selected cohorts, etc. As a case study, take a look at Talkspace's SPAC (https://finance.yahoo.com/quote/TALK/financials?p=TALK https://finance.yahoo.com/quote/TALK/financials?p=TALK). There's no way this company got to public markets at a $1b valuation without serious misrepresentation of their marketing performance.

neilv 4y ago

Early Reddit's comments were suspiciously too smart/clever. When telling people about Reddit early on, I'd warn them that I suspected Reddit was using professional writers as shills (but that that wasn't entirely a negative). Gaming the karma and other facets of the system was pretty much always a sport. Then it got popular, and by then it seemed third-party astroturfing/shilling and gaming owned the front page.

x0x0 4y ago

Ashley Madison is, afaik, a Toronto company. Not sure how that's getting blamed on the valley.