Live data from Hacker News

Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

pubsonline.informs.org

81–90 of 101 posts

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#81

“Our theoretical framework captures how entrepreneurs facing minor, wide, and extreme expectation-reality gaps engage in evermore sophisticated efforts to detach the venture’s externally projected appearance from its actual operational reality.” Look, I’m not promoting fraud at all, but having been doing seed raising for the last eight months, there have been many times where I thought the only way to compete was by…

I'm guessing investors understand that there's high probability of the numbers being 'optimistic'.

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#82
post #16

Earlier quoted context omitted.

Are you a biochemist? Would the Theranos machine have worked with new tests using new reagents? Is the needed blood volume not similar to, for example, payload capacity? Are we discriminating against people who affect an unusual voice?

It wouldn't have worked, period. You can't use capillary blood for the kind of blood tests they were claiming to. It's statistically impossible because the sample isn't big enough and drawing more capillary blood doesn't improve the SNR. Two samples taken at the same time from different spots on the same finger can yield wildly different results. Everyone in diagnostic medicine knows this (they've been dealing with t…

> It wouldn't have worked, period.

That's the point. As yet uninvented tests and reagents are the same kind of line of BS as "let's make the rocket bigger." While I have the advantage of having a mother who is an immunologist and did in fact work in developing diagnostics, all it really takes to call shenanigans is a knowledge of project management and critical path analysis. By the time you're launching 15 or 25 starship missions to refuel one on its way to the moon, the whole project is irrelevant.

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#83
post #8

Earlier quoted context omitted.

In the current environment I doubt Elizabeth Holmes would go to prison. She would be saying the machine would work by early next year. After all a drop of blood is just a smaller quantity. Making the machine work is just an engineering problem. If she were really clever she would recruit a social media army of all the weird conspiracy theorists who think "medbeds" are real. Of course now we know that a drop of capill…

The big difference was that she was in the medical field. She used her machines that worked unreliability on patients and caused actual damage to humans. Then she noticed that this could be a problem and switched to blood analyzer from Siemens. But she still continued to say that the machines do work. She lied to investors. I still feel her case is a lot different to what musk is doing. I think you can definitely say…

Tell that to Kyle Shanahan, whose Tesla got into a big accident while on autopilot...

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#84

“Our theoretical framework captures how entrepreneurs facing minor, wide, and extreme expectation-reality gaps engage in evermore sophisticated efforts to detach the venture’s externally projected appearance from its actual operational reality.” Look, I’m not promoting fraud at all, but having been doing seed raising for the last eight months, there have been many times where I thought the only way to compete was by…

I spent a few years hanging around the VC-adjacent scene in a major city, met quite a few of them (because I'm that way. elevator docent during events... priceless).

There is publicly performed theater around VCs which is pretty consistent, taught in incubators, etc., etc. So that's how they manage set and setting (grooming) for the marks. Internally there are certain tells, that they must act a certain way. There are arbitrary character tests and whatnot which provoke a "culture" if you will, similarly to how computer languages and tech stacks form distinctive cultures if left unchecked; there could be self-selecting pressures (for these behaviors) as well. This is unsurprising to me as someone who analyzed voting patterns, and was asked numerous times variations on the question "is it something in the water or 'new car smell'?" (I don't have an answer for that question.)

However VCs are much more stovepiped and cliquish concerning their actual selection process than people realize, I've heard it publicly described as "mafia like" by someone who I worked for and whose name many would recognize. I don't understand why this person, like so many others, invested so much effort... enough to get some serious butthurt IMO.

It's a distraction, it effectively destroyed a different company I was working for.

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#85

If this was applied to all of commercial organizations equivalently, the entirety of our society would probably grind to a halt

Absolutely not. Silicon Valley powers its own unique type of reality distortion field.

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#86

If this was applied to all of commercial organizations equivalently, the entirety of our society would probably grind to a halt

Absolutely not. Silicon Valley powers its own unique type of reality distortion field.

Have you ever bought a car near a military base?

How about getting a check cashed or a payday loan?

Furniture financing is almost 100% a scam

Pharma pricing?

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#87
post #79
post #52

Earlier quoted context omitted.

IME, it's about pushing you to overextend on the forecast, so that when you don't meet it, they get more control or claw back funds promised or given. Fudging actual numbers is a dangerous and illegal game to play and never pays off, except in the edge cases (e.g., Enron... but usually you have to pay the Piper).

Interesting, this presents an meta for an early stage investor. Fund a company with a BS forecast based on your ability to make money on the claw back provisions.

I see it as a game where investors get a better deal than the founders wanted. There is a lot of innuendo on the "we're not really interested, unless there's more upside for us" and the founders are then under pressure to up forecasts.

I think the investors believe the business is sound. It's just a way to get it for a better price.

Of course, if the business is a unicorn, none of this applies.

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#88
post #75
post #64

Earlier quoted context omitted.

I am torn on this issue, because I would love to disincentivize short-term thinking at the executive level, and I initially considered this a decent move in that regard.

I mean, maybe a disinterested moron is better for some things? Would be great if companies only had to report once a year.

> Would be great if companies only had to report once a year.

Why and how would it be in the public or shareholder interest?

Im unaware if any public market where similar reductions in reporting led to significant, positive, outcomes. FTSE is the common example. They had a similar “reform” circa ‘14 and FTSE companies continue to generally under perform while the LSE continues to lose listings.

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#89
post #52

Earlier quoted context omitted.

Was it fudging expected numbers (forecast), or fudging actual numbers (revenue, etc)? VCs are looking for a long-tail, if you have a 1% chance at 5B - 1T market, this is more interesting and impactful than 10% chance at 5M market. And yes, 1% chance of success is considered to be unrealistic by common sense standards.

IME, it's about pushing you to overextend on the forecast, so that when you don't meet it, they get more control or claw back funds promised or given. Fudging actual numbers is a dangerous and illegal game to play and never pays off, except in the edge cases (e.g., Enron... but usually you have to pay the Piper).

Off topic, but I like your blog.

Re: Analyzing data from Silicon Valley ventures and founders prosecuted for fraud

#90

This is what Stanford kids do. Read "How to Rule the World: An Education in Power at Stanford University" by the theo guy.

Great suggestion. Thank you.

It's a really good book. Would recommend to everyone.
Post reply on HN