I have a question. How in the world do VC's ever fall for this bullshit? I mean in most situations they have made enough money on their own to invest, so they aren't stupid right?
2. Most of the people staffing VCs were not necessarily successful investors. Many were people in their 20s escaping the NYC banking scene to be analysts in VC. These days, there are many people on the capital side that are ex-entrepreneurs, but that still doesn't mean they know how to spot a deal.
3. It does not always make economic sense to try to out a scam. If your model is that you find one mega-return to erase 100 failures in your portfolio, you actually go around looking for deals that sound insane (like Theranos). If other reputable VCs have already led the round, you just throw your money in without even investigating.
4. Most importantly, most VCs don't fall for anything this crappy. The target is likely individuals with net worths in the millions who aren't very business savvy. There are lots of such people (children of wealth, for example).
You'll never guess what happened when it passed $17,000
Probably the biggest is just that they have a bias to be bullshitted (bullshat?). The are constantly searching for the next big thing, so they need these things to be true. They want them to be true. And human nature makes them scared of missing out.
Also, most of the VCs out there are not investing their own money, and have never actually operated a business. This is why they ask the same questions with slight variations, and get obsessed with metrics that may or may not apply to a given business. This also makes them easier to fool, although many make up for this hands-on inexperience with enough years of watching startups that they can "pattern match" rather than understand things from first principles.
Most also develop specialties. You're not going to fool an experienced blockchain VC with the made up or cherry-picked bitcoin numbers. But go next door on Sand Hill Rd and you can probably get away with it.
Then I found out... they DID got scammed, in a rather elaborate way:
some guy (that I won't name here, but you can find out who it is) seemly created a mobile games company, made some simple but wildly successful games (in donwload numbers), and then started to put ad fraud after ad fraud on the games, Apple started to ban him, but he would find other ways to get back, meanwhile he would accumulate cash, then he rented an office, built a seemly legitimate company, and asked the VCs for money, and as proof of his business working as intended, gave to the VCs the data about his income...
Eventually Apple and Google figured out how to kind-of get rid of his frauds permanently, seemly he found one last loophole, moved all apps to a new account that was on his name only (not his company), fired all employees, and took off with Apple's and VC's money.
I was told Apple ended taking the hit, they gave all the defrauded money back to advertisers, but couldn't get the money back from the scammer.
So to reply to your question: if you have data, for example (fraudulent) income, it is easy to convince VCs... for the first time.
Since on the second attempt they believe even real business (like mine) is a fraud.
They are all simple stupid games (think floppy bird, although games in question are not that one)
- rich people by inheritance. They might have been spoiled and thus required little due diligence in life; or simply they are dumb and believe the hype.
- rich people by accident. They are not particularly bright. They invested in real-estate very early on because that's what they know at the time. Then real-estate appreciated significantly in the last few decades in their area and they are crazy rich.
- people managing other people money. they have to invest in "blockchain" and stuff and they get introduced via their circle. It's not their money at the end of the day; and if the VC fund collapse they'll manage to jump to the next one thanks to the networking circle they were busy building during their last tenure.
https://www.wsj.com/articles/stablecoin-project-basis-is-shu...
It helped a lot during demonstrations.
I believe what happens is that they think about the idea. What if there were some kind of bitcoin powered investing platform. Sort of like angellist but the block chain would ensure the funders were real and the money was in some crypto?
Yes, that could work. Wow, it could be worth a lot! Imagine all the startups that could get funded and omg where do I sign?
This wouldn't happen if you went for a visit, and the person -- lets assume they mean well and are not lying -- logged in and the screen was a little awkward. There were zero companies signed up because the authorities had not signed off on it yet. There are two companies waiting: a fast food franchise and a t-shirt company.
The gap between what could be and what probably is, is very wide till you actually look at the thing.
"I.. have made enough money on .. own .. so I aren't stupid"