
Why I'm Furious with Silicon Valley (2011) - wslh
http://www.aarongreenspan.com/writing/essay.html?id=60
======
coffeemug
_Rather than invest in a productive, useful and frankly unprecedented product
such as FaceCash, venture capital and angel investors have focused their time
and billions of dollars of their money in companies and entrepreneurs that
have, in serial fashion, deceived co-founders, deceived employees, and
deceived customers._

Rather than hiring a brilliant, hard working, and frankly outstanding engineer
such as myself, technology companies have focused their time and billions of
dollars of their money on engineers that have demonstrated, in a consistent
fashion, lack of talent, skills, and integrity.

~~~
angersock
That's very cute and all, but do you care to skim TechCrunch or something and
say, with a straight face, that primarily worthwhile endeavors are getting
funded?

Tell me about social, mobile, or the like.

~~~
nemothekid
I don't think that is very honest considering FaceCash (not entirely sure)
didn't beat Square to market, and I don't believe his idea was very "wild and
unprecedented" as he claimed.

Yes, seemingly dumb start up ideas get funded, but at the same time a lot of
dumb and smart ideas don't get any attention, and there are still a good
number of smart ideas that do get funded.

If he couldn't get anyone to back his mobile payments idea, I think it says
more about him and his character more than his idea. It's my belief that the
reason someone funds/works for you can be attributed to less than half to how
good your idea was, especially something that is really early stage.

------
alan_cx
Forgive my ignorance, but he talks about "necessary capital", and fails to
explain why and what it is for. Is this something the regulators demand in
order to protect his customers? Isn't that desirable?

Further, if he has put $1m in to the project, should he not have checked that
laws and regulation first?

Perhaps the writer assumes a lot of knowledge on the part of the reader.

~~~
McGlockenshire
> should he not have checked that laws and regulation first?

The regulations came into existence after his project did.

After the regulations went into effect, he was unable to get his project
certified under the regulations.

~~~
7Figures2Commas
This is called regulatory risk. This story seems like a good example of why
anyone starting a business in an industry that is already highly-regulated,
such as finance, must assume that future regulations could increase the cost
of doing business, or threaten the viability of the business outright.

------
beachstartup
i'm not going to go into specifics because i'm scared of
retaliation/retribution. there, i said it. i'm scared like a little bitch.
especially now that i've got plenty to lose (read on...)

imagine the following scenario.

CEO (not me) of self-funded startup hires prestigious silicon valley law firm
to incorporate and represent his new company.

recruits 4 cofounders including big-name software company engineers and big-
name b-school MBAs. however, nobody is 'connected' per se.

ostensibly law firm does its job, and helps coordinate meetings with the TOP
valley and seattle VCs. like top 3 in each area. like 'holy shit' what am i
doing in this board room right now. like 'wow i can't believe i actually
delivered my pitch without tripping over my own tongue'.

during the fund raising process it's discovered the name of the company may be
a copyright/trademark infringement on another company also represented by the
law firm.

founders are assured by law firms and VCs it's no big deal. it happens all the
time. this sort of thing is very common! law firm could stand to charge 10
thousand in fees for a name change, so it seems like an honest opinion.

during the fund raising process it's also discovered that the core business
model of startup is in sort-of competition with another startup, already
funded, represented by both the law firm, and a VC firm that lawfirm set
startup up with to pitch. (of course no NDA's were signed). however, the
business models are not identical, only similar. assurances all around, of
course.

fast forward 2 months. startup is getting traction. 10,000 users, some high
profile sites are using startup's technology.

fast forward another month. threats of lawsuit from represented company whose
trademark claim is now becoming serious.

fast forward another month. sort-of competitor is now full-on competitor.
exact same concept is now implemented and deployed.

no need to fast forward anymore. funding is never realized, company is under
legal threat from multiple parties. other mistakes are made, but greatly
exacerbated by a name change, which effectively kills the product. company
implodes. kaput.

the conclusion of whether this was purely due to founder incompetence or
naiveté (which there is certainly a component) or there was a large component
of malicious VC/lawyer/funded collusion is left as an exercise for the reader.

however, i posit that the startup would have done FAR BETTER to not even get
involved with the SV ecosystem IN THE FIRST PLACE. once you get involved, they
will enforce their iron rule of SINK OR SWIM. and they WILL sink you.

my current startup is making $millions/year in revenue WITHOUT ANY OUTSIDE
HELP. cofounders own 100% because we said FUCK IT over 2 glasses of scotch
whisky and dumped $250k of our own money into it. we get multiple emails and
calls per month from VC and PE firms inquiring. lollerskates. fuck off
assholes. i would rather go bankrupt and steal loaves of stale bread from my
local bagel shop than work for those people.

so that's just one data point for you. it's a jungle out there. keep your wits
about you.

~~~
randall
This is why you work with YC.

If you're going to get into the SV ecosystem, in order to stay away from the
bad actors, I think you have to align yourselves with the forces for good. You
think anyone will fuck with a YC company like that? Only if they want to be
lambasted among most of the new / best / most promising startup founders in
the valley.

~~~
nickpinkston
You're painting it like the mafia - like...exactly like the mafia...

~~~
michaelochurch
In some societies, the organized crime contingent is morally better (and
sometimes more competent) than the official police force.

In the private sector where "law" is the whim of powerful people, that's
almost invariably true.

Whatever the good guys form (possibly centered around YC, and possibly
something else) is going to be likened to the Mafia, a "don't fuck with us"
collective that protects its own. After all, one of the Mafia's first
(entirely just) social functions was to protect people against Pinkertons and
other company police forces.

The thing is, those with capital and connections have been using their social
power for extortion ("you'll never raise another dime") for _decades_. If
talent starts to fight back, that's a good thing.

------
ISL
Note date of 2011.

~~~
redthrowaway
Yes, the mods should probably edit the title lest people mistakenly think it's
part of his lawsuit.

------
brianbreslin
Where did he get a million bucks?

------
politician
Is this a federal law or a state law? The content of the article seems to
imply state law, but the "gloom and doom" tone implies that FaceCash can't
just move out of CA.

~~~
dangrossman
It's state law, but virtually every state licenses money transmitters, and you
need a license from each state you want to transmit money into (where your
customers are). No matter where you start, you need the licenses, and CA is
particularly important since that's where the early adopters and investors
are. Here's the list of 50 state licenses PayPal needs to operate:

<https://www.paypal-media.com/state_licenses.cfm>

------
barretts
I don't know the details here but this missive reads like that of someone who
failed and turned to the litigation system for revenge.

~~~
josephagoss
The government was forcing him to shut down his company, I would turn to
litigation if this happened to me.

------
michaelochurch
I don't know about his past with Zuckerberg, but this guy's basically a hero
for calling VC-istan out for what it is: a rigged, corrupt mess where one's
personal level of power determines which laws one must actually follow and
which ones can be ignored.

Consider all the co-funding and note-sharing that goes on among supposedly
competing investors. That's clearly anti-competitive activity, but it's never
enforced because of the power of the people who do it.

It sounds like his particular lawsuit is without legal ground and will fail,
but he deserves major props for bringing public attention to VC-istan's
collusion problem.

As I wrote, he's already morally entitled to an EIR position (at the very
least, if not a real VC job) from VC-istan for his courage, intellect, and
ethical above-board-ness, which are well into the top 5% by VC-istan standards
(although that's not saying much).

~~~
coffeemug
_A rigged, corrupt mess where one's personal level of power determines which
laws one must actually follow and which ones can be ignored._

Do you have a shred of evidence to support any of these accusations? Not that
I think the VC industry is devoid of problems, but in my experience it is
neither rigged nor corrupt, and the people with the most power actually tend
to be the most morally conscious people I've ever met.

~~~
sjtgraham
I think your language indicates some bias here. To play Devil's advocate for a
moment, the bankers that manipulated LIBOR did so for quite some time without
being caught. Those whom submitted the rates they thought their bank could
borrow from other banks at wielded incredible power, magnitudes more than any
VC, i.e. contracts worth $300 TRILLION were influenced by LIBOR. It was shown
that these bankers acted, most would agree completely immorally, without
conscience, artificially influencing the rates to suit their own trader's
positions.

~~~
jamesaguilar
He's biased because he doesn't buy into the conspiracy theory without some
evidence? Hmm.

~~~
enraged_camel
No, he's biased because, by his own admission, he's basing his opinions on
anecdotal evidence, i.e. those VCs he has met are very ethical people. Whereas
we have a ton more data points to prove that power = corruption. Considering
the amount of power VCs yield in Silicon Valley, it's pretty much a given that
they break the law and get away with it.

------
greenlander
Think Computer Corporation has documented their dispute with the State of
California in great detail, including scans of all the physical
correspondence.

<https://www.facecash.com/legal/brown.html>

If you read through the history, it's pretty clear that Think Computer
Corporation got screwed by California. California classified him as a money
transmitter, but refused to clearly define the bar needed for him to become
one. It's obviously a case of favoring the big guy for now reason. Facebook
and BoA can be money transmitters, because they're big. You're not big, you're
a scrub, now go to get job at Facebook like the other scrubs. Obviously, this
latest lawsuit makes him look like an obnoxious dickhead. I can nevertheless
sympathize with his action here, which is to lash out at an obviously unfair
system.

~~~
wmf
And yet somehow their competitors are still in business.

~~~
lisper
In large part because they chose to flout the law, and California chose not to
prosecute them (yet). Be careful before you celebrate people who succeed
because they choose to break the law. It's a very slippery slope.

~~~
7Figures2Commas
I don't think this is necessarily a fair assessment.

In my brief reading the documents at the link referenced above, it appears
that the author originally contacted the state of California, believing that
he may be subject to the Money Transmission Act (MTA) based on his reading of
the law. In his initial correspondence, he asks for clarification: is he
actually engaged in operating a money transmission service, or is he an exempt
payment processor?

That seems like a simple question but the bureaucrats he's dealing with don't
provide an answer. Instead, they appear to latch on to his correspondence and
treat it as a representation that he _is_ engaged in money transmission and
therefore subject to the MTA. That's not exactly surprising: if he is subject
to the MTA, there's a license involved, which generates revenue for the state.

This leaves an interesting unanswered question: was the author ever subject to
the law in the first place? Perhaps the competitors who you suggest are
flouting the law brought the matter to their legal counsel, who concluded that
they were exempt. That doesn't mean that they aren't, but the lack of
prosecutions hints that this isn't an unreasonable possibility.

One final comment about breaking the law: financial services are highly
regulated and given the number of laws and regulations at the federal and
state levels, I don't think _any_ company in this space can ever be certain
that it is not breaking _some_ law. One thing is for sure however: if you're
running a financial services company and have questions about a law, allowing
legal counsel to research the matter and handle any correspondence with
regulators is the best approach.

~~~
lisper
> was the author ever subject to the law in the first place? Perhaps the
> competitors who you suggest are flouting the law brought the matter to their
> legal counsel, who concluded that they were exempt.

You can read the law and decide for yourself. The text is actually fairly
clear: if you receive money from one party for the purpose of transmitting it
to another party then you need a license.

~~~
7Figures2Commas
Reading laws and trying to determine what they mean when you are not an
attorney is a dangerous pastime.

~~~
mindcrime
That tells us something about the nature of what passes for "law" in
contemporary times, doesn't it? I mean, there's no particular reason that
_every_ single citizen shouldn't understand what is and what isn't illegal,
without any need for a specialized class of judges, lawyers, etc. to
interpret, debate, spin and mangle things.

Limit the scope of government _very_ narrowly, to about what Bastiat argued
for[1] and a lot of this problem would go away.

[1]: <http://bastiat.org/en/the_law.html>

