It was the most corrupt place I have ever worked in my life. The COO was a ghost who just spent money (like staying at hotels all the time, even though he lived an hour away by train) making 400K+ at a startup with no revenue, the CEO (who Kaleil replaced) drove the company into the ground and subsequently started another startup that is now under lawsuit as well after lying to his employees and not paying them for months. Absolutely crazy stories.
Happy to answer any questions :)
Who invests in these things? Even more puzzling: how is it that these hucksters keep raising money to found another startup? I've seen this phenomenon before. I called them "financial serial killers" -- hustlers who raise money, vaporize it all, then raise again. They're "serial failed entrepreneurs," and we're not talking failures where they legitimately tried. We're talking failures that involve lots of stupid asshat money-burning and nothing much of substance at all.
My mind boggles. It's like there's some clique of investors out there who believe in supporting sociopaths as some twisted form of philanthropy. Either that or they're making money too through some as-yet-mysterious means.
I do have one total speculation:
Is it possible that there could be some kind of money laundering going on here? Are these money-burning "investments" actually something else? Sometimes stupid things actually aren't stupid if they're viewed from the right perspective, and things that make no business sense might actually make a lot of sense in some other way.
I have no idea how they kept raising money, outside to say, Video was hot at the time, and the corruption was buried in complicated accounting fraud so it wasnt front and center.
If you want the details check here - https://m.fbi.gov/#https://www.fbi.gov/newyork/press-release...
For example, think back to Google Glass. There was a time when it was an amazing revolution about to happen. There are pictures of generally smart, experienced people wearing Google Glass and trying hard to look like the future.  How much got spent there? On the glasses alone, figure it was something like 100,000 units at $1500 each for a total of $150m. Google presumably spent a fair bit more on R&D and marketing, and plenty of other companies spent time and money on the platform.
Were all those people dumb? I never understood the appeal of Google Glass, so you'd think I'd be inclined to say so. But my take is that the people who gave that a go were just working with different heuristics than I am. Lord knows I've bought plenty of disappointing gadgets over the years. As long as we're write more often than we're wrong, the heuristics aren't bad, just not perfect.
So here I figure that most of the people who put in money weren't idiots; they just had different ways of judging. E.g., a lot of deals happen partly because of trust. But we all know that con men are people who are extremely good at manipulating trust-related heuristics.
If you've ever been near or caught up in the whirlwind of one of these hustle jobs, it's obvious and unmistakable that nothing is "actually happening." They're not failed attempts to do something, but successful attempts to appear to be doing something. They're cons.
That's not my point, though. My point is that from the perspective of the investors these things look great because they are optimized to appear that way. They may look dumb or pointless to people from other perspectives, of course. But it's like one of those optical illusions that only works when you stand in a particular spot. Every company does this with their investors. Every company does it with their customers.
I also think the dividing line between con and regular company is not as clear as you make it to be. How many people do you know that have stories of working at companies where the executives have no clue? E.g., the charismatic but coked-up executive, or the VP Sales who promises entirely impossible things on a regular basis. Stories where things only worked out because actually clueful people worked hard and made it happen. Or at least made enough happen that checks got cashed and customers didn't actually sue. I know a bunch of those stories, and I'd bet you do too.
I could easily imagine that this was not an out-and-out scam, but just something moderately more fucked up than places I've seen end up doing quite well.
I understand where that sentiment is coming from, but to be fair, I also heard the word growing up, but used to describe a certain kind of athlete - the kind who would dive into the bleachers to save a ball.
In that sense, it's like the word "hacker". A word with two diametrically opposed connotations. And it is interesting how two such potentially ambiguous words have assumed such a prominent place in SV culture.
Tangentially I read about an interesting money laundering technique once. Apparently you can take two low-volume stocks and use them to launder money by effectively committing financial fraud against yourself. It works like this:
1) Take a small amount of clean money and average into a position on a cheap low-volume stock.
2) Take the dirty money and use it to pump the stock by buying in and driving it up.
3) Sell your position on the clean side. Then pick another low-volume stock and do the same again.
Apparently variations of this technique can be used to smurf money across the market. You'll lose some in the transfer but that's cost. The dirty money appears to be "lost" in the market, while the clean side books short-term capital gains. I'm sure experts would know how to calibrate their smurfing rate to avoid SEC scrutiny and minimize side-channel losses. Seems like something that could be automated with an algorithm.
The illegal drugs industry kicks off such obscene profits that there's probably an enormous market out there for creative ways to launder it all.
In retrospect, we should have went to the board like we discussed and tried to salvage the company which could have had a decent product, were it not for the constant corruption and idiotic decision making.
At one point I was supposed to meet Kaleil at CES and our plans kept falling through. Finally as I was waiting for my plane back to SF I got a call from his admin asking if I wanted to join him at his table for the AVN awards that night (the CES dates always butt up against the AVN (porn) awards). I ended up passing....
> The process of building the business focuses on obtaining venture capital based solely on the idea, with the actual mechanics of the website seemingly almost an afterthought, or at least one left primarily to the hired help.
Basically they were two guys who tried to capture a lot of value without creating any, basically by world-beating levels of hustle. That describes the story of KIT Digital, too.
(Don't forget that Kaleil stabs his cofounder in the back in the middle of the film, too — metaphorically, fortunately.)
I think this is a big problem with the current "entrepreneurial" ethos: you have people out there who are really honestly creating a lot of value, and then you have people like those guys who see a big pile of money and try to scheme up a way to skim a bunch off the top, making life harder for everyone who's actually contributing.
It's harder to tell the difference than it probably should be. Around the 2000's there were a number of acquisitions of companies that were mostly hot air. It's a game of hot potato (don't pick it up!), if the investors make bank on your BS company then nobody will complain (except for the acquiring party, but hey, that's their problem...).
It is also hard to tell which companies are actually contributing and creating value and which companies are simply pumping money around. See: groupon for instance.
I don't know about Groupon. Group buys have been very successful in China but I have the sense that Groupon has institutionally evaded the accountability to its product buyers that is required to make a group buy into a net-positive interaction, let alone a win-win.
(Amusing sidenote: in Groupon's heyday I met a US spy (who of course didn't admit she was a spy) here in Argentina whose cover story was that she was coming here to open up a local presence for a more exclusive Groupon-like company called Theliste, which turned out not to exist. We had a good time at dinner talking about Arabic grammar and morphology, which she had been studying at a language school in Monterey, California; her boyfriend and my wife were unfortunately a bit left behind by the conversation.)
Pumping money around can contribute and create value — consider Bitcoin, where the question is not whether Bitcoin creates value, which it clearly does, but rather whether its potential to destroy civilization (through prediction markets and tax evasion) is more or less significant than the value that it creates.
Also, there are plenty of great successes that are outright scams. The British East India Company, for example, or the Congo Free State, or the police department of Ferguson, MO, or Bernard L. Madoff Investment Securities LLC, or the Treaty of Guadalupe Hidalgo, or the divine right of kings, or the sale of indulgences. Heck, we could even include those guys who robbed me on the train a couple years back.
Now of course the question is, who's side was she a spy for ;-)
On the other hand there's the unicorn phenomenon which I still do not fully understand. It's obviously some kind of game to artificially pump valuation, but I'm not sure why yet... especially since over-inflated valuations seem to almost guarantee a down round. Who benefits there?
You just described every VC and LP in Silicon Valley. They're not working and creating value, they see a big pile of money and try to scheme up a way to skim a bunch off the top, making life harder for everyone who's actually contributing. It's no surprise that "entrepreneurs" get swept up in this thinking as well.
Actually, they don't have to go that far. I'd take a simple email notifying me that I HAVE mail in my PO Box, and maybe who it's from. Would save me a trip a week probably.
I remember seeing this on the USPS website a while back, but I haven't tried it myself yet.
They're also who I thought this was about. I get Startup.com and Start-up Junkies mixed up. Start-up Junkies followed Earth Class Mail, and was also pretty interesting.
Disclaimer: customer for many years
I wish I could keep my current PO Box that I've had for years but still have some of these features.
It would be awesome if the Post Office could:
A) Let me know mail has arrived, and from whom.
B) Mail be a box full of my mail once a month to my physical address. That way I can either drive in and get it, if it's urgent, or just wait for the box.
Does that ever really happen? My instant answer would be "No" if I was seriously given that restriction.