Hacker News new | past | comments | ask | show | jobs | submit login

Is this a pyramid scheme?

No more than VC in general is, I don't think. Making money on tech and then re-investing that money into new tech is basically the whole premise of the business. It does in a sense depend, like pyramid schemes, on a continual influx of new money; otherwise VCs couldn't, on average, actually make more than a 1x multiplier on their exits.

But unlike pyramid schemes, that not-yet-made money isn't actually promised yet: the article didn't say that they're already funding new startups with their future profits, only that they decided that, if they do make profits, they'll use them to fund new startups.

Edit: Actually, the above comments make more sense when comparing to a Ponzi scheme. Pyramid schemes are even less similar. A pyramid-scheme way of funding tech startups would be: you put in $1000 towards funding the current round of startups, and in return, get your name put on a list of startups that'll get funded in the next round. The direction of money flow is different: in a pyramid scheme, tomorrow's startups are funding today's startups, while in a Ponzi scheme, today's startups are funding other startups of today with money they don't have yet (which they hope to get from tomorrow's investors in an exit). In a normal, non-fraudulent investment scheme (like this one), today's startups will, in the future, fund tomorrow's startups, once they have the money to do so.

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact