I'm actually surprised there haven't been more cases of VC folks being defrauded (Theranos aside). The way those people like to just throw hundreds of thousands of dollars or more at newly formed, wholly unproven, companies is astounding.
How do you know this doesn't happen all the time? Athletes and celebs get fleeced every single day but no one ever hears about it. No one in that position wants anyone to know they got taken. I can't imagine a VC would be any different. If you were a VC would you want anyone to know that the $X00,000 you put into an "early stage company" was actually spent on hookers and blow? Everyone knows there are shitty people out there but you were the one who gave them money. There is certainly a threshold where this turns into fraud and the authorities are called, but if you've lost a rounding error amount of money why would you risk the reputation hit over punishing a con artist? You blacklist the fraudster, sweep it under the rug, then hope your next investment covers the loss. What is surprising to me is that this is happening right out in the open all the time and no one is noticing, mainly because the fraudsters have CS degrees and know not to get too greedy or seem too incompetent. Everyone here knows you can get industry cred and a very nice salary for a couple years with nothing more than a clever slide deck.
If you are supposedly a brilliant investor and some idiot kid stole $200K from you, you wouldn't tell anyone because it would ruin your reputation as a genius.
You have a point there the rich folks wouldn't want to be seen as gullible. Maybe I should have said "more reported cases of VCs being defrauded."
> "If you were a VC would you want anyone to know that the $X00,000 you put into an "early stage company" was actually spent on hookers and blow?"
Well, if I'm a venture capitalist investment type that probably means I have "fuck you money" so... yea, actually I would. If I spent 6 figures on coke and whores then I'm telling everybody.
Referrals are huge for VCs and maybe that's the reason. If they're going to take a huge risk they want some level of trust and the fastest way to establish that is if you've already gained the trust of one of their friends.
It looks pretentious from the outside, but it does help ensure fewer fraudsters get in to pitch them.
This is why "equality of opportunity" social reforms have to start with people in childhood, and the older the subject, the less likely the efforts are to succeed.
It’s much more likely that a startup goes under from bad luck, bad execution, or just not being one of the 0.001% that make it versus deliberate fraud.
