from Hacker News

Guiding a Venture-Backed Startup to a Felony

by sigacts on 8/20/16, 4:58 PM with 41 comments

  • by jessaustin on 8/20/16, 5:23 PM

    Calling this a "venture-backed startup" is a stretch. It was really just a con. One couldn't reasonably expect a single author who wrote five westerns all by herself to net $250k for her efforts. They didn't really expect to be able to pay back the investor after buying all those goodies for themselves, even if they could have gotten a single book written.

  • by dmix on 8/20/16, 6:17 PM

    > Share a Worst Case Scenario - The prospectus for the Scoundrel deal showed a conservative, most likely and optimistic scenario. The conservative scenario showed that Mr. Brandenburg would receive all of his investment back in just two years. In fact, Mr. Brandenburg never saw any dividend or repayment on his $250,000 investment. Don’t gloss over risks.

    This is an interesting piece of advice. I never thought to plan the negative scenarios when doing high-level planning. You always discuss possible risks and keep them at the back of your mind but adding a failure scenario to your plans among low, medium, high outcome scenarios is a really good idea.

    You don't hear much about risk management/planning for startups. If you're not monitoring your risks along with your positive KPI's (or factoring them in your KPI analysis) it's easy to gloss over them or delude yourself that they don't exist.

    Although, otherwise I question the value of taking much lessons out of this 'startup' failure. It's not very analogous to anything like the standard HN web startup. Just some outsider non-techies who wanted to make a 'web portal' and wasted a bunch of money frivolously (ie: 100k went to the author for licensing upfront). Even ignoring their lack of technical industry experience, their business plan heavily centered around building a community with a target market they didn't already have any traction or influence in - which is always the hardest part in any community-centric product. The tech is (usually) the easy part.

  • by jondubois on 8/20/16, 8:18 PM

    The only thing I learned from this article is that even the most idiotic ideas can appeal to some investors if you search hard enough.

  • by wtvanhest on 8/20/16, 6:36 PM

    IMNAL but...

    > Keep personal expenses out of your company books.

    Is likely the most important advice in this piece. If you only take the compensation you agree with your investors/board to take, and you never pass unrelated expenses back to your entity, you will at least appear to be acting morally.

    The second you start commingling funds, is the second you enter a period of extreme risk. Never commingle investor funds with personal funds and avoid spending on things that you 'justify' as a business expense if they benefit you personally in anyway.

    I have a feeling we are about to read about more cases like this one. America is in full startup fever right now and people will act immorally when they realize that success is out of their grasp.

  • by nstj on 8/20/16, 11:26 PM

    Without being sarcastic, I think the best part of this article was discovering that Tom Selleck starred in a 1990 Western set in Australia called "Quigley Down Under"[0].

    And I tend to agree with the general sentiment of other comments here, it seems that given there seemingly was no real intent to create a real company from the funds invested, the title of the article could just as easily be "How Not to Run a Fake Startup Investment Scam".

    [0]: https://en.m.wikipedia.org/wiki/Quigley_Down_Under

  • by Pitarou on 8/20/16, 7:58 PM

    If you need these six "lessons for entrepreneurs" explaining to you, you're not fit to take investors' money. Period. It's a story of ignorance, incompetence and irresponsibility from start to finish.

  • by realworldview on 8/22/16, 3:22 AM

    If it sounds too good to be true, it is too good to be true. There is no magic. Where there is money, there is deceit and opportunistic theft. Don't believe anyone who tells you they will do a job without staging and proof.

    Unless you bought those venture-backed rose-tinted glasses for those passionate about whatever the next fad is.

    Open your eyes, people... Oh and this just reeks of con.

  • by api on 8/20/16, 6:06 PM

    The international bureau of you can't make this stuff up delivers yet again.

  • by gerby on 8/21/16, 12:24 AM

    How did they expect to build the web portal, if no one on the operating team had any knowledge of how to do so?

  • by Waterluvian on 8/20/16, 8:12 PM

    What kind of punishment could be handed out for this?