Is Startup Funding a Ponzi Scheme? - Company Forensics

[@CamJames]

Former founder who raised $1.5M here - being on the other side of the table from VCs (after successfully raising money from them) is an experience everyone wants but few get to experience. I'm here to tell you that running a business is not for everyone, it's much harder than the jobs i loved/hated before that. Generating new business and early clients, hiring/firing people, fighting with co-founders over strategy...i don't want to have to do any of that ever again. I love my simple WFH 9-5 now.

[@slidebean]

Word.

[@Galopo]

Now imagine doing all that without VC money... thats how we roll in latin america.

[@CamJames]

hats off to y'all!@@Galopo

[@tam12025]

You mean the pressure of dealing the venture 24/7? Everyone is on you? The client, supplier, your team, and the fuxking competitiors? Oh the vendors hence the logistics guy might messed up and you need to figuring out where to replenish your stocks for your vendor… then the banks and the tax office sniffing your books. I have been a cofounder and that's what I had to deal with. But hey, it was a experience, it was hard AF, but it does shows who is ultimately your reliable friends and partners.

[@afrosymphony8207]

nnnd in africa lool we're all in this together hehe@@Galopo

[@ismynamemoyo6743]

This is giving the vibe of OG slidebean videos, more please❤

[@slidebean]

🫶🏼 thanks for being an OG subscriber - Caya

[@allenleexyz]

Having worked at a VC-backed startup, a top tech media company as a managing editor, and having founded a few companies, I have had the opportunity to interact with numerous venture capitalists (VCs). Very few of them are genuinely passionate about taking a long-term perspective and being aligned with the startup's vision and values, the majority of VCs are driven by hype and market trends, leading them to overgeneralize and make inaccurate predictions. So startup founders should avoid blindly listening to VCs' predictions and market analyses, which may be short-sighted. Instead, you need to stay focused on building a strong, long-term business with a solid value proposition and sustainable model. If you need VC $, you should seek out VC partners who are truly aligned with your long-term vision and values, rather than those just chasing the latest trends. Building sustainable businesses requires patience and persistence, not reacting to every shift in investor sentiment. You will need backers who support their multi-year vision, not quarterly projections.

[@hbsemt]

You should do a video about the Blitzscaling strategy

[@KINGJulien15x]

Finally a solid video for this topic , now that every time someone says "Startup Funding is a Ponzi Scheme" instead of arguing I will just refer them to this video 😂

[@kittananj]

As a person who looks to a ton of startup news, I found that valuation is meaningless (if the firms are not in exit state). If I start a startup, I will not think about valuation. Instead, I will just focus on profitability and cash flows of the company and try to ensure that the investors will get back their investments in full amount. It is challenging, but I think it is the best way to maintain trust with investors and VCs.

[@kittananj]

@1x0x exactly. For me, bootstrap is a great way to test the market and see if it works out or not. Based on my experience, I tested my idea in one competition, and it was working (and, actually, I am working on it to launch as a bootstrap service that is scalable in the future). For me, I don't want to rely on the investors' fund to make it happen since I consider it as debt, not fundings (others may think otherwise, but I digress). So, yes, I completely agree with you.

[@irene.9278]

Who knew old school things like profitability, cash flow and trust are still relevant after all.

[@grant_vine]

Would be interested in an analysis of the Uber turnaround and the economic impact of their exit in specific regions, for example the remaining operators and how they are affected (increase or decrease in use/growth in that region) - basically “do people use Uber because it’s Uber, or because they just need a ride?”

[@gaboronem8615]

I second this

[@ghrayo]

They just need a ride, all this companys are basically a commodity, if uber is gone there another one to use. Because they don't hire drivers they can drive whatever app is on demand, I don't see what value has uber over the others

[@allamasadi7970]

​@@ghrayoalso there could be a situation where friends give lifts to each other like an underground taxi service, people won't mind giving cheap lifts to friends as they are basically getting paid to socialise and meet friends

[@arttig.3377]

In my country we have Uber and Bolt EU. I have both apps and use the one which gives a better price. If the price is the same I just estimate briefly the number of drivers nearby. At some point I used only Bolt, however lately Uber gave me some promos so I used it more often. Do I have any "Brand loyalty"? No, lol the service is the same and majority of drivers use both apps anyway.

[@oberstoffer]

the youtube channel "modern MBA" made a video "Why Uber Fails to Disrupt Transportation". this really good

[@griselangel]

Wait , so how are banks not a pyramid scheme ? 🧐 because if we all pull our money , they fall apart too

[@CamJames]

they provide a lot of tangible services in addition to handling our money. they also aren't structured like a typical consumer-facing business so the comparison is invalid.

[@alex0589]

I dont have a bunch of bank products gathering dust in my garage lol

[@JeremyPickett]

Ive been in startups for twenty years, and looks like thats the next twenty years as well :) The part i still cant wrap my head around are multiple rounds, and who the hell decides both dilution and seniorage. Its likely that while im pretty darn senior, i am not veep or C level. And my mind truly starts trippin' when i hear points, percentages, and shares in the same sentence without knowing about existing sheets pbligations and side deals (oh yes, side deals, they happen)

[@lancesamaria8130]

Great Video!!! I thought it was going to end with vcs pump up a company with no revenue until it goes public. After that the vcs get paid and the public market has to deal with what’s left. Still a great video 😊

[@slidebean]

Venture Capital is a gamble- check out our extended video about the economics ► kzbin.info/www/bejne/oJuWnnyvo82dn7M If you are going the (real) revenue route, you should be using ChartMogul to track your subscription ► yt.slidebean.com/wti

[@franchocou]

Atleast in MLM you got a product, meanwhile in share is just "floating money"

[@freezerman5871]

This is an incredibly useful video on the subject. Thank you.

[@emmanuelben1393]

Caya I always love your videos, Let me suggest a topic for another video, please. Can You talk about how it's hard for diverse founders to raise funds in the US, and also how startups's valuation outside the US especially in Africa are always little compared to the kind of value they are providing.

[@am-I-an-ai]

That wouldn't be a logical video to make due to the meteoric rise of DEI funds since 2020 -- there's lots of opportunities out there for minority founders! Think of the investment process like interviewing for jobs: you'll need to get a lot of irons in the fire to yield a successful raise (Unless you come from money, then it's a good bit easier)

[@tompuijpeNL]

6:39 Hold on. At Series A investors tend to expect revenue. The further the start-up goes in the funding proces, the more investors expect paying customers.

[@Myanmartiger921]

Not always i think

[@wronggg]

@@Myanmartiger921 Investors always expect monetization at some point, and the more the company grows over time, the more monetization better make its way towards becoming reality.

[@CamJames]

almost always@@Myanmartiger921

[@cristobaljavier]

Great video, probably the best on the topic. Amazing job!

[@KhalilMuhammad]

There’s a saying that goes: if the music changes, the dance should change too. I don’t see the point going back to the status quo. We must embrace the change.

[@thelasttellurian]

Wow, I didn't see that conclusion coming

[@YannickMotton]

🎯 Key Takeaways for quick navigation: 00:00 🤖 Venture capital and Ponzi schemes are being compared due to similarities in funding dynamics and risk perception. 01:42 🛡️ Most VC funds lose money, with only a small percentage actually making substantial profits for investors. 07:38 💼 Venture capital structures vary; some focus on genuine long-term investments, while others prioritize short-term gains for fund managers. 10:59 🏆 Startups initially appear unsustainable due to aggressive spending, but those that succeed can become profitable businesses, making earlier investments worthwhile. 16:16 🚀 Speculation and investor sentiment often play a significant role in valuations of both startups and publicly traded companies. Made with HARPA AI

[@nunyabidness6820]

HARPA AI?

[@alpaykasal2902]

I'm 2min in and I already love this. The hottest of the hot takes.

[@TheSushiandme]

They do that a lot in San Diego with Pharmaceuticals.

[@d3layd]

LFG! What a great topic

[@Grizabeebles]

I'd be interested what you guys have to say about Corey Doctorow's principle of "enshitification of online platforms".

[@wronggg]

Shouldn't Lifetime Value be strictly based upon Profit vs. CAC, not revenue vs. CAC? For example, if you do $100 in total revenue at 10% profit, you'll make $10. But if you spent $30 in CAC to make $10, you'd be at -$20. If you did revenue vs. CAC, you'd get a magical 3:1 ($100:$30) ratio, which would be misleading and flat out lying about the success of the business model.

[@slidebean]

In SaaS considering gross margins are close to 100%, then there isn’t a great difference between profit and revenue. In other business models a profit vs CAC would indeed be more fair.

[@wronggg]

@@slidebean Thank you

[@PhilippBlum]

Thanks for doing it. It's a nuanced topic, but it's also a huge issue for the economy. See svb.

[@daveb4446]

A few days ago I was looking at the market cap stats for unicorns and out of around 900 unicorns only about 30 flatlined or dropped. So statistically, the vastly majority of unicorns do continue to gain value, and aren’t Ponzi schemes. The late stage investors do overwhelmingly make profits. The real issue is when companies lose value, index funds often end up holding the remains while everyone else has already dumped it. Because by law, index funds have a set composition and can’t sell stocks even if they know they’re failing. Therefore the index funds are almost always the last investors out. They can’t get out even if they wanted to, as long as those stocks are in their declared index, they have to hold them by law, regardless of the situation. And there is nothing Ponzi about that. It’s just a flaw of the system.

[@yoverale]

3:35 that sounds kind of similar to the banking system, right? It works until it doesn’t, bank-runs end it all 🤔

[@filmcentrl9976]

I have never clicked on a video this fast before.

[@vighnesha7529]

Awesome video brother ♥️, just subscribed. Keep give your best, more power to you🔥🙌

[@MsGscoot]

Can you do a video on Saudi Arabias project The Line / Neom? Seems like a very interesting project with a lot of news surrounding and would love to hear your perspective on the topic. Thanks!!

[@ladygogogurl]

What if a company is guaranteeing a specific amount of roi for early shareholders? And marketing to individuals instead of say experts

[@grant_vine]

This was awesome, literally the first 90 seconds had me laughing so much lol

[@stevevitka7442]

YES.

[@999NINE99]

Many times it is.

[@TooManyBrackets]

15:31 "Optimises its processes" probably means "burns all its people - to death"

[@davidkey4272]

Not the same thing but the incentives get warped around the paper valuation

[@KaiSosceles]

"Ponzi schemes work as long as not everybody gets their money at the same time." *Looks deeply into the entire Fiat Banking systems eyes*

[@darsandevs316]

Except banks are backed by government

[@TheSushiandme]

Yes

[@microMobilidade]

Caya have you seen Radpower and Vanmoof? Are they the new Boosted Boards?

[@joebazooks]

didnt uber just show their first profitable very recently??? -.-a

[@slidebean]

Literally a week after shooting the video.

[@CoSelf]

Why did that conclusion feel so weak?

[@mfulan7548]

No sources on the description

[@kasvith]

Whats that movie with WeWork

[@waltersabino9891]

Thank you for another excellent video

[@eduardobatasuna8398]

Great vid, Bro! :D

[@alex0589]

You did NOT just splice in Russ Hanneman hahaha

[@tylerhackner9731]

Interesting topic

[@henryonyango6431]

Love the videos...awesome discussion

[@Tharoxxx]

Agree

[@peternystrom921]

Sounds like a 100% scam, whats the skills and point of just throwing money on 100s of companies to find one who makes it? Every one can do that.

[@Millenniallabs]

He really used chamaths face 😂

[@ShapeshiftMoses]

Please give me a quick brief of how you make your thumbnails please

[@slidebean]

We try about a dozen title and thumbnail combos. Sometimes we run dark social media post to test them

[@ShapeshiftMoses]

Thank you for the prompt reply, I am not sure what you mean by "dark social media post" could you elaborate? I'm very new to the industry. @@slidebean

[@kimjw001]

"It works as long as not everybody wants out", sounds like insurance.

[@321ecommercedotnet3]

Great topic

[@stachowi]

Honestly... what ISN'T a ponzi scheme... housing, stocks, social security.

[@cnsmiles]

anything that produces a profit isn’t a ponzi scheme.

[@MogulSuccess]

Yes

[@jkostelac]

[citation needed] for the stats @1:45?

[@slidebean]

Here: techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ - Caya

[@jkostelac]

Much appreciated! Love your videos.@@slidebean

[@RubiconVentures]

The moment you realize when some one has a machine to print money, you will understand the Dollar ponzi economics.

[@DodoLP]

when you were explaining Ponzi scheme, you literally explained banks

[@mattao1]

was the question answered in the end? i rewatched and couldn't figure out if a conclusion was drawn.

[@MessiahManiac]

Slidebean's gonna have a hard time raising their next round 😅

[@slidebean]

😅

[@One.Zero.One101]

📌There's no doubt some startups are legit but that doesn't mean everyone else is as honest as they are, in fact some have already been jailed for scamming people.

[@StrongbodyAi]

Calling for investorr :)

[@aprilmintacpineda2713]

"Ponzi scheme works as long as not everybody gets the money at the same time" (BANKS)

[@nat.serrano]

don’t want the video. the answer is YES

[@suryaprakashkannan5036]

I am just putting this nagging thought out here, why is the financial system designed this way? I mean if speculation and bad valuations have been known to cause irreversible damage to the financial stability of the world economy, why does nobody do anything to change it? Is it because those who lost big don't intend to change the game until they win big? Like a game of poker ?

[@Galopo]

a bit apologetic dont you think? sometimes its genuine, sometimes its a Ponzi Scheme.

[@One.Zero.One101]

Yeah there's no doubt some startups are legit but that doesn't mean everyone else is as honest as they are, in fact some have already been jailed for scamming people.

[@jautele49]

🔥🔥🔥

[@thefocuschic3234]

Insta-scam 😂😂😂

[@beepboopbeep5456]

The corporation is the ponzi.

[@thatchinaboi1]

If you aren't rich and you are investing in a VC then it is probably a ponzi scheme. 😂

[@mitwy]

Ya banks are ponzi scheme 😅

[@luisduron2722]

??

[@MetodoCuboAzul]

I love how startups reinvented “dumping”: pricing your products low enough to gain market, become monopolistic and then start generating profits with higher prices while the competition crumbles for not having cash to burn for that long. That is blitzcalling for you…

[@Omarism]

Not everything is for everyone! People who tried to ride the fame of being the entrepreneur and failed calls Venture Capital a Ponzi scheme. VCs takes money from Partners, invests that money in selected Startups with growth potential based on intuition comes with experience and assumptions and eventually, payback to partners with profits. Where it's Ponzi? They have money to play with and take high risks or do things lies in grey areas. What VCs care about is to make sure to invest in 10 startups out of 100 investments which are guaranteed to succeed, and wallah returns are out of the roof from those 10 only to keep for themselves as well as return to partner with profits. Simple Business, No?

[@plusone.network]

Uber was reported profitable on Aug 1st

[@VicDamoneJr82]

First time