If you are going to build a startup, build a board, get your finances in control and very transparent to investors.

Fraud will never be gone but you can ensure your firm will never be accused of it.

One of my takeaways from the chaos surrounding SVB’s collapse is that Silicon Valley is starved of CFOs. Part of this is due to the anti-MBA high horse that was in vogue in tech post financial crisis. Part, frankly, is VCs wanting to be the only financial brains in the house. (Guess who loves promoting the MBA myths? Despite being staffed by MBAs?)

1. Cases like the All Here example are kinda baffling to me. It's like the founder jumped out of a window without a parachute and was like "This is fine! I'll learn to fly before I hit the ground." I think in cases that are as egregious as this, the fraud is eventually discovered, if only because at some point it has to become blatantly obvious.

2. If by some miracle the fraudulent founder does manage to "make it" before their "fake it" is discovered, well then, honestly good for them I guess. VCs tend not to get too angry if you make them a ton of money.

Point being, in cases like this All Here one, the "Frank" company fraud by CEO Charlie Javice, Theranos, etc. were all examples that were pretty much guaranteed to be discovered at some point (and pretty soon at that), because none of their tech had any hope of working in the first place.

As an analogy, it's also pretty easy to write bad checks, but they're also likely to be discovered very quickly, with the check scammer going to jail, so banks just consider it the cost of doing business.

I think their goal was to use false figures to attract investment that would lead to real revenue that would eventually cover up the alleged fraud. If they managed to build a good product and find market fit and revenue with their Series A funds, maybe it would have worked. What’s weird though is that all these investors didn’t do basic diligence to confirm the money flows that were claimed. It’s a bit different from the Theranos fraud, where the fraud was around the effectiveness of a highly complicated and secretive product rather than revenues that are easy to confirm with bank statements.

Anyone who did the bare minimum of due diligence found out from experts that blood from finger pricks is not usable for the kind of diagnostics they were proposing, which is why no qualified biotech VC invested in them. It was all dumb money like Ruper Murdoch and tech investors Tim Draper/DFJ who have no idea what they're doing in biotech.

Investors didn't even need to look in the books or research, it prima facie was not going to work.

This is technical risk, however. I remember experts telling me in 2009 that SpaceX was fundamentally fucked.

Financial fraud is way more black and white because it’s backward looking.

Finger capillary blood is fundamentally unrepresentative of blood samples taken from veins with few exceptions. Doctors and scientists have known this for a long time. Theranos’ technology was never going to work the way they sold it, and if they sold it as a faster on-site diagnostic device with standard blood draws they would have been just another in a sea of diagnostics startups that few care about.

I am more interested in developing the mechanism and knowledge it would take to avoid making those kind of mistakes.

Step #1: do your due diligence. Usually that means hiring experts to do it for you if it’s outside your field of expertise.

That’s it. There are no more steps. Doesn’t matter whether its a founder asking for capital or a nigerian prince asking for a wire transfer.

Theranos’ investors did not do their due diligence and paid the price.

Come on Axios…

From https://shoppeblack.us/black-owned-app-allhere/

“AllHere’s approach has been proven through randomized control trial research to reduce chronic absenteeism by 17%, reduce course failures by 38%, and increase student retention.

Attendance was already an issue for K-12 schools before the pandemic, but the pandemic has increased absences across the board. This has led to K-12 schools turning to AllHere for assistance: the number of K-12 schools using the AllHere chatbot has risen by 700% to over 8,000 schools across 34 states, helping AllHere reach a total of 2 million families.”

Anymore know if this info was false? Is it just the financial figures that were alleged to be fraudulent or also the effectiveness of the product?

Here’s the DOJ notice for reference: https://www.justice.gov/usao-sdny/pr/ceo-artificial-intellig...

DEI initiatives are just excuses for doing a bad job. They would have done a bad job anyway.

It's still an open question whether or not the civil rights act protects whites or not (that is, are they a protected class). That's not flamebait, although I realize it's a spicy observation. Regardless, there is a real question around the legislative intent when the law was passed and in ordinary jurisprudence laws are interpreted through that lens, among other factors.

I kinda doubt it.

The CRA doesn't mention, afaik, any particular ethnic group.

E.g., It shall be an unlawful employment practice for an employer to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin;...