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Comment by mdorazio | Hacker News Reader

To be fair, so do "real" companies like Tesla, which like to use alternate accounting systems to report profitability while being unprofitable in accordance with GAAP. I like to think that investors who actually do their homework can see through the nonsense in both cases.

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It is much harder for investors to do their homework on private companies, because (as described in TFA) many private companies selectively disclose metrics that paint them in a positive light. And there are no requirements or standardized metrics of disclosure.

I think this is why regulators are concerned about the steep drop in "startups" going public. You have these huge companies with enormous valuations, and they arent subject to the disclosure and reporting requirements that regulators have designed for public companies...

The most ridiculous recent example was Morgan Stanley marketing Uber to high net worth individuals. [0] Potential investors were not even allowed to see the financials! You just had to take Morgan Stanley's word for it that the valuation was "reasonable".

[0] http://www.bloomberg.com/news/articles/2016-01-14/here-s-wha...

Well I think that makes a good place to put a hard rule if you're considering investing in a startup: don't hand over a single penny unless you can see their actual financials. Of course very few people are going to do this instead of just hopping on the startup bandwagon, but it's easy to not play the game.

you know, i would have thought investors on that level were doing their homework too, but look at Theranos... raised a unicorn level valuation without ever really proving their product worked at all. Isnt Palantir in trouble too?

Or maybe the investors are part of the problem.

You can't really just drop a statement like that and walk off. No one knows what you're talking about.

Investors change the game theory in company's model. A company without VC doing the exact same thing as with VC will perform and act differently. Pretty much all we hear about in the news is that VC money is good for startups, founders, employees, the scene in general here and the tech economy. In reality, I doubt that's true long term. My rationale is that the WHOLE game is significantly altered when people who have stored trust get involved in a big way. Stored trust being capital, money or stored work. The game being the market we entrepreneurs look to game in moving forward.

The effects of these consolidated investment cycles result in bubbles. The more stored trust involved, and the more systems put in place to bring more stored trust to bear on an idea, market, company, etc., the more disruption there will be on the changes in the cycles. Cycles are a thing with technology, probably due to the discovery phases of market bubbles. All theory, of course. I'd like to see it put to analysis though.

Better?

Probably as in the investors want to create a Ponzi-like scheme and make profit regardless of the future of the company? (which makes sense IMO)

There are investors and then there are investors. Seems a lot of VC type investors are happy to go along with that nonsense as long as they can get out early and dump their stuff on another investor, often the retail investor.

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