Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A7053170045455134720
The Wall Street Journal: The End of Faking It in Silicon Valley: #VentureCapital #Startups #Investments #Controls #Oversight #Trust #Regulation: “Recent charges, convictions and sentences all indicate that the start-up world’s habit of playing fast and loose with the truth actually has consequences.” https://lnkd.in/gfWtdB6Q : Not only has #funding dried up for cash-burning start-ups over the last year, but now, #fraud is also in the air, as #investors scrutinize start-up claims more closely and a tech downturn reveals who has been taking the industry’s “fake it till you make it” ethos too far. The funding downturn may be to blame. #Unethical #behavior can largely be overlooked when times are good, as they were for #tech start-ups in the 2010s. Between 2012 and 2021, funding to tech start-ups in the United States jumped eightfold to $344 billion, according to #PitchBook, which tracks start-ups. More than 1,200 of them are considered “unicorns” worth $1 billion or more on paper. But when the easy money dries up, everyone parrots the Warren Buffett proverb about finding out who is swimming naked when the tide goes out.
In the past, the venture capital investors who backed start-ups were reluctant to pursue legal action when they were duped. The companies were small, with few assets to recover, and going after a founder would hurt the investors’ reputations. That has changed as the #unicorns have soared, attracting billions in funding, and as larger, more traditional investors including #hedgefunds, #corporate #investors and #mutualfunds have entered the #investing game. The Justice Department has also been urging prosecutors to “be bold” in its pursuit of more business frauds, including at private start-ups.
All of this creates an awkward moment for #venture #capital #investors. When start-up #valuations were soaring, they were seen as visionary #kingmakers. It was easy enough to convince the world, and the investors in their #funds — pension funds, college endowments and wealthy individuals — that they were responsible #stewards of #capital with the unique skills required to predict the future and find the next #SteveJobs to build it. But as more start-up frauds are revealed, these titans of industry are playing a different role in #lawsuits, #bankruptcy #filings and #court #testimonies: the #victim that got duped.
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