[tweedledee]

This is so common it’s hard not to do. Not doing it definitely stunted my startup but it’s a lifestyle company and I don’t mind building slower.

Edit: I should add that while I was working at a FAANG (before doing a startup) the team I was on would constantly be blocked from building X only for a VP to buy a company that said they did X but didn’t. Because we still needed X we would buy a new company each year. We could tell the VP was setting them up to sell to us. We would joke about leaving to do a start up for the VP to not only make more money but so we could finally have a working X in the company.

Edit2: With my current start-up it's not uncommon that we are instructed to sell to a customer via a nominated 3rd party. We don't know for sure, but we strongly suspect, that the 3rd party markup is how the executives are skimming off extra money. At least it keeps us out of it.

[jollybean]

M&A stupidity is not the same as fraud though. M&A is hard. It's not unreasonable for execs to tell the team not to do X because they're buying it, and then to screw it up.

It's also normal for companies to want to buy via a dealer because they don't want to deal with your little startups legal issues, compliance, regulatory, billing. They just want to deal with small tier of vendors.

In fact, that's kind of a startup idea: AppStore for SaaS because most corps don't want to deal with your little vendor BS. Everyone would be happy to pay an extra 10% just to have everything easy and clear.

[tweedledee]

I'm privy to more details than I am giving out. I've been in SV for over 15 years and I have seen a lot in that time. I'm aware of what is normal. There is normal purchasing intermediaries and then there are purpose built bribe vehicles. We're not talking 10% it's more like 100% to 1000%.

[jollybean]

Yes, I'm not denying it's common, just that it doesn't have to be that.

That so many M&A deals are so blatantly shady it completely shocks me that CEOs/Boards/Shareholders aren't more vigilant about it.

In your view, are the the most respected firms more or less immune from that, (maybe because they do really well and don't need to), or are they the worst offenders? Or is there a differentiation for simple favours for favours i.e. VC ABC wants to find a home for a project and it actually does make some sense that company XYZ would want to buy it, the deal is done and that's that. Maybe the M&A lead at XYZ later does get a nice job somewhere, but is it really that sweet of a deal to the point wherein it constitutes fraud? Is the M&A guy really getting a simple consulting job that pays 'many millions'? Or is it in XYZ's best interest to have a good relationship with the VC firm and to buy the semi crap companies so they get access to the good one's as well? And what percentage of M&A deals would you say follow this angle?

[tweedledee]

I don't know of any firm immune to it and I've worked with a couple of the most prestigious and hear about many others. I've long given up wishing people were better. And unfortunately I expect it to get much worse. As the financial crushing of the middle class increases I would expect much more corruption as being middle class / poor becomes more humiliating. I expect this to give way to mobsterism that would make current levels of capitalist fraud look like paytime.

[rexreed]

To clarify on Edit #2, are you saying that you're selling to the customer through a reseller, and you suspect that the reseller is actually an executive at the company who is skimming margin by purchasing from you at a list price and marking it up to the end customer?

The levels of deceit and lying are so thick.

[tweedledee]

I was Applied Research, feature X was for internal use. The companies were supposed to be tallent and tech acquisition, they claimed to have feature X but were faking it. The 'talent' was fresh out of university people crammed in last minute to bulk up numbers. The VCs funding the startups had a pre-existing relationship with the VP who joined the company in a similar earlier acquisition. One of the VCs approached me about doing a purpose built start-up of my own, the purchasing company and sale amount was already determined, quick easy money. It was clear making working technology was orthogonal to the real objective of extracting huge amounts of money large tech companies. I only cared about the tech so it wasn't of interest to me. Even 10 years later feature X doesn't exist even though it's entirely tractable. It's possible that it may never get built which would be a shame.

It doesn't bother me anymore. It's just people being people. I'm enjoying the series The Expanse lately because of the way it integrates realpolitik into the storyline.

[rexreed]

I'm actually asking about this part: "With my current start-up it's not uncommon that we are instructed to sell to a customer via a nominated 3rd party. We don't know for sure, but we strongly suspect, that the 3rd party markup is how the executives are skimming off extra money. At least it keeps us out of it. "

This implies something other than the crazy rigged acquisition scenario you describe above (which is also absolutely bonkers).

[tweedledee]

Sorry, I misread as Edit #1. We know in certain countries in certain areas nothing gets done without some kind of bribe / kickbacks so we assume some of finders fee we pay for leads goes back to the customers exec. Sometimes we get asked to increase prices to increase their margins. I.e. make a Pro version for 10x the cost for them to buy. Sometimes the customers complain to us how expensive it is and then we tell them how much it should be costing them which is a fifth of the price. Usually the exec is untouchable though so it doesn't change anything. Funnily enough, only time we've been directly asked for graft was from a Swiss customer and we offered a junket which they didn't like, I guess they wanted more.