[Aurornis]

"Fake it till you make it" was about presenting yourself as an established, stable company to overcome objections about using a startup. Things like having a "Customer Support" phone number and e-mail address that just go to the founders, for example. It's fair game if the founders are actually picking up the phone and doing customer support, and it overcomes one objection people might have about using a startup instead of a big company.

Claiming you can do something specific (use AI to do something) and then using humans to do the labor is something else entirely. If you raise money on that, it's just fraud.

[MangoToupe]

There's a good deal of grey-area there, for instance in faking user activity in social media startups. Reddit did this for instance, although I don't know if they reported active user numbers as part of fundraising.

[Aurornis]

If Reddit create a material number of fake accounts and reported those as a key metric for fundraising, that would be fraud.

I think the story has been exaggerated a lot, though. The original story was that the admins were doing real submission activity (links, etc.) but they had a mechanism to create a new user account with the submission. So they created a lot of new user accounts for themselves, but the activity was real and driven by the founders.

We all have test accounts on our production systems. If it's a tiny number of the overall users at time of fundraising it doesn't matter. On the other hand if they created 10,000 accounts and then claimed they had 11,000 users that would be blatant fraud. I really don't think they did anything like that, though. I think they seeded the very initial site with content and made different "accounts" for it, but by the time they raised they had real traffic.

[spwa4]

... and what if Twitter does it?

Because at the very least they killed most countermeasures to bots and a serious percentage of activity on twitter is "fake engagement".

I also have a much more difficult question: Could you explain how this fraud works/applies if nation states are the ones developing the bots? Is there a difference between foreign and US bots?

[Aurornis]

It's not complicated. If a company knowingly misrepresents their user activity then it's fraud. Knowing that a significant portion of your user activity is bots but then claiming you don't have bots would be fraud.

[MangoToupe]

> If a company knowingly misrepresents their user activity then it's fraud.

Demonstrating this in court might get pretty complicated, though. Legal terms often have a way of obscuring the complexity of real life (which is understandable, of course).

I'm guessing the number of well-known startups who have committed fraud by "faking it until they make it" is somewhere between 1 and N. What that number is might well be subjective to the judge or jury rendering a verdict. Unfortunately, lack of serious insight into this might also be evidence that "faking it until you make it" works even if it's fraud, so long as you can spin revenue that investors demand out of it eventually.

Edit: forgive my claiming lack of evidence = evidence; i'm just tired. I think my point that it's kind of unknowable, and this might prompt people to accept it as proof positive (even irrationally). I hope my comment can be received in good faith

[spwa4]

Really? Because just about every dating site, every forum, every ... has been doing this for decades. If this were true, where are the many court cases where management loses against investors? Because I don't see them. The only one I see is the whole shitshow around Elon Musk buying Twitter.

Also a bunch of the bots are by nation states. In that case I would expect that at least some courts would not cooperate with any such fraud case (Russia, India, China, I don't know in Europe but I doubt there aren't a few examples ... and maybe US. Probably at least a few states). Best of luck to make anything stick if the courts to not cooperate.

[snowwrestler]

Most people on web forums or social media sites are browsing, reading, watching. Only a small percentage are posting UGC, user-generated content.

So when founders are starting a new site, they need to bootstrap by getting enough content in there to drive browsing. Only then will the audience grow, and only then will users start to post their own stuff. This is what Reddit did, and it’s not unique to them. YouTube’s founders did the same thing when they started.

Note that this is not “fake it til you make it.” This is investment in audience growth.