[SlinkyOnStairs]

If you'll humor a cheeky substitution:

> No, your VC investors don't give a damn what you deliver. They only care about the valuation. Lie if you have to. Hype up your project like it's the greatest thing in the world. Do whatever to enable security fraud.

People are quite good at recognizing this dynamic amongst crypto startups.

Yet they pretend it's not the driving force in both the VC world and Big Tech.

[aurareturn]

Not the same because VCs can only make money when the startup gets acquired by a bigger company or by IPO. Both of them will require professional due diligence. So it's far harder to fool investors than crypto which prey on the least sophisticated investors.

[SlinkyOnStairs]

The due diligence stops the fraud that is rampant in crypto. It doesn't change the incentive structure of hype-over-substance though.

So long as you aren't (caught) overtly lying about the startup, all hype is fair game. Sam Altman can spout his ridiculous claims until the sun explodes.

The reason I left the security fraud part of the quote in is that the line is entirely demarked by what the SEC will enforce, not what's actually illegal according to the law or not. (And under the current admin, the SEC isn't gonna do shit.) There are a lot of tech startups doing securities fraud that'd get them hit by the regulators in any other part of the west.

[oofbey]

Clever comparison, but the key difference is there’s no mechanism for a rug pull for most startups. Unless they reach a huge valuation, the stock is absolutely not liquid. There’s no way to cash out.

[SlinkyOnStairs]

The incentives are the same. Rug-pulls just make it faster to cash out.

> There’s no way to cash out.

There are precisely two: Go for an IPO, or get acquired by a major tech firm.

Both of these run near-exclusively on hype. So long as the company isn't showing actively fraudulent numbers, you can IPO with a terrible product that doesn't turn a profit.

[oofbey]

It's not just that crypto lets you cash out faster - it lets you do it with zero notice, accountability, or diligence.

Startup exits (IPO or acquisition) often have a big chunk of hype associated with them. But often the hype is backed by factual numbers of revenue or user-base. Even if it's pure hype, there will be mountains of legal paperwork. Hundreds if not thousands of hours spent by professional lawyers checking that whoever is putting up the money really is getting what they're paying for, even if what they're buying is a dream. If not, somebody has broken the law (fraud) or a shocking amount of incompetence has occurred. Your typical crypto scam thrives because there are no such procedural guarantees.