May 162017
 

One of the curious things about the Silicon Valley business model is how fundraising is seen as an end in itself.

Most business proprietors would be philosophical or mildly irritated if they’d had to give up equity or go into debt to fund growth, but in startup land a whack of money is seen as success in itself.

Sadly that money isn’t always well spent as the story of the free spending Guvera streaming service shows.

Over the company’s eight years the founders raised $185 million which ran out last week leaving the 3,000 small investors out of pocket.

That small investors were even involved in such a venture raises eyebrows and suspicions aren’t helped by a funds manager charging huge commissions for their services.

 

Just the use of a middle man like AMMA Private Equity – which happened to be run by one of the co-founders – should have raised concerns however the high commissions should prompted questions from the investors about advisors’ interest in getting them into a high risk venture.

In the current overheated startup space it’s necessary to be skeptical about many of businesses claims and the amounts of money being raised, as big pots of honey attract the flies.

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