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3 Venture Capital-Funded Startup Red Flags That Might Signal A Madoff-Style Ponzi or A Unicorn in a Hoodie

3 Venture Capital-Funded Startup Red Flags That Might Signal A Madoff-Style Ponzi or A Unicorn in a Hoodie

February 11, 2016

3 Venture Capital-Funded Startup Red Flags That Might Signal A Madoff-Style Ponzi or A Unicorn in a Hoodie

Unicorn in a Hoodie is A Madoff Style Ponzi Scheme Killing My Career

Many people I’ve spoken to over the last five years, from injured patient victims to U.S. Government officials, unfamiliar with the startup business model, were often either intimidated and or impressed by the over-romanticized notion of venture capital-funded startups. All were certainly purposely misdirected by an industry that still wants employees, consumers, patients, eventual shareholders and taxpayers blinded by the potential billions they’ve read or heard about from companies like Facebook (now publically traded) or Uber, without understanding that a large majority of startups are nothing more than Bernie Madoff-style Ponzi schemes, rebranded in Silicon Valley “hoodies.”

If you’re thinking of working for, purchasing from, or investing in a venture capital-funded startup look for these RED FLAGS when researching extensively, before investing your talents, skills or money, to avoid potential fraud.

  1. Lack of transparency regarding funding or management
    • If a company does not transparently state who are the venture capital investors, chances are one or more parties are linked to current or previous fraud  RED FLAG
      • EarLens, a medical device startup, claims 22 unnamed investors.  Ask why would an industry usually so boastful about how much and from whom they received funding all of a sudden not disclose that information?  EarLens, CEO William (Bill) Facteau he was arrested, federally indicted on 18 counts of fraud and awaiting trial, May 2016, for his efforts at another startup Acclarent.
      • New Enterprise Associates (NEA), the world’s largest venture capital firm, was previously listed as an EarLens investor and no longer publically listed.  NEA also invested in startup Acclarent’s fraud and now linked to funding several other medical device frauds that injured tens of thousands of women.
    • If a company removes a founder or executive from the website but not the company RED FLAG
      • NxThera, a medical device startup, funded by Frank Yu’s Alley Bridge and recently $40 million additionally from Boston Scientific, removed Chief Commerical Officer Patrick (Pat) Fabian from their website but not the company.  Fabian was also arrested, federally indicted on 18 counts of fraud for his efforts at another startup Acclarent.
      • Nuelle™, a sex toy startup, removed from their website but not company Founder & Executive Chairman Josh Makower, Eric Goldfarb Vice President of Research/Development & Co-Founder, Karen Long Vice President of Sales and Marketing, and Earl (Eb) Bright, all of whom held similar or exact positions at startup Acclarent, which is target of a federal investigation involving healthcare fraud. 
Ask why you'd want to work for, purchase from or invest in any unethical startup?

Ask why you’d want to work for, purchase from or invest in any unethical startup?

  1. Restructuring or Rebranding the Company
    • Think about why a company tries to build a brand in the first place, customer recognition tops that list, so it’s inconsistent & contradictory language to action for a company to take the time, money and effort to build recognition only to abandon it and start over. RED FLAG
  2. Laying off employees
    • An end-stage sign that the company was mismanaged from the executive level on down at the startup level and continued after purchase or IPO. Companies will often inappropriately blame the economy or sales team to avoid accountability for mismanagement. RED FLAG
      • Twitter recently cut 8% of their salesforce
      • Johnson & Johnson cut recently 3,000 jobs on top of last year’s cuts, all from purchased from startup medical device units.

RED FLAGS are not 100% conclusive evidence fraud is occurring, but a call for a further investigation because fact-based evidence over time is a good indication of the future; and, there are obvious and very recognizable patterns in fraud, once you know what you’re looking for and which questions to ask.

For more information on understanding the startup fraud model or The Sociopathic Business Model™ click the link below:

 

 

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