Founders of early stage startups (as in, not AirBnB or Square or other companies clearly in torrid scaling mode) heading to Vegas frequently on chartered planes?
Yeah that doesn't scream RED FLAG at all.
I am honestly shocked at how poorly understood early stage startups really are if this is true. Any half-decent founder knows to be frugal, treat every dollar like it's their last and loses sleep over money in the bank (God knows I do and have been for 3+ years after raising $5M+).
I've seen exact scam before. Young people flying on private jets with so-called hot shot young entrepreneurs, only to find all the expenses on their credit cards. There is no such thing as a free lunch.
Right after we did YC, a bunch of friends of mine who had decent amounts of money asked if they could invest. I turned them all down. They were upset, but we didn't NEED the money and there was no real way they could help us. Reading this elicited a rush of "boy I'm glad I did that".
This is a case of fraud and theft. I don't get why your takeaway is that it's somehow unsafe, as a founder, to take legitimate investments from friends. Were you planning on ignoring your company bylaws, pumping money into a secret account, not papering the investments, and hiring an R&B star to serenade you? Because otherwise I think you'd be OK.
A good reason not to take money is you'll probably fail, lose your friends' money, weaken friendships, and feel like a douche. I don't think there is much legal risk if you aren't totally nutso, and the board approved the investments.
Right, your second paragraph describes the reasons why I turned my friends down. This story's depictions of this guy's conversations with his 'friends' about investing and their willingness to believe him due to external signals they didn't understand ("Mark Cuban invested!") reminded me of my own experience having those conversations.
In this case the Latin verb is defraudare, and the French verb is defrauder so this may be a different usage. In general de- can mean both to take something away and to be of or about something. So this could be seen as about, of the taking of money through deception, i. E., through fraud.
Something doesn't sit right. Why would he tell them the company had been acquired and $37.7mill had deposited in the escrow account. its not like he can pull real cash out of his ass so he boxed him self in.
It makes zero sense. Something is not right here on both sides.
Why? Perhaps because he's a sociopath, perhaps because it was a case of irrational escalation of commitment, perhaps because he was a childish idiot. Lots of possible reasons. Why is it so difficult to consider the possibilities? :-)
A company apparently so weak financially that it couldn't even keep its office rent paid up, isn't about to be acquired for ... $100x million. It wouldn't have been difficult to properly capitalize the company to get it through an acquisition period - ie they wouldn't have run the finances to the last minute of operating cash even if an acquisition were imminent.
More likely is that Mills saw the writing on the wall, that his opportunity with MotionLoft was crashing and burning, and he chose to go out with a fraudulent bang.
Looks like Mills himself and investors involved are in the comments section via FB (so they're using their real identities). One of the investors even still believes in Mills and states he invested 48k.
So they just wait for the company to magically get healthy?
And does Mills get to start another company with VC Money?
Seems like he could very well trick more investors in the future and if I read an article on TechCrunch about him founding a new start-up I'd be extremely upset that a douchebag like him gets a second chance while harder working and more honest folks don't succeed because of a combination of lack of connections and "shyness". That's an awful read to end the year.
Honestly, it's the right move if they want even a chance at getting their money back. Best case if they go to the police: a long court battle with Mills in which they get a tiny fraction of their investment. At least this way has a chance, and they can always go to the police down the road.
Not necessarily. If this guy wrote bad checks, he may well be given an option to make good on it to have his sentence reduced or removed.
A similar thing happened to a guy who scammed me and others. One of the guys who was scammed went to the local cops who took out a warrant. The guy who scammed us was arrested and released almost immediately. He paid the guy through the court and his attorney. I still remain unpaid...and I didn't go to the cops(mostly because nyc cops didn't care much about the case speaking to them on the phone). You can read more here if you're curious: http://cliffkaplanfraud.com/
Yeah that doesn't scream RED FLAG at all.
I am honestly shocked at how poorly understood early stage startups really are if this is true. Any half-decent founder knows to be frugal, treat every dollar like it's their last and loses sleep over money in the bank (God knows I do and have been for 3+ years after raising $5M+).