I’m thinking of the venture capital community today as SVB Financial goes down for the count. I feel bad for the bank’s employees, but could not care less about the bank’s clients – the venture capital community at large. How did the FTX fraud come to be?
There were two key components to the FTX fraud:
- FTX capitalized on the crypto craze. The crypto mania that captivated 20-somethings globally before capturing the minds of institutional investors late in the cycle provided a loose money environment where speculators wanted in – damn the risks.
- Growth is all that matters in VC Land. How your company generates Revenue isn’t necessarily important so long as growth is robust. FTX grew at such a clip that the VCs did not bother to perform due diligence at any level. “Oh, Sequoia is in? That’s good enough for me. I’ll write the check.” Always perform your own due diligence. Here’s a link to Sequoia’s puff piece about FTX founder Sam Bankrun Fraud. No mention of drug fueled parties nor any meaningful details about FTX’s business in this piece – only smoke and mirrors in an effort to drive FTX’s valuation higher: https://web.archive.org/web/20221027181005/https://www.sequoiacap.com/article/sam-bankman-fried-spotlight/
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