The Allure of Perceived Value

Let’s reframe the question: "Is a startup truly a startup?" This inquiry parallels the debate over whether an NFT holds any genuine value.

Proponents assert that NFTs possess inherent worth, often overlooked, and that investing in the latest trend could yield a monumental financial return. Conversely, skeptics view NFTs as little more than derivative crypto schemes, if not outright Ponzi schemes. Yet, early adopters of popular NFTs, like Bored Apes, can laugh all the way to the bank—at least for the moment.

Most people, however, find themselves ambivalent about such matters, as the truth is often more layered than we have time to dissect. Still, some choose to explore platforms like OpenSea and Decentraland, just in case.

When Startups Morph Into Schemes

This scenario can also apply to entrepreneurs who establish ventures that masquerade as startups but are, in reality, mini-market manipulators. Their "currency" often revolves around options in a startup that may or may not secure significant funding while promoting complex scientific or business models that few truly understand.

A pertinent example can be seen in the aftermath of the SPAC phenomenon. Is a SPAC genuinely an IPO? Opinions vary. Some reputable venture capital firms and affluent private equity groups have embraced SPACs as a streamlined way to take their portfolio companies public, bypassing the more rigorous due diligence process.

However, it doesn’t take a SPAC for a startup to begin resembling a scheme. Any influx of funding aimed at supporting an unproven concept can push a startup toward that precipice.

The Relentless Pursuit of Investment

If an NFT exists solely as a data point on a blockchain, does it retain value? Similarly, if a SPAC offers shares to the public prior to clearly defining the entity, is that a legitimate public investment?

When a startup dedicates all its resources to securing its next funding round, can it still be deemed investable? Again, the complexities of this question may lead you to shrug it off.

Securing funding is a responsibility, not an obligation. Outside investment raises more questions than it answers. It can weigh heavily on a startup, rather than providing a boost to its growth.

While every startup needs capital to scale, that funding can often come from founder contributions or customer revenue. However, the funding that garners the most media attention typically stems from well-known investors, such as Softbank.

Once a startup enters the cycle of chasing investment, it can reach a point where its primary purpose becomes securing the next round of funding. It’s not a scam—those are easier to identify. Instead, it becomes a scheme.

Schemes may begin innocently. No founder in their right mind would reject an opportunity to extend their runway. Yet, every competent CEO must navigate how far they will adapt their vision to align with the new expectations that outside investment brings.

Astute leaders seek funding not out of desperation but with a clear strategy in mind. Ensure that if you decide your startup's existence hinges on external investment, you have a well-defined plan and the commitment to follow through. Otherwise, that initial poor choice can lead you down a slippery slope toward a scheme.

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