> If you're an investor and you find out that the co-founders gave you bad numbers to juice the next round [...] you have no incentive to get the law involved. You would lose your entire investment, instead of just some of it.
> And oftentimes, the extra juice gives them enough runway to make things work.
Above all, it gives you [1] time: To cash out that investment. Sell it to some later bigger sucker who doesn't already know or suspect what you know or suspect, maybe even at some more modest profit -- not making any loss at all! -- in stead of the super-jackpot you'd been hoping for if it were a "unicorn".
Early investors who start to smell a rat don't only lack an incentive to raise the alarm, they have a positive incentive to keep the lid on the story.
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[1]: The editorial "you", the hypothetical early(ish) investor.
> And oftentimes, the extra juice gives them enough runway to make things work.
Above all, it gives you [1] time: To cash out that investment. Sell it to some later bigger sucker who doesn't already know or suspect what you know or suspect, maybe even at some more modest profit -- not making any loss at all! -- in stead of the super-jackpot you'd been hoping for if it were a "unicorn".
Early investors who start to smell a rat don't only lack an incentive to raise the alarm, they have a positive incentive to keep the lid on the story.
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[1]: The editorial "you", the hypothetical early(ish) investor.