HACKER Q&A
📣 whateveracct

Not sure if founder is (lightly) defrauding investors?


Our small b2b startup is seeking seed money from investors at the moment. We also have a potentially big fish client deal in the works, and our founder has been telling investors about this possibility order to drum up excitement and in turn, funds.

We expect the next response from big fish to be a yes/no as to whether we are moving forward.

The founder said they didn't want to follow up with the big fish to speed up their response because if it were a "no," they could no longer tell investors about the possibility of a big fish deal. They said they wanted to close out this round quickly instead.

This feels a little off to me, and I worry it borders on fraud. Is intentionally blinding yourself to information like this illegal in some way? Or is this just par the course and not an issue?

Just wanted to make sure I'm not in an legally precarious situation here.

  👤 mytailorisrich Accepted Answer ✓
What would be a con would be to tell potential investors that the deal is done, but telling them that you have a promising deal in the works but not yet agreed is fine, it is the truth. Your founder is doing nothing wrong. In fact he is being quite canny.

Also, don't assume that potential investors are not as canny. They know full well that the potential deal may never materialise and that it is spun positively.

👤 rogerkirkness
Investors are smart. Potential is good, closed deals is better, paying/using/referenceable is best. It's not hard to qualify this, as long as they aren't saying they signed when they didn't, not wanting to rush them is valid.
👤 quantified
Your sensitivity to honesty and ethical behavior is strong. There is no requirement to hasten a decision. Perhaps speeding up the response would generate a "no". Investors will prefer to invest in companies that know how to sell.
👤 devperson45
This is sales 101. Your founder is nothing doing anything wrong.