The company has not had a series A funding yet, and was almost bankrupting some months ago until a VC gave them "some" millions. Meanwhile, there's still no product, and the company pays for worldwide company trips for no purpose (no conferences or anything), pays for life coaches and frequent global flights for the CEO and who knows what else.
When I say "no product" I literally mean it. It only exists on a powerpoint slide without a single line of code implemented.
The worst part is this startup is 5-7 years old, and has gone through the bankrupt -> saved last minute by investor cycle more than one time.
Average employee stay is 6-14 months. During my employment three managers left the company, and four engineers. There's no documentation about anything because people come and go after they see there's no future in this company.
Should I anonymously inform investors that my startup employer is a scam, and if yes, how should I approach it?
Here's my advice to you, and I'm not going to say IANAL because you don't need to be a lawyer to know this: you are working for shady people. If it is, as seems likely, a laundering front, the very last thing you want to do is "go to the investors", unless you really enjoy the feeling and weight of a custom pair of concrete shoes.
I would find another gig ASAP, and then and only then would I sit down and have a serious think about how much I cared about seeing these people get punished for what they're doing. Because the only people you should probably be going to are the SEC, and that would probably turn into a criminal case, and then you'd be getting the very strict attention of whomever set this up. And those people are probably not tech bros.
Up to you, man, but I would seriously suggest you consider this possibility.
Just build your dream project there, and then take it with you. Its basically a mafiosi incubator and the software is decoration and they do not recognize the value of it missing or ever having existed. Could be other things to. Empty houses in the middle of L.A or NY. Large Resource storages or car traders, dealing in circles.
Just make sure, there is no paper trail showing that you knew.
It seems obvious to me that VC is part of the scam
>>> Should I anonymously inform investors that my startup employer is a scam, and if yes, how should I approach it?
I wouldn't but, if you decide to inform don't report to the VC, but the people/entities above this VC (could be another VC, funds, physical persons, etc).
Just be careful, it seems that you are looking through a very narrow window here.
I eventually started to get roped into investor meetings and he was just straight up lying to investors; nothing wrong with a little optimism or whatnot, but suggesting that you present-tense have some non-existent capability that'd take years to develop is ballsy. Paychecks started getting late and then not coming at all and I had to threaten to sue him.
Just give 0 notice on payday and gtfo.
If the company has indeed defrauded its investors, that's between the company leadership and the investors. Unless you're involved directly enough to be potentially liable, this is above your pay grade.
If you think you may have been involved in defrauding the investors, talk to a lawyer. Otherwise, shut your mouth until you've found a new place and then carefully evaluate what you say to whom to minimize the risk of being thrown under the bus.
You'd be horrified if you knew how many companies sell products that don't exist beyond organically evolving powerpoint presentations. It only becomes fraud when the companies fail to deliver and can't meet their obligations and the customers aren't willing to agree to alternative resolutions.
It sounds like your employer is currently not very good at generating sales at all so the only defrauded party would be the investors and that would require knowing what your employer actually contractually agreed to deliver in return for the investment. Unless you're privvy to what's in those contracts, my advice would be to zip it and GTFO.
Stick around till you have an even better gig lined up.
Listen to others here, just leave. You will not break into that fuct up situation, you cannot improve it, no one will listen to you, and if you blow the whistle you'll be done.
It's literally the investors' job to have figured this out
Even if you were to blow the whistle, do it after you have left for greener pastures. By then you wont care but perhaps you will ...
Consider that someone else may already be planning to warn the authorities. To avoid or minimise involvement in any legal issues yourself if the company goes down, you should be able to prove you were either naive (very difficult) or had misgivings -- in which case you may need to demonstrate intention to act.
You've already written this post, so if you can prove authorship that would be good. An encrypted string in your profile, perhaps.
As others have said, you really need to talk with a lawyer.
The reasons I suggest this course of action: be the change you want to see in the world. You'll feel better about yourself. God knows what this organisation is actually doing; you were a naive cog in the machine but you're no longer naive, and you don't need that responsibility on your mind.
Finally, regardless of your actions, you should think about how your CV/résumé reflects the time you've spent at this company. Don't hide the truth, but of course don't flat-out divulge everything.
My advice would be to leave as soon as possible. If no technical work is happening then you are not building anything for your resume, and if the company goes under then its bad practices might be revealed. That would make the time you spent there seem like a toxic spot on your career.
On revealing them, I feel the VC is required to do their due diligence and the amount of legal headache and exposure you as an individual would have to deal with if ever discovered to be the revealing party is not worth it.
Exit, and tell friends to avoid being hired by this firm.
Imo, the good first step is to contact a layer with relevant expertise and consult what your steps should be. So that you don't accidentally break law or otherwise get yourself in trouble, so that your whistleblowing way is most solid possible and so that you don't accidentally out yourself.
The layer can also help you figure out what is actual fraud and what is not.
After you get the raise, go into your cubicle, close email and phone, and start working on your own projects until the moving guys come to take your desk.
It seems to me that you went in blindly and now you’re trying to cleanse your conscience. You think the investor didn’t do due diligence? I doubt it - sounds like a money cleaning operation to me!
You won’t get anything out of reporting - get the hell out now!
So not exactly a startup any more.
> has gone through the bankrupt -> saved last minute by investor cycle more than one time.
This isn't a scam. It's risky/bad investment.
Around a year ago I also left a 8-9 year "startup" with some of the same fundamentals issues but at least we had a basic demo even though it was very insecure. That wasn't the primary reason for me leaving but their attempt at A funding was taking a lot longer then expected and the contract was up.
Interesting enough the company I used to work for was mentioned on hn at one point, but this was many years ago. They changed industries which is understandable.
However, if you don't mind sharing additional details, I'm interested in knowing how you arrived at the position. Did the company seem legit from the outside when you first started? Did you seek out the job, or were they the ones to initially reach out to recruit you? Knowing what you know now, what are the things you would watch out for to avoid falling prey to a scam company like this?
Do the same. They either know or don’t want to know.
It sounds like there isn't much work to be done and even if you are found out I don't think they have enough motivation to care.
most people capable of raising money have connections… buddies and social capital
i never raised money for my company. meanwhile a well known VC funded a competitor because of connections or because they like the founder’s “energy”. after a few years the company went bankrupt. the guy went on to raise money again. we had far superior technology far beyond what they were able to develop. it would have been cheaper to acquire us.
TL;DR most peole who succesfully raise do so because of different reasons than having a product or revenue.