isn’t this the definition of a Ponzi scheme?

From this article at the WSJ detailing the deflation of the tech bubble in progress now.

Venture capitalist Bill Gurley of Benchmark described this phenomenon at length in a recent blog post, in which he alleged that dirty term sheets allow some companies to continue raising money at higher valuations by promising bigger payoffs to new investors at the expense of older investors. That ultimately could render worthless shares held by employees and even some founders.

A Ponzi scheme is like this:

A Ponzi scheme is a fraudulent investment operation where the operator, an individual or organization, pays returns to its investors from new capital paid to the operators by new investors, rather than from profit earned through legitimate sources. Operators of Ponzi schemes usually entice new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.

Viewed 25264 times by 1664 viewers

Facebooktwittergoogle_plusredditpinterestlinkedinmail