New ask Hacker News story: Ask HN: Do VCs often do this? Ask HN: Do VCs often do this?

Ask HN: Do VCs often do this?
7 by throwaway-vc-q | 3 comments on Hacker News.
I worked for a company a couple years ago which was in a very odd situation. Let’s call them Company A. They didn’t seem to realize that they were being vastly overcharged for IT services by a “firm” that was owned in part by the individuals running the VC firm that gave them funding. They primarily invested other people’s money, not their own. This ultimately drove the business into the ground, as they had software that barely did anything and no money left for anything else. They charged over half of the total “investment”, hundreds of thousands of dollars, for an app one guy could have built in 2 months. At the same time this was happening, sketchy IT firm was giving free help to their biggest investment (Company B) in an attempt to try and keep them afloat. It seems to me that the investment in Company A was really just a means of moving money to Company B, which was in a different fund that was running dry. That, and pressuring companies to use the sketchy IT firm to begin with allowed the managing partners of the VC to shift money into their own “business”. All of this was even occurring on the same floor of the same office building. Now I’m just a junior dev now, and this was just an internship I had, but to me this seems like it should be multiple very serious crimes. But I know nothing about that, and I haven’t dealt closely with any other VCs. Is this kind of behavior relatively common? Is it even illegal? Sorry if this is off topic or not a good post for HN but nobody else I’ve ever talked to about this has had much to say, and this seems like the most knowledgeable group of people I know of about this sort of thing.

I worked for a company a couple years ago which was in a very odd situation. Let’s call them Company A. They didn’t seem to realize that they were being vastly overcharged for IT services by a “firm” that was owned in part by the individuals running the VC firm that gave them funding. They primarily invested other people’s money, not their own. This ultimately drove the business into the ground, as they had software that barely did anything and no money left for anything else. They charged over half of the total “investment”, hundreds of thousands of dollars, for an app one guy could have built in 2 months. At the same time this was happening, sketchy IT firm was giving free help to their biggest investment (Company B) in an attempt to try and keep them afloat. It seems to me that the investment in Company A was really just a means of moving money to Company B, which was in a different fund that was running dry. That, and pressuring companies to use the sketchy IT firm to begin with allowed the managing partners of the VC to shift money into their own “business”. All of this was even occurring on the same floor of the same office building. Now I’m just a junior dev now, and this was just an internship I had, but to me this seems like it should be multiple very serious crimes. But I know nothing about that, and I haven’t dealt closely with any other VCs. Is this kind of behavior relatively common? Is it even illegal? Sorry if this is off topic or not a good post for HN but nobody else I’ve ever talked to about this has had much to say, and this seems like the most knowledgeable group of people I know of about this sort of thing.