The post is a first-person account from an engineer who later realized his old startup job may have existed less to build a successful company than to support a venture fund and incubator that could keep collecting fees, salaries, and status while portfolio companies stumbled along. The core claim is not that every failed startup is fraud. It is that some organizations are designed so insiders get paid whether or not the business ever has a real path to customers, and employees can spend years doing sincere work inside a machine that was never aligned with normal startup success.
What people added is that this pattern is not confined to sketchy startups. It shows up all over large companies, banks, government contracting, academia, defense, and grant-funded work. The repeated mechanism is simple. Budget categories, procurement rules, tax treatment, grant conditions, and headcount targets create incentives to replace employees with pricier contractors, burn down budgets before year-end, route money through approved intermediaries, or keep zombie projects alive because someone benefits from the spend itself. A lot of this is not technically fraud. It is accounting theater, career management, or legal gaming of line items. But the comments landed on a sharper point: from inside the system, real work, genuine effort, and polished process do not prove the enterprise is economically real.
The strongest discussion split was over morality and responsibility. Many people argued the author should not feel guilty if he lacked visibility into the scheme and did honest work. Others pushed back that once you can see the pattern, staying becomes a moral choice even if you are not the one forging documents. On the practical side, several commenters stressed that there is a meaningful line between failed experimentation, which is normal, and structures that profit from failure itself. That line often becomes visible when the product story is weak but the fee, grant, outsourcing, or investor-marketing machinery is unusually strong.
If a company or program keeps existing despite weak customers and fuzzy outcomes, inspect who gets paid regardless of success and which accounting buckets or subsidy rules keep the machine alive. For operators, a lot of “irrational” spending is best explained by incentives, not incompetence, so diligence should focus on funding structure as much as product quality.
Cynical and unsurprised. Many commenters treated the essay as a recognizable example of how incentives in startups, corporates, and public-sector contracting reward spend, optics, and intermediary fees more reliably than useful output.
Key insights
01
Budget buckets create fake savings
Separate treatment for payroll, contractors, and project spending explains a lot of behavior that looks insane from the outside. Managers can cut headcount, hit cost targets, or preserve political turf on paper while paying more to bring back the same people through outsourcers, because the expensive replacement sits in a different accounting bucket and triggers different approvals.
When a company is cutting staff but contractor spend keeps rising, do not read that as confusion. Check who owns each budget line and how success is measured for the manager making the call.
Grant and government work often rewards fully consuming a budget and punishes coming in under, even when underspending reflects efficiency. That pushes teams toward timeline stretching, unnecessary side work, extra staffing, and other forms of spend maximization that can stay just inside formal rules while still producing obvious waste.
If you run funded programs, treat underspend as a signal to explain, not a failure to hide. If you evaluate them, ask how budgets roll over and whether managers can safely admit they needed less money than expected.
The most concrete red flag in the story was not just weak startup performance. It was the model where the investor or incubator also sells office space and shared services back to its own startups. Once the intermediary makes money from keeping companies alive rather than helping them win, failure stops being a bug and starts looking like a revenue stream.
In diligence, map every related-party payment between fund, incubator, service provider, and portfolio company. If insiders earn steady fees before anyone proves customer demand, assume incentives are misaligned until shown otherwise.
Several commenters drew a hard distinction between normal startup failure and operations built mainly to sustain appearances for the next investor, acquirer, or grant cycle. The common pattern is delayed promises, strategic pivots that never resolve the core weakness, and sophisticated storytelling that keeps capital flowing long after product reality should have stopped it.
Do not ask only whether the roadmap sounds ambitious. Ask what evidence would force leadership to admit the story is broken, and whether anyone inside actually loses when milestones slip again.
A lot of expensive choices are really finance choices dressed up as technical or staffing strategy. Teams move people to consulting, favor projects over maintenance, or choose pricier vendors because capital expenditure and operating expenditure are judged differently by boards, investors, or internal scorecards.
If a strategic decision keeps making no engineering sense, translate it into accounting language. You will often find the real buyer is finance, not the technical organization.
Amid the fatalism, one useful legal mechanism stood out. The False Claims Act and qui tam suits were cited as rare cases where the system gives whistleblowers both leverage and financial incentive to expose fraud against the government, instead of asking them to absorb all the personal risk for free.
If you see suspected fraud on government-funded work, talk to counsel that knows False Claims Act cases before assuming your only options are silence or self-destruction. The reporting path matters as much as the evidence.
The cleanest pushback against the anti-government mood was that bad execution does not prove public funding itself is a mistake. Governments are still the only actor that can back research and citizen interests without a shareholder mandate, and the right response to failed programs is better oversight and staffing rather than automatic retreat.
Do not let one broken subsidy program harden into a blanket no-government thesis. Separate the case for public goals from the quality of the machinery currently used to pursue them.
A few comments argued that not every absurd contractor loop hides kickbacks or fraud. Vendor consolidation, compliance burdens, and the real cost of managing thousands of direct suppliers can make an apparently wasteful intermediary rational even when nobody is stealing.
Before assuming corruption, price the administrative alternative. In large organizations, reducing transaction overhead can be the real product being purchased.
Some readers pushed back on the tendency to read failure backward as evidence of deception. Most new products do not find product-market fit, and paying engineers to explore ideas that later die is part of a healthy economy, not proof that the job was fake.
Keep a sharp line between 'this failed' and 'this was fraudulent.' Otherwise you will misread ordinary experimentation as malice and make your risk filter useless.