A few weeks ago an investigative journalist named MegaLag uncovered what has since become known as the biggest scam on the internet. The story exposed how the discount code browser extension systematically stole the affiliate commissions from prominent influencers while, at the same time, also worked with the companies to give ever-less-meaningful discounts to customers. The scam affected all levels of the internet-consumer ecosystem and has set off a firestorm of controversy. Millions of people have uninstalled the app since the report came out and the team at Legal Eagle announced that they would file a class actions lawsuit.
I didn’t think that I had much to add to the report until I realized that the scam wasn’t only about influencers and their audiences. It was a window into the venture capital pipeline whose very purpose seems to be to destroy promising companies before they ever meet their potential.
For the last few months I’ve been working on a piece about how venture capital firms associated with major universities—Stanford and Harvard in particular—can make immense profits off of scientific ideas even if the ideas only work on paper. They invest in early-stage businesses while always keeping an eye on their own lucrative exits. Since venture-backed companies never have to prove their value in the market, all they need to do is form the perfect-pitch for some other company to acquire. I realized today that I could give you a preview of that research in a video about the Honey Scandal.
Venture Capital sucks the value from the companies they back in two basic ways. They can over-hype the science and underlying value of a company and get it into the hands of an ever-larger company before it all falls apart. Or, more frequently, the venture firm can back a company with a great idea, replace the current founders and CEOs with their own profit-focused stooges—and transform the business’s goals to maximize profit over whatever value the customer might receive in the end. This is what happened with Honey. After revamping the business model from a genuine-coupon code tool, it seems that Anthos’s team reimagined the brand as a pipeline to offload the company to Paypal for an astounding $4 billions in 2020.
In this video I look at several other companies in the Anthos portfolio that look amazing on paper, and I believe are prime targets for what Cory Doctorow calls enshittification.
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