DeFiance Capital CEO Criticizes Certain Web3 Startups for Quietly Shutting Down: At Least Thank and Apologize to Investors

Arthur Cheong, CEO and CIO of DeFiance Capital, recently expressed dissatisfaction on social media regarding how some Web3 startups have handled shutting down their businesses. He stated that many Web3 startups that received funding in 2021 and 2022 failed to notify investors when closing their operations, describing this "quietly running away" behavior as unacceptable. He believes that even if a company fails, it should at least send an email to investors containing an apology and gratitude. Cheong referenced a post analyzing current issues in the venture capital model, including lack of oversight, weak accounting foundations in startups, minimal decision-making power for investors, and the tendency of investors to focus on successful projects while neglecting failed ones. This model relies heavily on the ethical conduct of founders, but during a capital-abundant bull market, founders may benefit themselves in various ways, such as paying high salaries and bonuses, using company funds for luxury travel, renting offices they own to the company, or paying fees to affiliated companies through contracts. The post pointed out that these behaviors not only allow founders to profit significantly but also make their resumes appear more impressive, while investor returns may sharply decline or even turn negative. Cheong agreed with this analysis and stated that such situations remain unacceptable.