The Mechanics of Silicon Valley Pump and Dump Schemes
Tags: lowcode, postgressql, database, productivity
Published: 2024-02-18 08:12:53

A pump and dump scheme is when somebody artificially pumps up the evaluation of something, for then to sell whatever they’re pumping up for this artificially inflated value, leaving somebody else to cover the loss.

Elizabeth Holmes and Theranos is a well known example of this. Elizabeth had no real value in Theranos, yet still she created outrages claims about what Theranos could do, based upon lies about her own product, and fabricated science and research. At its peak Theranos was worth 9 billion dollars, and Elizabeth Holmes became the youngest female billionaire on earth. I’m not going to spend too much time talking about Elizabeth though, the story has been thoroughly covered a million times — What I am going to talk about however, are other similar pump and dump schemes, for then to explain why they’re so damaging to society as a whole.

## SupaBase and other Pump and Dump Schemes

SupaBase is one such [obvious pump and dump scheme](https://medium.com/@thomas_78526/open-source-as-a-vc-scam-15234222d6ee). SupaBase was founded in 2020 and acquired a user base that I’ve shown was larger than the number of software developers that exists on earth — Which of course is ridiculous, since SupaBase is a tool for software developers. To put that into perspective, imagine you’re creating airplanes, and you’re somehow able to sell more airplanes then there are pilots on earth 3 years after you started creating airplanes.

> The math doesn’t add up

The math of the above is really simple. [Microsoft has 13,000 stars](https://github.com/dotnet/runtime) on their GitHub profile for their flagship product. [SupaBase has 63,000 stars](https://github.com/supabase/supabase) on their GitHub project for their flagship product. 27% of all software developers in the world are using .Net. SupaBase has 4.5 times as many likes as the .Net Core runtime, so they must be 4.5 times as large, right? 4.5 multiplied by 27% becomes 130%. Implying 130% of all software developers that exists on earth are using SupaBase (apparently!)

Even if you look at [Microsoft’s by far most popular GitHub project](https://github.com/dotnet/aspnetcore), they’re still only half as big as SupaBase. If you believe _“the SupaBase story”_, SupaBase grew and became twice as large as Microsoft in 3 years. Below is their likes over time if you’re curious, together with a couple of additional _“too good to be true”_ Silicon Valley projects.

![SupaBase claim to fame](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/xjamospx130y2i2kvtci.jpeg)

To put the above data into context, please realise that all the following software platform companies are larger than Microsoft, and Microsoft is being used by 27% of all software developers on earth.

* [SupaBase](https://supabase.com/)
* [Grafana](https://grafana.com/)
* [Strapi](https://strapi.io/)
* [Meilisearch](https://www.meilisearch.com/)

All of the above 4 companies grew from zero users to twice as many users as Microsoft have in 3 to 5 years if you use their GitHub repositories as your source of truth here. If you look at how many users are actually downloading SupaBase though, you’ll rapidly realise that even a single software developer such as me is able to outperform SupaBase by 20x.

> My open source projects have 20x as many downloads as the SupaBase platform

Still, SupaBase is evaluated at roughly 1 billion dollars, while my open source project is evaluated at _“not as much”_ you might say.

## The Media Scams

If you followed the Theranos scam, you’d rapidly realise that the media was at the heart of the scam. Elizabeth would _“play”_ the media to generate attention to justify the evaluation of her own company. This generated attention around her company, driving up stock price, making her richer. It would be based upon outrageous claims about what her platform could do, such as eliminate premature death due to access to early diagnostics.

At the core of her platform there was more or less zero real value though, similarly to how SupaBase have more or less zero real value in their platform.

The mechanics of such pump and dump schemes are very similar to _“crypto token rug pull schemes”_, where some token based upon some ridiculous ETH smart contract is being hyped up beyond sanity — For then to have the founders pull out during the _“initial token offering”_, or some similar mechanism to dupe their users of all their money. Except, with companies and stock, we’re talking about IPOs (Initial Public Offerings) — Which again are regulated, implying it becomes a federal crime!

## Zero real value

SupaBase created their platform on top of a tiny open source library called [PostgREST](https://postgrest.org/en/v12/). PostgREST is a tiny library for the database called PostgreSQL. Technologically it does roughly the same as [OData](https://github.com/OData/odata.net) from Microsoft. Interestingly, even though OData is 100x better than PostgREST, open source, and created by a trillion dollar company (Microsoft) — SupaBase has 100 times as many stars on their GitHub profile — Which becomes kind of funny realising OData probably have 100 times as many real users as SupaBase.

> SupaBase took PostgREST, wrapped it into a PaaS service, added PostgreSQL hosting, and became worth a billion dollars over night

The reason why the above is funny, is because any mediumly skilled software developer could basically do the same in a couple of weeks — Implying, the real value of the SupaBase platform can be replaced by a senior software developer in a couple of weekends.

> Yes, I could replace SupaBase’s technology in 2 weeks!

In addition, SupaBase is 100% open source, implying even if there was any real value in the company, that value could be downloaded, deployed to a DigitalOcean droplet you could get by paying $6 per month for — Implying even if you believe in their evaluation, and the value of their platform, there exists no means to intelligently monetise the platform in the future using traditional scaleonomics.

However, even the above is a mute point, because you’d probably be better of simply installing PostgREST yourself, or preferably use OData from Microsoft.

Explaining the above to a journalist though is of course impossible. They simply don’t have the skills to be able to determine the real value of technology. Similarly to how journalists had no idea how to evaluate Theranos, so they simply believed in Elizabeth — While all **real scientists** had _“questions”_ about Theranos.

> Well, I’ve got _“questions”_ about SupaBase!

## How to recognise a Pump and Dump Software Scheme?

The mechanics are always the same; Somebody finds an existing open source library, adds little to no value on top of it, creates another open source GitHub project, and starts contacting the media. _“Mysteriously”_ their open source project starts accumulating unbelievably high amounts of _“likes”_, from _“random software developers around the world”_, creating the illusion of real value in the platform.

These likes are of course simply automated bots, and/or created by somehow tricking people to liking their repository, resulting in the illusion of an upwards trajectory of _"additional value"_. The exact mechanism is difficult to determine though admittedly, since if you actually look through their star gazers, a majority of their likes seems to be originating from legitimate users.

However, how can a company acquire 4.5 times as many stars as Microsoft's flagship product without applying dubious methods. It simply doesn't add up. Linux for instance, the world's largest open source project, being deployed to tens of billions of devices, only have twice as many likes as SupaBase. Your car, phone, laptop, tablet, and probably refrigerator runs on Linux. When was the last time you heard anything run on SupaBase?

This becomes a self-sustained spiral upwards, where the media starts writing more about the company, due to apparently _“so many software developers seems to like it”_, while there’s actually no real value in the company beneath the pump and dump scheme.

## Why do I care?

I have an open source project myself, and I am building an [AI and Low-Code/No-Code platform company](https://ainiro.io) on top of it. Contrary to SupaBase though, I have spent 4 years creating **real value** in my platform. The project solves a **real problem**, it consists of a lot of **real innovations**, and I’ve spent **a lot of time building it**.

My platform has 20 times as many downloads as SupaBase, but because SupaBase have 67 times as many likes on their GitHub repository as I do, SupaBase gets all the sunlight from the media, while my project gets none.

> Pump and Dump schemes such as SupaBase destroys real innovation!

This implies it’s not just a problem with some rich investor schmucks getting ripped off by some psychopath entrepreneur, it also destroys real innovation’s ability to grow. It’s like a sick forrest, where all the sick trees, that are living as parasites on the forrest as a whole, not only suffocates the good trees — But they also steal all _“the sunlight”_ from healthy trees, that could create real value for the forrest as a whole.

## Conclusion

Pump and Dump schemes such as SupaBase are destroying real innovation — In addition they’re probably illegal. However, by stealing all the media attention from real companies, they become a liability to us collectively, due to a parasitic existence, not only on investors and VC funds, but also on the world at large. So this is **your** problem, it’s not (only) my problem. It’s _“a society problem”_, and we have to deal with it collectively.

If you know about more such Pump and Dump schemes, please comment, and I will investigate them, and try to determine if they are parasites, for then to out them as what they are — Because I’m done playing _“the nice guy”_ now — I want my sunlight! And unfortunately I’ll have to destroy a couple of bad apples to get it!

![Sunlight](https://dev-to-uploads.s3.amazonaws.com/uploads/articles/6s73yqr3hx6hek9c3h8o.jpeg)