Startup Scams – And What To Do About Them

The startup space has been attracting a lot of interest in India. There are lots of young entrepreneurs who feel they can start a new business which can change the world. This is all for the best because we need the spirit, creativity, and enthusiasm which young blood can bring to infuse fresh life so that we can continue to progress.

Unfortunately, because these entrepreneurs are very young and immature, they’re also very vulnerable. There are lots of scam artists who are out to take advantage of the fact that these founders are looking for funding and don’t know how to get it

They make all kinds of promises to lure them in. For example, they promise them funding by offering to introduce them to influential well-heeled connections for a “facilitation fee” – and end up converting that poor entrepreneur’s dream into a nightmare because they have no intention of delivering.

These scum bags will often end up cheating the entrepreneur, by stealing his idea and taking ownership of all the hard work he’s done. By the time he realises that he’s spent many months just chasing a mirage there is precious little he can do about it. He feels bitter and angry, and feels that all investors are crooks.

Talking About It Helps

One way of fixing this problem is by openly sharing your experiences on LinkedIn as to how these scam artists work. The truth is that when you’re cheated, you contribute to the problem by keeping quiet because your silence encourages the cheater to cheat other people. Because you are ashamed that you were so naive that you got duped, you clam up and don’t want to acknowledge that you allow yourself to be taken for a ride. It is this passivity which allows these cheats to continue to flourish.

They hone their techniques and polish their modus operandi because new suckers are born all the time. It’s because entrepreneurs don’t share this information amongst themselves that this problem becomes even worse.

Yes, there are informal networks of founders who discuss these issues amongst themselves, but this is not enough. We need openness and transparency if we want to clean up the system. While you may not be able to get your time or money back, the best form of revenge is outing these scammers, so they aren’t able to swindle other founders.

Investors Need To Be Open Too!

I think it’s equally important that good funders also speak up, and let founders know what is considered to be good practice in the investor community. If we don’t, then the entire funding ecosystem starts getting a bad reputation and this will affect all of us. By keeping quiet, we allow a few bad apples to spoil the entire bunch, because “bad money drives out good.”

These are still early days, but if we don’t nip this problem in the bud, we will find it increasingly harder to cope with it over time. It’s great that there are open platforms like LinkedIn which allow funders and founders to connect with each other, so they can share their experiences, and learn from each other.


[This post by Dr. Aniruddha Malpani first appeared on LinkedIn and has been reproduced with permission.]

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.

You have reached your limit of free stories
Become An Inc42 Plus Member

Become a Startup Insider in 2024 with Inc42 Plus. Join our exclusive community of 10,000+ founders, investors & operators and stay ahead in India’s startup & business economy.

2 YEAR PLAN
₹19999
₹7999
₹333/Month
Unlock 60% OFF
Cancel Anytime
1 YEAR PLAN
₹9999
₹4999
₹416/Month
Unlock 50% OFF
Cancel Anytime
Already A Member?
Discover Startups & Business Models

Unleash your potential by exploring unlimited articles, trackers, and playbooks. Identify the hottest startup deals, supercharge your innovation projects, and stay updated with expert curation.

Startup Scams – And What To Do About Them-Inc42 Media
How-To’s on Starting & Scaling Up

Empower yourself with comprehensive playbooks, expert analysis, and invaluable insights. Learn to validate ideas, acquire customers, secure funding, and navigate the journey to startup success.

Startup Scams – And What To Do About Them-Inc42 Media
Identify Trends & New Markets

Access 75+ in-depth reports on frontier industries. Gain exclusive market intelligence, understand market landscapes, and decode emerging trends to make informed decisions.

Startup Scams – And What To Do About Them-Inc42 Media
Track & Decode the Investment Landscape

Stay ahead with startup and funding trackers. Analyse investment strategies, profile successful investors, and keep track of upcoming funds, accelerators, and more.

Startup Scams – And What To Do About Them-Inc42 Media
Startup Scams – And What To Do About Them-Inc42 Media
You’re in Good company