Fake startup scams target investors who are comfortable with a large amount of risk. These con artists are comfortable living with a high degree of dishonesty.
Never underestimate the extent to which a scammer is willing to lie to you, and even to their own friends and family. Make sure you know that what you’re getting into is real before you invest in a startup or leave your current job to work for one.
Invitations to invest in or be a part of a startup project target individuals with disposable income, few responsibilities, and are comfortable with taking on a large amount of risk.
A con artist with a sound business plan and a smooth tongue can lure in even the most wary investors and contractors. In fact, what makes startup cons especially hard to spot on contact is the extent the scammer will go to keep up the charade.
Never underestimate the extent to which a scammer will go to pull off a con. Lets look at some recent examples. Startup advisor Hillel Fuld was conned into getting onboard a startup plan wherein an alleged Apple engineer proposed a great product plan. When the con unraveled, Fuld discovered that not only had he been misled, but the scammer actually had his own family believing that he was actually an Apple engineer. To pull off this scam, the scammer had to con his own family.
Fake startups will get contractors onboard, recruiting them and luring them away from their jobs. These contractors will sign agreements that will be impossible to fulfill because the capital and resources simply don’t actually exist. Professionals leave their high end jobs at current companies to join in on fake startup projects every day only to find out that they’ve invested their livelihood, and often even their own financial savings, into a project that never actually existed. Fake contracts, fake terms and conditions, fake numbers and fake business plans that all look solid are all part of this common con. The invitation in can come in the form of an email, a website, snail mail, or being recruited off professional sites like LinkedIn.
Trying to reason with a con artist, or confronting them when you find out the startup is fake is a waste of time. Remember, these people are willing to defraud their own families to pull off a scam. They don’t care whose money they take or whose lives they destroy, or what bridges you burn for them.
The solution is prevention. Here are some things to look out for:
* The product, business plan, and opportunity sounds too good to be true.
* When asked questions about the product or project, instead of answering them directly, the entrepreneur refocuses the question back on him or herself, displacing the project from center stage and focusing the attention on him or herself as an individual.
* Excessive sales talk.
* Name-dropping can be a big red flag. Sometimes an entrepreneur will drop well-known names to lend credibility to their alleged project, other times they will make up names that sound legitimate. Make sure every name that gets dropped checks out.
* Make sure their resume checks out. Did they actually work for who they said they did? Were they actually on that project? Is that actually their education? Was that really their position in the business?
* Excessive excuses for when information isn’t readily available or something goes awry.
* Your first paycheck doesn’t show up. Bail!
Before you leave your job, invest money, or agree to anything, make sure you fully investigate the entrepreneur and the business plan to make sure everything checks out. If you’ve been approached by a startup to invest or to come aboard as a contractor or employee, contact Mignolet@Bellsouth.net for a consultation.