How to Protect Your Startup from Fraud: Insights from the World Startup Convention Scam

Everyone knows the age-old saying that “all that glitters is not gold,” and this statement is quite true when it comes to certain glamours of the startup ecosystem, life, or any given industry.

Elon Musk and Sundar Pichai were listed as ambassadors in a recent scam called the World Startup Convention. To support the false narrative, it was also claimed that thousands of pioneering VCs, angel investors, and dignitaries from the Indian startup ecosystem, politics, and industries would be in attendance.

As an entrepreneur, I understand what the aspirations and dreams of an entrepreneur or a person who wants to be an entrepreneur are. The Indian startup ecosystem is not only a difficult mechanism for newbies, but the Indian market is one of the toughest to crack in the world.

The World Startup Convention also referred to as “Scam 2023,” has shattered the hopes and dreams of business owners, entrepreneurs, startup enthusiasts, and business students across the nation and damaged the reputations of many of our country’s founding dignitaries.

You can learn more about the World Startup Convention scam on social media, YouTube, or any other medium. However, the most important aspect of this kind of event is to make people, both businesses and consumers, aware that not every scam is done haphazardly, some things are planned and fortified by technology, influencers, PR, and any other narrative aspect that is all over inbound marketing.

How can startups, investors, and consumers be safe from fraud like this?

You see, I would be wrong if I claimed that you could always be protected against fraud. This is so because everything around us develops exponentially at the same time as we do.

Even though you might be aware of a particular piece of technology that shields you from fraud today, there may be a fraud system in place tomorrow that gets around all of your current security precautions and awareness. Sadly, that is the price of education and awareness.

However, there is a good chance that with enough time, awareness, education, and transparency, you will be able to recognize any malicious activity, message, or other floating object that may be presented remotely to trick you and demand money, value, or time from you.

Understand these principles

New goods and services also bring new security risks.

New threats inevitably increase the number of existing ones as a company grows and scales.

Any startup adding a new service, feature, or product is one such threat that con artists closely monitor.

Fraudsters always try to take advantage of anything your business offers to facilitate money laundering or obtain the good or service for nothing.

In this case, thinking through your company’s potential weak points and making the necessary preparations are the best ways to prevent fraud.

Always start by thinking about the security gaps and vulnerabilities that new features and products will introduce. You must thoroughly test every new feature before releasing it, and you must keep a close eye on it afterward to prevent serious losses.

How does it apply in real life?

Change is necessary, and frankly, people with a growth mindset should view change as an opportunity to evolve. However, the example we are talking about is the world startup convention;

This so-called program promised everything too good to be true in the first place. They took advantage of media influencers, PR articles, and the images of profound government and business dignitaries to establish a sense of trust in your mind.

You should always anticipate the fulfillment of the promises when a situation similar to this one arises in the future. Things that seem too good to be true usually aren’t true. Sadly, to evolve, you must also take some risks, just like in the risk-reward paradigm. But before you take advantage of any opportunity, use your head to identify any weaknesses you or the opportunity may have.

Beware of the ‘friendly fraud’

Startups also need to be on the lookout for “friendly fraud,” which isn’t as nice as it sounds. When a customer uses their card to make an online purchase, disputes the transaction with the bank, and requests a chargeback after receiving the goods or services, this is referred to as “friendly fraud.”

Businesses in sectors like e-commerce, online dating, and gaming frequently struggle with chargebacks and the associated transaction fees when they bring on new clients. But identifying attack patterns can reduce these fees.

That’s how it went for one Covery client who was victimized by a rival’s fraudulent activity; Covery assisted them in identifying and foiling the plot, which resulted in an 80% decrease in the number of fraud cases and a 70% reduction in payment processing costs.

When Covery looked into a case of alleged friendly fraud for one of their clients, it turned up previously unknown schemes that cost $300k in losses.

Although the harm had already been done, Covery assisted in putting in place real-time customer checks and device fingerprinting, which allows for the identification of devices like computers and phones by gathering data regarding their software and hardware, to stop further fraudulent transactions.

How can customers and new entrepreneurs be aware of this?

For consumers, it is very easy to understand why this kind of fraud exists. As a consumer, I will surely purchase anything online that is from a registered and trusted website. Sure, digital marketing has taken away many malicious websites from our personal social media feeds. However, always be aware of the most lucrative offers.

Entrepreneurs, you must realize that as more companies offer their products and services online, fraudsters are following suit and developing new, intricate scams that are getting harder to spot. Every business needs a complex combination of features, not just one solution, to ensure maximum protection.

Maxpay, a global provider of payment processing services, selected Covery as its risk management platform because anti-fraud tools frequently only address particular issues. According to a Maxpay representative, the idea behind Covery is that it is a multitasking tool equipped to perform all necessary risk management and prevention actions.

Final Words

• For startups, it’s essential to be aware of the possibility of scams. There are many reliable startups, but there are also several dishonest individuals who wish to take advantage of unwary investors.
• Not just startups, but any occasion, gathering, or chance that offers enormous value in any terms (primarily in monetary terms)
• A few precautions can help you defend against fraud. Do your homework first. Make sure you are familiar with the management team and business model of the company. Just a few of the online resources that can be used to research startups are Crunchbase and AngelList.
• Second, be wary of statements that promise high returns. Startups, occasions, or companies that promise improbable returns are probably frauds. Be sure to conduct extensive research and seek out any information you may need before making any financial decisions.
• Last but not least, don’t be afraid to leave if something doesn’t feel right. If you have any doubts about a startup, it’s best to err on the side of caution and refrain from investing.