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How Scams Have Become Legal In The Modern World
The most insulting part upon realizing that you have been taken for a ride… is to realize that you have no legal means to seek redemption…
Traditional scams conducted by individuals, groups, or syndicates have been around for ages. And they have now taken a back seat against a more formidable competitor. A hybrid of legal and illegal. The biggest opportunity in a generation is the rise of legal scams.
You see… blurry land investments have been found out, shady hedge fund pyramid schemes have become old-fashioned, mortgage frauds are no longer trendy, and the typical emails asking for processing fees to wire you the inheritance of a stranger is becoming more of a known novelty.
The REALLY smart guys are now taking the bull by the horns by going legal. If you are still wondering, I’m referring to private investments and private equity, especially in the startup scene.
In the last 20 years, technology have advanced by leaps and bounds. Well… maybe a lot of them had been around for ages. But it is within the last 2 decades where the masses had access to them via consumer goods and services.
This has led to exciting developments in the world of startups.
Everyday, new startups are born with the full intention of drawing up glossy presentations scribbled with revenue projections plucked out from the sky. Hepped up business plans hide the true inferior status of reality.
And knowing how the application of technology have changed, and will continue to change the world, investors ranging from fund managers to venture capitalists to the individual are pushing around to get elbow room for a stake in these startups.
The key players in such companies then fly around the world to raise funds again and again in a never ending loop that resembles a cassette player on auto reverse playback.
CEOs and partners in these companies then pay themselves hefty salaries using investors funds and deliver nothing but promises that never actualize.
In fact, since they are already making money for themselves, they would actually reap more rewards if their projects, whatever they are, continue to stay in a development phase.
You’d think that the primary reason to start a business is to generate revenue and be profitable. That is not the case these days.
The longer “entrepreneurs” drag the company’s growth and development, the more excuses they have to raise more money. And the more money they can draw from company wallets to live the high life while pocketing their million-dollar salaries.
If this strikes an awkward chord with you, you are not alone.
Many investors are trapped in these “investments” all over the world. And they will never see their money ever again because these startups were never conceptualized to succeed in the first place.
The only people making money from such startups are the founders themselves. They then cash out and move on to the next startup.
Don’t believe me?
Just do a simple research on some of the CEOs of the early dotcom fiasco. Their companies imploded when the bubble burst. Yet they walk around with millions in their pockets… then fronting new companies in… what else… new tech startups.
Mobile apps and cryptocurrency are the more recent buzz around the world of startups.
For every app that turned out to be profitable, there are at least 10 others that failed miserably. And for those who failed after burning through millions of dollars in investors funds and millions of dollars in debt, their CEOs cash out as millionaires with millions stashed in the bank legitimately as their personal and legal “compensation”. It’s a disturbing trend to behold with your own eyes.
What will follow closely after will be industries like self-driving vehicles, holographic technology, 3D printing, etc. This is without counting the proven industries like real estate, ecommerce, ride-sharing, etc.
Crowdfunding platforms now offer scam artists an even easier access to private funds.
Investors, people who believed in them, lose their shirts and end up with nothing but write-offs on their balance sheets.
Those who lose their money have nowhere to go for help because these are classified as bad investments instead of fraud. They can’t sue for a failed investment.
So really. This is the biggest scam that you have to be wary of in the modern world.
Because they are legitimate operations, you are often off your guard when weighing up your decisions. The shares you hold are also seldom liquid as the companies are not publicly traded. What’s worst… when the company starts raising more capital, they issue more shares that dilute the value of what you hold.
You will never have an exit strategy to look forward to.because there is none in the pipeline. Your only hope in getting your money back is a buyout that will never happen.
Oh and even if a buyout indeed happens, you have to wait for your turn. Because the acquisition starts with the largest shareholders with a controlling interest. Meaning the CEO and founders. You will be left holding the bag if a buyer decide to just get a controlling interest instead of going for a full-fledged buyout.
Starting to see how distasteful this startup market is?
If you are already in one of these “investments”, take it as a learning experience and never put your hard earned money in such risky predicaments again.
And if you have yet to get involved with such private “investments”, I advise you to stay away. You truly would make more money by parking your extra funds in a time deposit account.
And if you really have to invest, do conduct vigorous diligence checks including:
- Background checks on key promoters
- Deep analysis on the technology involved
- Market research on the real demand for products and services being sold by the company
- Make reference checks with stakeholders who are already invested
- Compare the price you are buying at with it’s price history
- Ask your mother for a neutral non-investment opinion
- At what phase is the startup at concerning technology development and market penetration
- Check with lawyers to determine the legitimacy of their fund raising terms and activities
You’d be surprised at how much dirt you can dig out from background checks.
Sometimes, you find things so blatantly obvious like a company raising funds for the last 10 years and nowhere close to a finished product.
The bigger shock is that many investors don’t depend on their own research to make their decisions. They depend on the reports and projections provided by the fund raisers themselves which you would expect to paint a pretty biased picture.
If you think that you are too smart and financially savvy to be cheated, BEWARE. Because this is exactly the profile of investors who lose everything. You have the money and the ego of a prime target.
The best defense against legal scams is to walk away.
It is often the fear of missing out on a windfall that drives people to take action and invest.
If you lose this mentality and refuse to bite, you will be humbled by your own foresight 5 years later when you see that startup still idling around and never taking off.