VC-backed startups commit more fraud, and researchers think they know why
A new report from Imperial College and Emlyon Business School suggests that venture-backed startups are more prone to fraud, particularly in overheated markets. Researchers argue that investor pressure for high growth and weak due diligence create conditions that tempt founders to engage in 'façading' or dishonest practices.
Why it matters
The findings raise significant questions about the role of venture capital in incentivizing unethical behavior and the systemic risks in the startup ecosystem.
A new report from the U.K.’s Imperial College and France’s Emlyon Business School has mapped out the ways Silicon Valley’s VC-backed founders commit fraud — and the role investors play.
For the report, published online in June, researchers built a database of tech founders and companies who faced civil and criminal securities fraud prosecutions from the SEC and DOJ between 2000 and 2023.
Some famous cases of tech founders being convicted of fraud over the past few years include Frank’s Charlie Javice , Kalder’s Gökçe Güven , Terraform Labs’ Do Kwon , and GameOn’s Alexander and Valerie Lau Beckman.
Get smarter about the news
Sign up free for a feed built around what you actually care about, Dive Deeper research on any story, and the full text of every article.
Create free accountAlready have an account? Sign in