Start-up scams
Also known as:
- investment scams
- investment fraud
- fake startups
What is Risk ?
Digital risk factors associated with their interests and activities
For a child or young person, the most likely way to invest in a startup is through crowdfunding. This is where money is raised with small investments from a large group of people. This normally happens through social media or crowdfunding websites.
Investments can also come from venture capital funds. This is where a venture capital firm pools together larger sums of money from multiple investors and then invests these in a startup business.
Startup scams imitate these opportunities. They often promise quick, guaranteed profit. These scams can pressure someone into investing on the spot. For example, a limited-time offer.
Scams might also promise career opportunities. For example, an internship or a well-paying job.
Trustworthy-looking social media posts and websites are used to target people. They often use false testimonies, sometimes from celebrities. People targeted might be asked for an initial investment or for personal information, like bank account details.
Finfluencers are content creators who offer investment advice on social media platforms. Some of these may encourage viewers to invest in false or misleading startups.
Where this can happen
Risks and motivations
Risks
Losing money
If a child or young person invests in a startup scam, it can be difficult for them to get back their investment. A bank may refuse to return lost funds if they think someone has been negligent.
Even if funds are eventually returned, this may be a process that takes weeks or months.
Emotional harm
Fraud can have an impact on a child or young person’s mental health. They may feel angry or worried that they won’t get their money back.
Losing money might make someone feel like they’ve lost some independence. They may also be less confident about future investment opportunities.
Breaking the law
A startup scam is a type of fraud and is against the law. A child or young person found guilty of committing fraud could face a criminal record, a fine, or a prison sentence.
Motivations
Reasons a child or young person might invest in a startup business include:
- making money quickly
- building profits long-term
- meeting other investors
- feeling pressured to invest
- career opportunities
- trusting a celebrity or influencer endorsement
- not understanding the warning signs or risks
Several famous tech companies, like Facebook, Apple, and Google, began as startups. A young person with an interest in careers in emerging tech may want to engage with startups.
What you can do
You might be working with a child or young person who wants to invest in a startup.
Talking could be one way of minimising some of the risks. You might discuss:
- offers that seem too good to be true
- how scams and fraud can impact victims
- how to think and research, especially if someone is pressuring them to invest
- using the Financial Conduct Authority to check a business is registered
- thinking about why some influencers endorse investments
- how fake celebrity endorsements can be used to trick people
- speaking to a trusted adult if they are ever unsure or worried
If you are working with a child or young person who has been scammed, you may need to help them contact their bank or building society. This can be one way to recover lost funds.
If you think that a young person is at risk, follow your safeguarding procedure and read our safeguarding guidance.
Support
You may be working with a child or young person who has been scammed into investing money.
Part of the recovery process could focus on the child or young person’s emotional well-being. It is important to remind them that they are not to blame.
If a person behind the startup scam has made any threats, you may decide to contact the police.
If the scam organisation has had any access to the victim’s devices or online accounts, it is important to reset passwords and run anti-virus software.
A child or young person’s recovery process can also involve getting back their lost funds. A bank or an independent specialist organisation may be able to help with this.
Some organisations will also be able to help with debt or financial difficulties which the child or young person may be facing.
Read more about start-up scams
Share your experience of start-up scams
You can tell us about:
- other terms you might have heard
- conversations you’ve had with young people
- a related platform or app
- another related risk or harm