The Startup Competition Scam: How fake entrepreneurs are stealing millions from competitions

This was originally published at: https://arnab.co/the-startup-competition-scam-how-fake-entrepreneurs-are-stealing-millions-from-competitions/

I’ve been a passionate advocate for startups for as long as I can remember, having spent the last 16 years deeply embedded in the startup ecosystem. Over these years, I’ve had the privilege of being invited to judge numerous startup competitions, particularly those organized by educational institutions, including prestigious engineering colleges and B-schools. These competitions, designed to ignite the entrepreneurial spirit among students, are initiatives I fully support. However, I’ve uncovered a disturbing trend—a dark underbelly to these seemingly noble events that many are unaware of.

The rise of Startup Competitions in Colleges

Startup competitions in colleges have exploded in popularity over the last decade. These competitions have become ubiquitous in Indian educational institutions. With the increasing focus on entrepreneurship, driven by government initiatives like Startup India, almost every institution has jumped on the bandwagon. Almost every college, from the top-tier IITs and IIMs to smaller engineering and management schools, now hosts at least one such event annually.

Today, it’s not uncommon for colleges to organize annual startup competitions, business plan (B-plan) competitions, or pitch contests. These events are often part of larger festivals—tech fests, cultural fests, or dedicated entrepreneurial summits. They’re usually spearheaded by the college’s Entrepreneurship Cell (E-Cell), with students working tirelessly to make them a success.

The premise of these competitions is straightforward: encourage students to think creatively, develop innovative business (product or services), and present them to a panel of judges. The winners are rewarded with cash prizes, media mentions, and, sometimes, additional perks like mentorship or incubation opportunities. On the surface, it’s a win-win situation for everyone involved. However, the reality is far more complex.

How these competitions are organized

Having been part of over 100 such events, I’ve gained a pretty decent understanding of how these competitions are organized. Typically, the process begins with the announcement of the competition date, followed by the creation of a website and social media handles to promote the event. The organizing committee, often composed of students under the guidance of faculty members, works hard to secure sponsorships, manage logistics, and ensure everything runs smoothly.

Participants are usually required to submit their pitch decks online, after which an initial screening takes place. The shortlisted teams—usually 10 to 12—are then invited to present their pitches in front of a panel of judges, which often includes industry veterans, entrepreneurs, and investors. The judges score the pitches based on a set of criteria, and the winners are announced, receiving trophies, certificates, media coverage, and, of course, the much-coveted cash prizes.

The Scam: Gaming the System

Now, here’s where things start to go wrong. Despite the positive intent behind these competitions, there is a growing menace that threatens their integrity—fraudulent participants who have turned these events into a money-making scheme.

A few years ago, I began noticing a peculiar pattern. I was judging multiple competitions across different institutions, and I started seeing the same teams being shortlisted repeatedly. Initially, I thought nothing of it—after all, it’s only natural that the best startups would be invited to multiple events. But as the years went by, I realized something was amiss. These startups were pitching the same ideas year after year, with no changes to their business models, sales figures, or even their pitch decks. They claimed to be in business, yet when pressed for details, they couldn’t provide any proof—no prototypes, no minimum viable products (MVPs), nothing.

It became clear that these teams were participating in as many competitions as possible, fabricating or exaggerating their claims, and walking away with the prize money. I began asking pointed questions during the pitches, probing for details on what progress they had made since their last competition. More often than not, the answers were vague or outright evasive. It became evident that these so-called startups were nothing more than fraudsters—creating false narratives to win cash prizes, with no intention of ever turning their ideas into real businesses.

These teams are not genuine startups; they are what I call “startup competition fraudsters,” individuals who craft impressive pitch decks filled with false claims, all designed to win competitions and walk away with the prize money.

The scale of this issue is alarming. These scam pitchers participate in multiple events, often across different institutions, using the same fabricated story to win cash prizes. There is little to no due diligence conducted by the organizers or the judges to verify their claims, allowing these fraudsters to repeatedly defraud institutions and deprive deserving startups of recognition and financial support.

The Impact: Stifling genuine innovation

The implications of this scam are troubling. First and foremost, it robs genuine, deserving startups of the recognition and financial support they need to grow. When fraudulent teams win these competitions, it means that teams with real potential are sidelined. This not only demotivates aspiring entrepreneurs but also skews the perception of what it takes to succeed in the startup world.

Moreover, this scam perpetuates a cycle of dishonesty. These fraudulent startups continue to pitch the same lies year after year, collecting prize money from different institutions without any accountability. This not only undermines the credibility of the competitions but also tarnishes the image of the institutions that host them.

The impact of these fraudulent activities is far-reaching. Not only do they undermine the purpose of these competitions, but they also represent a significant financial loss for the institutions involved. Furthermore, these fraudulent participants crowd out genuine startups—those with real products, real innovation, and real potential. The recognition and financial support that should be going to these deserving teams instead end up in the hands of those who have no intention of building a business.

Estimating the scale of the problem

To put this in perspective, India has over 40,000 higher education institutions. Based on current trends, it’s estimated that approximately 3,000 to 7,000 startup or business plan (BPlan) competitions are organized annually across the country. The prize money awarded at these events varies widely depending on the institution, with top-tier institutions offering anywhere from ?1 lakh to ?25 lakhs, while mid-tier and lower-tier colleges offer smaller, yet still significant, prizes.

In total, the prize money distributed across these competitions is estimated to range from ?41.2 crores to a staggering ?213 crores each year. This reflects not only the scale of these events but also the substantial financial resources being allocated to support budding entrepreneurs.

To give you an idea of the scale of these competitions and the potential for fraud, let’s look at some numbers. India has over 40,000 higher education institutions, including universities, engineering colleges, and B-schools. It’s estimated that around 3,000 to 7,000 startup or B-plan competitions are organized by Indian colleges annually. The total prize money awarded across these competitions can range from ?41.2 crores to ?213 crores annually. With such significant sums at stake, it’s no wonder that some unscrupulous individuals see an opportunity to exploit the system. Given the estimated ?41.2 crores to ?213 crores in prize money awarded annually, even a small percentage being siphoned off by these fraudsters represents a substantial amount of money.

How can this be stopped?

It’s clear that something needs to be done to protect the integrity of these competitions and ensure that the prize money goes to those who truly deserve it. Here are some steps that can be taken:

• Implement stricter verification processes: Before allowing teams to participate, organizers should conduct thorough background checks to verify the legitimacy of their claims. This could include requiring proof of product development, sales figures, and other key metrics.
• Create a Centralized Database: A centralized database that tracks participants across different competitions could help identify teams that are repeatedly pitching the same ideas without any progress. This database could be shared among institutions to prevent fraudsters from exploiting multiple events.
• Introduce follow-up mechanisms: Winning teams should be required to provide periodic updates on their progress. This would not only ensure that the prize money is being used effectively but also help track the impact of these competitions on the startup ecosystem.
• Limit participation to once a year: To prevent the same teams from repeatedly exploiting these competitions, institutions should implement a rule limiting startups to participating in only one competition per year. This would encourage genuine startups to focus on developing their business rather than simply chasing prize money.
• Cap the Cash Prize accumulated: There should be a cap on the total amount of cash prizes a single startup can accumulate within a year. This would discourage teams from participating in multiple competitions purely for financial gain and ensure that the prize money is distributed more equitably among deserving startups.
• Restrict the Number of events a startup can apply to: To further curb fraudulent practices, startups should be limited in the number of events they can apply to within a given year. This would help prevent the same teams from dominating the competition circuit and give more opportunities to other deserving participants.
• Shift from Cash Prizes to Grants: Instead of offering cash prizes upfront, institutions could provide grants or seed funding contingent on the achievement of specific milestones. This would ensure that only those startups with real potential receive financial support.
• Educate Organizers and Judges: Organizers and judges need to be made aware of the potential for fraud and equipped with the tools to identify it. This could include training on what to look for in a pitch and how to spot red flags.

By implementing these measures, we can protect the integrity of startup competitions and ensure that they continue to serve their intended purpose—supporting genuine innovation and entrepreneurship.

Conclusion

Startup competitions have the potential to be powerful catalysts for innovation, providing young entrepreneurs with the resources and recognition they need to succeed. However, the rise of fraudulent participants threatens to undermine the very purpose of these events. By implementing stricter checks, fostering collaboration between institutions, and raising awareness of the issue, we can protect the integrity of these competitions and ensure that they continue to support genuine innovation.

For more insights and tips on startups, entrepreneurship, and business strategies, visit my blog at www.Arnab.co and subscribe to my YouTube channel (https://www.youtube.com/arnabarray ) for regular updates.