Fraud in startups: what stakeholders need to know

Purpose This paper aims to explain the fundraising and valuation processes of startups discuss conflicts interest between entrepreneurs, venture capital (VC) firms stakeholders in context startup corporate governance. Further, this uses examples WeWork Zenefits how a failure demand an external audit from independent accounting firm early stages funding led opportunity for fraud. Design/methodology/approach The methodology used is literature review analysis combined with Fraud Triangle Theory. also provides discussion Zenefits, both highly visible fraud, explores increased role auditors fraud risk mitigation on behalf prior initial public offering (IPO). Findings documents number risks posed by “fake it till you make it” ethos investor behavior pricing world entrepreneurial finance VC, which could be mitigated greater awareness value performed IPO. Research limitations/implications An implication that regulators should consider oversight financing process potentially take steps facilitate independence participants IPO process. Practical implications Given potential VC firms, investment banks founders, investors at time may exposed shares are overvalued offering. Social study demonstrates practices can extended issue call action profession protecting then offers recommendations standards entities. Originality/value There few academic papers financial crime link culture risk. concise explanation highlights considerations assessing In addition, emerging as stewards proper pre-IPO firms.