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In today’s episode, Steli and Hiten talk about startup fraud. Unfortunately, even with great hiring processes and systems in place, it’s inevitable for you to come across a lemon. The worst case scenario is coming across someone who is fraudulent and takes advantage of you. Steli and Hiten discuss a very clear, cut and dry story with Close.io of a sales rep who engaged in fraudulent activity. They break down the difference between making a mistake (which may require a second chance) and when somewhat flat-out deceives you and the company (which means letting that person go). Tune-in to hear Steli and Hiten’s advice about how to effectively deal with fraud in your startup.

Time Stamped Show Notes:

00:31 – This episode talks about when a person in your startup does shady things

00:58 – One difference in building Close.io was the huge amount of transparency in communications

01:20 – A Close.io customer hired a sales rep who was supposed to set up demos with the head of marketing agencies

02:01 – The founder noticed weird stuff. He found out that the prospects being emailed were not actually prospects at all—their email addresses did not match their actual corporate email addresses

02:30 – The calls sounded weird—it was as if the sales rep was talking to himself

03:28 – In the end, the rep faked activity, calls, and demo schedules and would call his friends (not actual marketing people) and schedule demos with them because that’s how he was paid

04:37 – It’s difficult, in a startup, to trust all the people you hire

05:02 – Your startup, as a founder, is your brand

05:36 – “Trust, but verify”

06:38 – Relationship is a process of building trust

07:03 – Check-in more frequently in the first few weeks

08:23 – Listening to your reps’ calls will help you give more valuable feedback to them

08:53 – Steli was defrauded by a designer they hired years ago

09:37 – Things changed when they hired him

09:44 – The guy needed much more time to upload his work

10:13 – In 2 weeks, they realized the designer was doing something funky

10:29 – It turned out the designer just took design templates available and edited them

11:05 – Do your homework before hiring anyone!

11:55 – There are many shades of fraud

12:15 – One case popular in sales is inflating the numbers – reps would say they made 100 calls but in reality, they dial numbers and hang up

13:13 – Hiten’s first response is to seek to understand

13:57 – It’s unfair to look at situations without understanding the reason “Why”

14:45 – “If you don’t understand why they did it, you’re not going to understand how to prevent it in the future”

15:23 – Don’t instantly react!

17:13 – Usually, you don’t have time for second chances in a startup

17:52 – “Some things are so extreme and not culturally aligned that it doesn’t work”—sometimes there’s no room for second chances

18:46 – When somebody does something fraudulent once, it’s impossible to fully trust them again

19:24 – With dignity, let them go

19:43 – End of today’s episode

3 Key Points:

Doing background checks before hiring is a MUST.

Try to understand where the person who wronged you is coming from.

If you proved the person is guilty, let them go with dignity.

Steli Efti:

Hey everybody, this is Steli Efti ...

Hiten Shah:

And this is Hiten Shah, and today on the Startup Chat, we're going to talk  about startup fraud. So Steli, I know you have a story. What's up?

Steli Efti:

Yeah. So, specifically, we're going to talk about what happens if somebody in your startup,  somebody that you hired that works with you, is doing some shady shit. Is doing  things that they're not supposed to do and stealing money from you or your customers,

Key points in this episode

Key Highlights

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