Research from Imperial College and Emlyon Business School argues that venture-backed startups are more likely to face fraud charges than companies without VC funding, partly because investors can create intense expectations for rapid growth. The findings matter amid a buoyant AI investment market, where weaker oversight and ambitious targets may increase pressure on founders to misrepresent performance.

A related University of Toronto study examined 654 US VC-backed startup fraud cases between 2000 and 2023 and found that startups founded in overheated markets with weak due diligence were 19% more likely to later commit fraud. Researchers describe an escalation from misleading claims about success, to fabricated contracts and revenue evidence, and finally to fake demonstrations or entirely false versions of a company’s technology; they also say investors may enable misconduct by continuing to fund founders previously accused of fraud.