Ryan Shank had quite a workday this past Friday -- and not exactly the kind that you expect (or want to have). The Founder & CEO of Techstars-based call-tracking startup, PhoneWagon, discovered his sales employee trying to defraud the company and thanks to their daily vlogging efforts, the outrageously epic scam attempt was captured. Take a gander below -- it's worth a 15-minute break.

Please note, some explicit language is used.

WTF?

My fiancé initially showed me the video and as a serial entrepreneur, it was pretty appalling. So, I spoke with Ryan and he shared some more context.

TP: So, what was the genesis of this all -- how'd it come about?

RS: I hired the sales rep after he replied to a job posting. I initially wasn't going to hire him but he kept following up with me. Texts, calls, voicemails. I really liked how diligent he was at follow ups so I decided to give him a shot.

I hired him as a contractor for our test. For his first week, I flew him to NYC (paid for flight + hotel) which was around $1,500. I also bought him a laptop since he came without one (red flag?). I spent an entire week working with him one-on-one doing training, mock calls, objection handling, etc -- nearly 30 on-boarding hours.

After his first week, he flew home and he was working remote for the remainder of his time with us.

TP: OK nothing crazy, yet -- so how'd this hornets nest get uncovered?

RS: He set a demo for me that I did the following week. I noticed on this demo that the customer wasn't like the other people I had been talking to. This person didn't have a computer or know anything about marketing but was interested in trying out call tracking. I thought this was very weird because no one is just 'interested' in 'trying' call tracking. I actually determined it wasn't a good fit and walked away from the deal. I didn't think too much of this besides the fact that he must have just called a different lead list than I'm used to.

This lead also had the same accent as the sales rep. Weird.

TP: Plot is thickening .. my alarms would be firing.

RS: Yeah, same. So the following week nearly every demo that this sales rep 'set' ended up not showing up to their demo. His 'show rate' was around 10% while everyone else's was 80%. I thought this was very strange. I honestly couldn't think of why one sales rep would have such a drastically lower show rate than everyone else.

I finally sent him an email about numbers and expectations on September 6th, clearly outlining that he needed to have at least 1 demo per day show up.

The following day I get a Slack from him that a prospect had called in early for their demo. I thought this was strange because no one ever calls in for demos. We call them. And to call in early for a demo that was set 14 days prior is virtually unheard of. Either way, I told him to transfer me the prospect.

This is the link to the entire call recording of the demo I did with "Peter".

I'm not perfect at matching voices to what people look like but for some reason this was a red flag to me. The other reasons were that he couldn't really speak intelligently about marketing and Adwords.

Once I got off the phone with him, I called the actual company who I was supposed to be talking to and asked for Peter. Once they transferred me to the actual Peter, I knew something weird just happened.

TP: Uh wow.. can't imagine how you were feeling. I'm on a roller-coaster of emotions, myself.

RS: I actually felt sick to my stomach. Did this actually just happen? How could someone that I gave a chance to do something like this? This is not only lying and stealing but it's also betrayal. After the call I immediately told him to call me and began asking him what just happened. He actually tried to defend it and tell me it was the prospect. Then he hung up. I called him 4 more times and he wouldn't answer. This. Just. Happened.

So I dug into it even more. I listened to all of his past calls and realized he had been calling himself using masked phone numbers and a voice changer for weeks. He was emailing himself, leaving voicemails to himself and even did a call where he was both people on the call! All in order to 'set' fake demos.

TP: Unbelievable. Really puts things into perspective.

RS: After that day I began thinking a lot more about employee fraud. With the recent press around Equifax and hackers, it's clear to me that people will go through great lengths to pull off these scams. Even the managing director at Techstars was hacked (and wrote a blog post on tips for avoiding identity theft) and a writer from Techcrunch was hacked and scammed. This is happening frequently. It's a problem.

When I shared my post on Twitter, it resonated with a lot of people in the startup world:

A Valuable Lesson to All Entrepreneurs

Shank humbly fell on the sword, but it's something that I don't think anyone could have seen coming a mile away.

"At the end of the day, this is on me. I should have done a better job vetting this employee. I should have been listening to the calls a lot closer and digging into his metrics to understand why the show rate was significantly lower and none of the prospects were turning into customers. All in all, this is on me."

Shank added,

"I do want to spread awareness about employee fraud. We are seeing hacks and scams from people outside of your personal life and business life. The fact is that they can also be inside your organization as well. Any time someone gets commission or gets paid to do something, there is risk of fraud. This is an example of someone taking advantage of their commission structure (paid on demos) and being able to ride their base salary until they get caught."

Oh and as for how Shank and the PhoneWagon Journey is going? They're killin' it.

  • Over 100 paying customers already
  • Adding about 10 new paying customers per week
  • One of the fastest growing companies in NYC

Keep grinding.

Published on: Sep 14, 2017