Why Do Promising Startups Turn Into Scams? Lessons from Evaly and Flight Expert

Why Do Promising Startups Turn Into Scams? Lessons from Evaly and Flight Expert

Posted on: 24 Sep, 2025

Startups are vital engines of innovation and economic growth. They bring new ideas to market, challenge incumbents, and often create entirely new sectors. Yet in many emerging economies, the startup story doesn’t always end in disruption and success. Sometimes, what begins as a promising venture ends as a scandal.

Bangladesh offers two high-profile examples: Evaly, the e-commerce company that attracted millions of customers with steep discounts, and Flight Expert, a fast-growing online travel agency that suddenly collapsed in 2025. Both cases reveal how systemic weaknesses and poor governance can cause startups to cross the line from risky to fraudulent.

1. Unsustainable Business Models

Many startups adopt “growth at all costs” strategies to attract users. Evaly relied on extreme discounts and long delivery times; Flight Expert offered flights and travel packages at prices that raised questions about margin sustainability.

Without a viable path to profitability, such models often rely on new customer money to pay old obligations. This resembles Ponzi-like dynamics, where collapse becomes inevitable once new inflows slow.

2. Weak Regulatory Oversight

New sectors often evolve faster than regulation. In Bangladesh, early-stage e-commerce and OTA (online travel agency) companies operated in a gray zone:

• Evaly exploited gaps in consumer protection laws, particularly around refund timelines and payment security.
• Flight Expert collected advance payments without sufficient escrow mechanisms or regulatory safeguards.

The absence of robust frameworks allowed risky practices to persist unchecked.

3. Mismanagement of Customer Funds

A defining feature of both scandals was the misuse of customer advances. Evaly accepted full upfront payments for products that were delayed or never delivered. Flight Expert took advance payments for tickets and packages that remained unconfirmed. This creates a Ponzi-like cycle: new customer money is used to pay off old liabilities, instead of fulfilling real orders. Once the cycle breaks, the entire business crumbles.

Rather than being ring-fenced, these funds were allegedly diverted to cover operational shortfalls—eroding trust and creating cascading liabilities.

4. Lack of Corporate Governance

Startups often rely heavily on charismatic founders. While this can drive growth, it also concentrates power. Without independent boards, external audits, or transparent reporting, financial irregularities can remain hidden.

• Evaly's financial statements showed glaring discrepancies, later confirmed by regulators.
• Flight Expert’s sudden shutdown and the CEO’s disappearance highlighted the dangers of unchecked founder control.

Robust governance structures are non-negotiable for companies that handle large sums of consumer money.

5. Ecosystem Pressures and the Culture of Shortcuts

In developing startup ecosystems, “fake it till you make it” can easily slip into dangerous territory. The pressure to show exponential growth—whether to secure funding, media attention, or market share—creates incentives to overpromise and underdeliver.

When combined with limited oversight, this culture fosters an environment where shortcuts gradually escalate into systemic fraud.

6. Blind Trust from Stakeholders

Consumers were drawn to Evaly’s deep discounts and Flight Expert’s attractive deals. Investors and partners, eager not to miss out on the “next big thing,” often ignored early red flags.

This collective optimism—sometimes bordering on willful blindness—enabled unsustainable practices to continue until collapse was unavoidable.

Implications for the Startup Ecosystem

The collapse of Evaly and Flight Expert damaged consumer trust and raised questions about the credibility of Bangladesh’s startup ecosystem. However, these cases also provide valuable lessons:

1. Regulators must establish clear, enforceable frameworks for new industries—escrow requirements, mandatory audits, and consumer protection protocols.
2. Investors need to conduct deeper due diligence, focusing on unit economics and governance, not just growth metrics.
3. Startups must adopt transparent governance practices early, with proper financial controls and independent oversight.
4. Consumers should be cautious of “too good to be true” offers and demand accountability from service providers.

Final Thoughts

Evaly and Flight Expert started with potential. They tapped into real market needs—affordable e-commerce and online travel solutions. Yet their downfall illustrates how quickly ambition can slide into malpractice when unchecked.

For Bangladesh and other emerging markets, the takeaway is clear: innovation must be matched by governance. Sustainable growth requires trust, transparency, and accountability. Without these, even the most promising startups risk becoming cautionary tales rather than success stories.