The Latest Internship Scam?

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I’ve seen a lot of job and internship postings over the years. Most of them are generally uninteresting, but there are always a few that catch my eye. That’s what happened this morning.

Here’s the posting:

Internship Scam

I didn’t even think of the money at first. I thought candy bars. But I quickly noticed that they’re claiming to pay $100,000 for an internship. It’s pretty hard to take that claim seriously, but it’s even harder when the company can’t even spell the name of their internship (and their brand) properly in the advertisement.

Hey! Hey! Hey! What Is Going on Here?

While there isn’t any evidence of a product or business besides the Hundred Grand Intern brand (though they’ve posted their internship on all of the major sites), they do list an address (turns out this address is actually a P.O. Box), phone number, and the names of seemingly real people who are behind this project (I found them on LinkedIn).

They say that “Hundred Grand Intern is revolutionizing what it means to be an intern.”

That’s for sure.

Hundred Grand Intern is going to start accepting applications on March 1st. If they’re really offering what they say they are, then I’d expect them to get bombarded with applicants. But there’s a catch…

They’re charging a $50 application fee.

I’ve seen application fees before. While they leave a bad taste in job seekers’ mouths, there’s nothing illegal or even unethical about them. In fact, it’s often government jobs that come with application fees. When you are required to look at every single applicant, it can get expensive to do so. Charging a fee weeds out non-serious applicants and pays for the time to review the applications. It’s still a HUGE red flag–especially for an internship.

What Is This Fee Really For?

If you’re offering an internship that pays $100,000, you should expect a lot of applicants. A fee might help you keep things under control, right?

Maybe.

But it seems sketchy from a no-name brand with no stated business model. Especially when the brand says that it’s “committed to providing an internship that produces the results and experiences everyone is looking for – along with compensation.” Organizations that are looking out for the best interest of interns don’t charge application fees.

There’s no reason to think that Hundred Grand Intern would just take the fees and run. That’s blatantly illegal, and we’ve already established that real people have attached their names to this thing.

So how are these fees a sign of something worse? Take a look at this sentence from the posting:

NUMBER OF POSITION(S) DIRECTLY CORRELATED TO NUMBER OF QUALIFIED APPLICATIONS RECEIVED.

A company’s ability to offer a $100,000 internship has nothing to do with how many applicants they get…

UNLESS

… the company’s main source of revenue is application fees.

Risk More

From what I see so far, paying $50 to apply for this internship is taking a huge risk.

Hundred Grand Intern Logo

If Hundred Grand Intern isn’t going to steal your money, what are they planning to do with all of those $50 application fees?

Pay their interns!

How is that going to work out? Let’s do some math.

It takes 2,000 applicants at $50 per application to pay for one intern. That’s assuming that there are no other expenses and no profit.

Unless Hundred Grand Intern has some other funding source (we’ll get to why they likely don’t in a bit), they need more than 2,000 applicants to make this internship happen. If they get that many applicants, your $50 will give you essentially a .05% chance at landing the internship

Very few internships get that many applicants. None of them charge a fee to apply.

If Hundred Grand Intern is charging an application fee for this internship, the internship MUST exist. According to one attorney’s take on job application fees, if the internship never materializes, they would be fraud. When you start charging people money for something, the rules change.

What Kind of Company Can Pay an Intern Six Figures?

Let’s say that Hundred Grand Intern isn’t relying on application fees to pay their interns. An intern worth $100,000 would typically need to generate at least twice that for the company. There’s one more kink in the equation though. The internship posting says:

Intern(s) will participate in a ten-week, local session where they will be exposed to a network of small business executives in the Chicago area. The summer session runs from June 10th, 2013 to August 16th, 2013. Throughout the remainder of the year, intern(s) will be expected to contribute remotely to several ancillary projects.

Ancillary means subordinate, so we’ll assume that most of the work is done in 10 weeks. $100,000 for 10 weeks is akin to a $500,000 per year salary or $40,000 per month. Pretty much the only college students worth that much are the one who are about to go into professional sports.

The highest paid internships these days include:

Company Position Monthly Pay
Microsoft Research Intern $7,050
Google Software Engineer Intern $6,432
Amazon Software Development Engineer Intern $5,564
Qualcomm Intern $4,955
PwC Advisory Intern $4,873

These are all multi-billion dollar companies that are able to extract exceptional value out of their people. They may even be losing money on their interns knowing that they’ll make it back if the interns return for full-time jobs.

Hundred Grand Intern says that they offer “$100,000 total compensation – comprised of salary, travel expenses, living expenses and transportation.” That’s more than five times what the country’s highest paid intern is going to make this year for about the same amount of time.

If our country’s biggest and most successful companies can’t pay their interns six figures, how can Hundred Grand Intern do it? They claim to be working with “companies, ranging in revenues between $10-50 million.”

Why don’t they name the companies? Why would these companies work with a no-name brand to recruit interns who are worth six figures?

It doesn’t make sense.

Why They’re Charging an Application Fee

We’ve established that even Microsoft doesn’t value intern level talent at $100,000 per year, so how can Hundred Grand Intern value talent at five times that?

It only works if people pay fees to get the internships. And people will only pay the fee because the internship has the potential to be so lucrative.

The only way that Hundred Grand Intern will be able to sustainably offer internships in the future is to get more applicants. That means that their interns will work on getting more interns to apply for future internships.

I think we’ve found the business model, and it’s starting to sound a lot like a Pyramid Scheme, which is:

a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public.

The many who apply support the few who actually get the internships. At best it’s an unlicensed lottery.

Despite all of the evidence, I don’t think that the people behind Hundred Grand Intern have malicious intent. I try to see the best in people, and to me this looks like a “brilliant idea” gone terribly wrong. They’ve essentially reinvented an ages old scheme.

Hundred Grand Intern may truly believe that they are going to pay at least one intern $100,000, but I don’t see how that is ever going to happen. If they don’t, they are committing fraud by collecting application fees (even if they didn’t mean to).

Did I miss something? Is there another way that Hundred Grand Intern can make this work?

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8 responses to “The Latest Internship Scam?”

  1. Tiffany says:

    I wanted to ask which government jobs have required you to pay in order to apply? I ask only because I have applied to hundreds of them and never paid a penny.

  2. Shannon says:

    So….I came across this. And whats funny to me is its all speculation. Ironically enough I know one of the people that started this company. Its not a scam.

    Thats great that you are looking out for people and trying to point out scams. But before you write a blog post about a company why don’t you do more research then your own personal assumptions. Actually contact the companies and try and get info on anyone actually having been scammed instead of throwing a legitimate company under the bus without actually having any facts. Its a good way to receive a law suit for slander…just saying…maybe you should actually put more then just your personal opinion into a post like this as you are ruining a companies reputation without actually having any solid facts. to back it up.

    If you have done any research, please site your credible sources…which I know you havnt. Again since I know one of the owners, I know that this is not a scam. Wouldnt you be the tiniest bit upset if you were starting a company if someone wrote a nasty blog like this without even contacting you and finding out anything about your company or business model at all? All of your assumptions on how they would drive the profits to support this kind of internship are just that. Assumptions. Since youve done no work to actually find out how this company works why would anyone trust your own biased opinion? Help people but actually do research and make sure your claims are solid before you try and bring a company down without even knowing if your own personal opinions hold any relevance.

    I would suggest you delete this post as I am going to alert my contact within the company and i do know they have lawyers. Do research. Dont be a lazy journalist. And dont mislead people.

    • Shannon,

      When a company claims to offer an internship that pays $100,000 and charges a fee to apply, the burden of proof is on the company to prove they are not a scam.

      My post is a statement of facts and an interpretation of those facts based on six years in the entry level/internship industry. My track record over that time has been one of constantly standing up for students and trying to protect them from questionable opportunities. My only bias is towards standing up for young people who are trying to start successful careers.

      Please tell your friend to contact me with an explanation of the business model. I’ll happily replace this post with an apology if my suspicions are proven wrong.

  3. Deandra says:

    This is why I’m so skeptical towards the major job sites like Indeed, SimplyHired and Monster. They seem to have no regulation/screening for the postings at all, hence leaves open possibilities for scams like this.

    On the other hand, thank you very much for the extensive analysis, and your untiring work to give us such quality internships. :)

    D

  4. Shannon says:

    Alright, I will let them know. I do still think that maybe you should spend more time doing research before making claims about a perfectly legit company. We are all entitled to our opinions, but when your opinions are ruining reputations of a company that has done nothing wrong you should maybe spend a tiny bit more time making sure if your claim has validity. You say its on them to provide the burden of proof when you didnt give them the chance to before you published false claims.

    • Shannon,

      You haven’t provided any facts to support your assertion that they will actually pay an intern $100,000 (essentially a $500,000 per year salary when prorated). Hundred Grand Intern is making a ridiculous claim and actively taking money from people who buy into it.

      There is nothing false in what I wrote. The facts are based on what the company is advertising, and the commentary is my take on those facts. My conclusions may be wrong, but the way Hundred Grand Intern has positioned itself is completely irresponsible. I showed my post to a handful of respected people in the Career community before publishing. Every single one agreed 100% with my conclusions. Most said that I was being far too kind.

  5. As a followup, Hundred Grand Intern now admits the truth on their website:

    The $50 application fee goes directly towards funding the intern(s) salary.

    If they don’t refund the fees when they can’t pay $100,000, they’re going to be in a lot of trouble.

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