bait and switch.. the title says "why do investors avoid steem?" but your question at the end is reasons why people should invest... so.. idk I'm gonna go ahead and answer the title question:

firstly, the "crypto-scandalous" launch. although most new investors won't know the details without a ton of DD, the more experienced veterans of the crypto community do, and those people are sharing investment opinions with newbs.

reasons why investors avoid steem:

• Incomplete source code for mining steem accompanied the ANN post giving an advantage first to the dev team, and insiders\developers.
• There was a re-launch which some speculate was done for the advantage of steem developers.
• Multiple ANN posts, that people speculate were to sidestep negative attention.
• DPoS uses witness block producers rather than proof of work miners, which adds the necessity of more trust to the equation. Regarless of how secure DPoS may be, it is not widely considered secure by the greater crypto-community that prizes the less trust dependant mechanics of PoW. Specifically PoW means it costs a lot of $$$$ to falsify transactions (this whole line of thought should be explored thoroughly)
  ^^^ I'd say that's a more significant reason than the first 3.
• Steemit the flagship steem app is not an attractive option for self-publishing. (this is a dealbreaker IMO. rewards should be a bonus, not the primary selling point)
• Much talk of scamminess on the platform.

I think all the scandal is the least of the reasons why people might not invest. Basically every crypto has scandal. However, I think it makes more sense to be open and upfront about that stuff, steemizens should own it, and say "yeah, all that stuff, but here's why I invest anyways"

In my opinion #3 - #5 are the biggest reasons why people don't invest as much as we'd all like.

To overcome all of the above, I think a forward approach is best. Lets not act like those aren't (or weren't) real issues. Rather a public acknowledgement of above points could do a lot for confidence amongst investors new to crypto. Because they definitely hear negative rumours. Better to deal with these and let potential investors make a choice based on more complete information.

perhaps having prominent individuals publish more technical risk analysis of DPoS for use by a platform who's primary purpose is not "only currency" would help.

to me #1 in importance is having a platform that's a joy to use, and has a competitive UX compared to non-crypto competing platforms. The communities feature could address some of the issue and be a big turn-around for steem(it).

Not mentioned in above reasons is the fact that steem is still pretty centralized. A hardfork process directed by the community could do a lot for investor confidence. That, however, would require a number of properly engaged, motivated, and qualified individuals, and the approval of Steemit Inc.

not sure how much flack I'll catch for addressing "the elephant in the room", but here goes.