If I pay phase 1 and they fail to prove Italian ancestry, I lose the money I invested in genealogical research.

In SEFAR UNIVERSAL we make a preliminary study to study the viability of your request. Our genealogists base their work on sufficient indications to consider your candidacy as optimal, and from there you can contract the genealogy study by weeks and go on accrediting your condition of Italian descendant.
The work of the genealogists has an associated cost, without which it would never be viable for you to apply for Italian nationality.