Scamming the Business Community
by William Cate
Scamming the Business Community
By William Cate
There's an army of swindlers that pretend to be entrepreneurs or business
people. They cheat investors. There is a horde of swindlers that pretend to be
investors. They want to deceive you. Remember that one out of every three
swindles targets the business community.
Some Signs of Probable Fraud
Real investors have their own investment guidelines. The majority of businesses
seeking risk capital don't meet the guidelines of most investors. Any investment
offer that lacks a clearly stated investment policy is probably a scam. By very
wary of an investor who wants to invest in anything.
Secrecy is sexy. However, any investor who won't let you discuss their offer
with your accountant, attorney or other advisors is probably going to swindle
you.
Websites offering risk capital financing that fail to give the visitor the names
and backgrounds of the principals of the financial firm should be avoided.
Equally, a website that doesn't offer full contact information should be
shunned.
There are billions of dollars in risk capital offshore. Exceedingly few firms
can actually access these funds. You should be cautious of any funding source
offering foreign risk capital.
Swindlers and military personal have one thing in common. They both move often.
Swindlers move because the authorities eventually take an interest in their
activities. Be watchful of financial firms that have been located in the same
town for less than five years. There are some honest startup financial firms,
but the fly-by-night operations represent move than 95% of the newly created
investment firm are usually gone within two or three years.
Be careful about "investors" who advertise no front fees, but require that you
pay tens of thousands of dollars to firms they select to evaluate your company.
Too often, the "investor" and the "investigator" are sharing your payments and
this is the sole goal of their funding offer.
Never agree to a financing offer that requires that you sign the agreement
within a few days. Pressure sales imply swindle.
Due Diligence is Essential
Look carefully, before you leap. An Advance Search at Yahoo with "Venture
Capital" in the Exact Phrase field yields over 28,000,000 hits. You need one
investor from this list. Take the time to research twenty investor prospects
that offer funding for exactly what you need. Learn everything you can about
these twenty individuals or firms, before you contact them.
You can use the Net and do a good job as a business investigator. Run the firm
and the principals names through exact searches. You are seeking negative
comments about your target. Do credit and criminal searches on the principals.
Contact the local Better Business Bureau and the Consumer Affairs Department of
the local District Attorney about the firm and its principals. When it exists,
read the material published by the principals and when possible attend seminars
offered by the firm or its principals. Know your potential investor before they
become aware of your existence.
Knowledge is the best defense against fraud. A Due Diligence investigation will
take you a few hours and could cost you a couple hundred dollars. A swindler
will cost you at least $10,000 and usually more than $100,000. Only business
idiots fail to look before they leap.
Two Tactics that Don't Work
1. References are rubbish. Honest firms supply canned references that they know
will give them a positive referral. Swindlers have a network of other swindlers
who give sterling reference to their comrades. None of these references are
worth the time to contact.
2. Not paying front fees reduces your fraud risk. However, honest professionals
won't work with you without at least having their costs paid in advance. If you
are prepared to package your business plan and find your venture capital firm or
angel investors, you can avoid front fees. Your documentation will be weak. You
will have excluded some of the more responsive sources of risk capital. But, you
will have reduced your chances of raising risk capital for your firm. There is
risk capital available for most sound business ventures. Finding the money you
need is a matter of careful search and evaluation. If you respond to the next
spam offer of venture capital, you are going to lose time and money.
About the Author:
He is the Managing Director of
Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/].
He's the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
He's a Venture Capital & Equity Finance Consultant [http://home.earthlink.net/~beowulfinvestments/williamcateventurecapitalampequityfinanceconsultant/]
Source of this article:
www.goarticles.com
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