Below is a question from an entrepreneur, edited to protect the innocent (if you are a member of TheFunded.com, you can read the complete thread):
Q: An investor has been pressing me to invest and needs A DECISION IN THE NEXT DAY OR TWO, plus he is reminding me to stop publicizing my site and keep it strictly confidential.
He wants to put $xxK of his money into his developers in [third world country] to redo and significantly strengthen the site for rapid growth, in return for 10%.
He would not give me names of CEOs he’s funded as references.
He went to [fancy school], and claims that once the site is done, he can then draw on all his connections and angel funders to help it grow rapidly.
I am attracted by the offer, since I do not have the time or money to do all the social media etc necessary to make this site grow rapidly.
My tech cofounder engineer (with whom the investor will not speak) is against the idea.
How can I say this politely? Run. You are bein ripped-off.
How can any entrepreneur possibly fall for such an obvious scam?
Here are some hints:
- References don’t check out (if you don’t know how important references are when you are dealing with business people, read this).
- The money is fake, since the money supposedly invested goes right back into the pocket of the investor.
- High-Pressure sales tactics. There is no reason for the quick deadline, except to cloud the judgment of the entrepeneur. If you have never been exposed to such tactics, go to a used car dealership and ask about their deal of the day
Sadly, this entrepreneur had everything he needed to succeed. He and his technical co-founder seem to have designed the web site just fine on their own. And now the entrepreneur is considering dumping is co-founder for hollow promises.
Don’t fall into that trap.
FairSoftware is a community of entrepreneurs where you can find co-founders, form your first startup instantly and help each other by exchanging advice on how to start web and iPhone apps.
