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Bankruptcy InformationAngel Investors: 7 Online Business Plan Scams and 1 Real Deal
by:
MaryAnn Shank
We've all seen the hype: "We'll put your plan in front of thousands of investors!" "We'll write you an award-winning online business plan!" "Only $3,000 for thousands of investors to discover simply about your company!"
I cringe every time I see one of these ads. Vultures are preying on honest business folk who want to fund their businesses. Here are several route to spot them:
1. "Only qualified investors see your business plan." Yeah, sure. And who "qualifies" them? Have a friend try to sign up as an capitalist
(that part is ordinarily free). How is she "qualified"? Is there a background check? Makes she submit a business enterprise statement? Odds are that she wish be asked to do nothing much than sign a statement that she has a certain net worth. That's no "qualification" in my book. So who are these "investors"? Who knows. One could be your strongest competitor.
2. "You approve anyone who sees your business plan." Okay. So what are you going to do to qualify the potential investor? Are you going to run a background check? ask for ID? ask for tax returns? or simply be so happy that anyone wants to see your business plan that you jump on the idea? (That's how these scams get away with charging thousands of dollars -- too many an entrepreneurs are desperate for funding.)
3. "It's only $500 (or $300 or $100) to register." What makes it matter if it's free? If it is entertaining your time and energy and resources away from finding a viable investor, it's not worth it.
4. "Your idea is great, but we need to put it into our format. This wish only cost $800." Don't walk -- run from these guys.
5. "Your idea is so great that we want to invest $2,000 in it." (That's after you spend $5,000 to put it into "their" system.) Do I actually need to comment on this?
6. "Talk with a satisfied customer, or 2 or 3." Here's this businessperson
who simply got $2 million in funding, and he has nothing better to do than sell the web scam to you? Trust me, entrepreneurs who simply get funded barely have time to eat, let alone talk.
7. "Look at all these written testimonials." This is harder to negate
because the testimonials look so real -- even as the companies strength
be real. But unless the testimonials, and the companies, can be verified independently, I wouldn't trust them. And I'll lay odds that they cannot be verified independently.
There is one large exception to this: ACE-Net (http://activecapital.org). This is much properly the Access to Capital Electronic Network run by venture capitalists, institutional investors and individual authorized investors. It was developed by the U.S. Small Business Administration's Office of Support
to encourage the production of a national marketplace for investors to find and invest in equity offers by small companies.
ACE-Net isn't for all companies. Those seeking under $1 million wish probably find the work
daunting. Those seeking over $5 million won't qualify. There are special qualifications, and of course lots of forms to fill out -- but nothing like the forms required for a formal initial public offering.
But for those who do qualify, it's an amazing tool in raising financing. Spend several time with the website and the forms, and see if your local SBA office can put you in touch with another institution that went through the process.
As with any capitalist
tool, don't believe only on ACE-Net. Use it in conjunction with your in person
developed targeted funding search. This, combined with an exceptional business plan, doesn't guarantee success but it places your institution head and shoulders above all the rest.
Just simply about the author:
Ms. Shank is a seasoned business plan specialist, having served over 20 years with venture capital firms and emerging companies.
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