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Angel Investors: 7 Online Business Plan Scams and 1 Real Deal

Started by Perfect, 2011-09-23 07:51

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Perfect

We've all seen the hype: "We will put your plan in front of thousands of investors?" "We will write a plan of the award-winning business!" "Just $ 3,000 for thousands of investors to learn about your company!"

I cringe every time I see one of these ads. Vultures prey on honest business people who want to finance their businesses. Here are some ways to detect:

1. "Only qualified investors see your business plan." Yeah, right. And who "qualifies" them? Have a friend try to register as an investor (that part is usually free). How is "qualified"? Is there a background check? Do you have to file a financial statement? Chances are you will be asked to do more than sign a statement that she has a net worth. That's not "score" in my book. Who are these "investors"? Who knows. One could be the stronger competitor.

2. "You approve anyone who sees your business plan." Well. So what will you do to qualify the potential investor? Are you going to do a background check? ask for identification? tax apply? or just be so happy that no one wants to see your business plan that you jump from the idea? (So ??how are you scams get away with charging thousands of dollars - Too many entrepreneurs are desperate for funds.)

3. "It's only $ 500 (or $ 300 or $ 100) to register." So what if it's free? If it is diverting his time and energy and resources to finding a viable investor, it is worth it.

4. "The idea is great, but you have to put it into our format. This will only cost $ 800." Do not walk - run from these guys.

5. "Their idea is so great that we want to invest $ 2,000 in it." (This is after spending $ 5,000 to put in "their" system. ) Is it really necessary to comment on this?

6. "Talk to a satisfied customer, or 2 or 3." Here's this entrepreneur who just got $ 2 million in funding, and that has nothing better to do than sell the site to scam you? Trust me, entrepreneurs who just get funding barely have time to eat, much less talk.

7. "Look at all these written testimonials." This is more difficult to disprove because the testimonials seem so real - even the companies might be real. But unless the testimony, and businesses can be verified independently, I do not trust them. And I'll bet you can not be independently verified.

There is a big exception to this: ACE-Net (http://activecapital.org). This is the most appropriate access to Capital Electronic Network by venture capitalists, institutional investors and individual accredited investors. It was developed by the Office of the Small Business Administration U.S. promotion to encourage the creation of a national market for investors to find and invest in equity offerings for small businesses.

ACE-Net is not for every company. Those looking at $ 1,000,000, will probably find the documentation of enormous proportions. Those seeking more than $ 5 million, are not eligible. There is a special qualification, and of course lots of formS to fill out - but nothing like the formS necessary for formal initial public offering.

But for those who qualify, is an excellent tool in obtaining financing. Spend some time with the website and the formS and see if your local SBA office can put you in touch with another company that went through the process.

As with any tool for investors, do not rely exclusively on the ACE-Net. Use your search with personally developed specific funds. This, combined with an exceptional business plan does not guarantee success, but it puts your company head and shoulders above the rest.


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