April 21, 2009

Beware of the Scam: 7 Tips to Not Lose Money

Are you guys a scam?
You’d laugh if you knew how often we receive email asking us that. It’s OK. We understand. There’s more than a few shady characters in our industry and it’s alright to be cautious. There’s a lot of services out there like ours, designed to match entrepreneurs to funding, which just don’t deliver anything of value. So the question, “Are you guys a scam?” is not a stupid question, I just wonder how much you can trust the inevitable response of “no.”
Clearly, anyone who’d steal your money would have no qualms lying to you. But if asking someone directly isn’t a good idea, how do you find out if someone’s a good guy? Well, here’s a few ideas:
1. Use Google
Google is a great place to start. Just do a search for the person’s name or company’s name and see what comes up. Do a search on a contact’s address or phone number as well in case the name they gave you is an alias.
It’s also important that you consider all the information you find. Critics can spin things just as much as anyone else so weigh comments, good and bad, carefully.
2. Check Out Social Profiles
Look at LinkedIn, Facebook, Twitter and even MySpace for profiles of the company principals or the organization itself. Find out if the company or individual has a blog and review the blog’s content. Look at how long they’ve been online and what they talk about. Also consider how much content  is available. Legitimacy lends itself well to transparency.
3. Verify Credentials
In this world of online media, it’s easy to get some kind of mention in famous publications. It’s also easy to secure awards or certifications. Investigate those credentials. If they have a Better Business Bureau logo on their website, review the BBB profile. If they refer to an award given by a group you’ve never heard of, find out more about that group.
FundingUniverse rocks the Wall Street Journal logo on our front page not just because of a perfunctory mention, but because the article talked pretty extensively about our services and feaured quotes from an interview they had with our CEO. Those are media mentions you can bank on.
4. Don’t Pay Up-front for Vague Deliverables
A common maneuver by less-than-savory characters is to promise great results without talking about the process. If all you have is a promise, don’t pay. Expect them to give you a plan to get you to the promise and be sure it makes sense to you.

5. Get Referrals
Be sure to ask for referrals from satisfied customers. And don’t just be satisfied with names, get specifics. How much did they help them raise? What was their market vertical? How long did it take? Etc. If they can’t give you any, that’s a problem.

6. Review Agreements Carefully
Don’t sign things you don’t understand. If you need to have a lawyer review a contract, do it. Ensure you know exactly what both parties are being obligated to do to avoid misunderstandings in the future.

7. Trust Your Gut and Common Sense
The most important thing is to trust your instincts. If it doesn’t feel right, don’t do it. Usually when an entrepreneur tells me how they got taken for a ride by someone who promised to help them raise money, they mention that it didn’t feel right but they took the gamble. Don’t gamble.
Remember common sense too. If you’re dealing with someone who says they’re a highly prominent organization in the capital community and their email ends with “@yahoo.com”, something doesn’t add up. If their website looks like it was put together in the early nineties, be weary. Details matter.
There’s not a huge risk for being scammed when you’re looking for help raising money, but there is some. Just follow these suggestions and you’ll be fine.