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    7 Replies Latest reply on Jan 26, 2009 5:52 PM by OilandGas

    What is the process for a private investor? Real or not?

    needsomehelp Newbie
      I'm having trouble determining who on the internet is real vs a scam. I received a time sensitive LOI from a private investor requesting a due diligence fee. How can I determine if this guy is really an investor? What is the process for a private investor?
        • Re: What is the process for a private investor? Real or not?
          Diane528 Newbie
          I've been trying to find out the same thing! Keep me posted if you here of anything.
          • Re: What is the process for a private investor? Real or not?
            bmt2008 Adventurer

            You have to do you homework. Lots of scams out there. Find out where this company is. Ask around. Ask the chamber of commerce, the better business bureau. Ask for references. Now, don't trust the references that you are given, but call them and ask them for other people/companies that have worked with this person. Lastly, I never pay an up front fee especially if it is for something you don't need. They need the diligence - you don't.
              • Re: What is the process for a private investor? Real or not?
                needsomehelp Newbie
                The problem is he is a private investor not a company.
                  • Re: What is the process for a private investor? Real or not?
                    bmt2008 Adventurer
                    What's the difference? If you are doing business (which he is) - he is a business and his business is him. No different. Plus, if he is doing this type of thing, he has to be registered somewhere - with the state, with the SEC - start with the SEC - find out if he is an accredited investor. If not, ask him why he is not registered. If this person is just an individual like your neighbor who is will to put money into your firm, I suggest you hire a good lawyer to right lanuage in an agreement (prior to you giving this person any money) that stipulates what your recourses are should he not do what he says. Also, ask around in your and his communities. Someone should know if he is legit. If he is a professional private investor, he should be registered with the SEC.
                • Re: What is the process for a private investor? Real or not?
                  Lighthouse24 Ranger
                  How did you and the potential investor meet/connect? I'd suggest that in at least 99 percent of the private funding deals that are made, the small business owner was only three degrees of separation from the legitimate private investor to begin with -- i.e., someone the owner knew, and someone the investor knew, knew each other. This makes due diligence easier for both parties.

                  When that's not the case, it's important that the owner do his/her due diligence on the investor -- in other words, both participants in the deal have to know what (and who) they're getting into. If the owner hasn't received ample information to investigate and verify that the party asking for a fee is a legitimate investor (before the fee is requested), then that says something in itself, doesn't it?

                  In the SBOC and other on-line business communities, the single most common topic is the need for business funding, loans, and credit. By no coincidence, literally thousands of "investors" and private funding firms have sprung up on the Internet -- none of which have ever made a single investment or approved even one loan or credit line -- and they have no intention of ever doing so. They don't even bother conducting due diligence. They just take the money (and if they think the owner has more, they'll come after it, too, with additional services that will supposedly increase the owner's chances of being funded). In the end, however, the small business owner will come away empty-handed.
                  • Re: What is the process for a private investor? Real or not?
                    DomainDiva Ranger
                    When I first started making the VC rounds, I was approached by a number of 'venture law firms' that wanted to represent me. Their fees were upward of 40,000 (forty thousand dollars). There are rip off artists in every corner, Lighthouses' advice was sage indeed, my angel investor was already a long time friend. Keep talking to people you know, you will hit upon something or someone when the time is right.

                    A good rule of thumb is: If people want money up front, then they are not real investors. BTW these 'law firms' even offered to 'finance' their fees at 21%.