The Smell Test (spotting scam finance)

The Smell Test (spotting scam finance)

No.  This isn’t about checking to see if the diaper might be full, although that might be apropos.  In my line of work, I get approached by all types of different groups looking to sell me something that may or may not be of interest.  And that is great.  I applaud sales and have the highest respect for those individuals who put it out there.

One of the things that I get pitched is people who purport to be able to introduce us to financing, usually saying they have access to large pools of funds.  And everyone is looking for money.  If you’re not looking for financing all the time, then you’re not doing it right.  Heck, even Warren Buffet is looking for underwriting of some sort all the time. 

People who raise capital are very important.  Let’s be clear.  And many of these groups that have approached me over the years are very real.  Some are downright scams.  How do you tell the difference before investing valuable time?

A – Do they have a real email address?  

Sorry Gmail fans.  It costs $1.99 to host email through GoDaddy.   There is absolutely no way that someone purporting to have millions of dollars cannot afford to pay less than the cost of a cup of coffee…a month!  They should have a ___@domain.com or .ca or .co.uk or whatever jurisdiction they are from.

B – Which leads me to the next point.  Do they have a website? 

Here’s where it gets crazy expensive.  For $1.59 a month, you can register a domain and get a one page website.  Wanna spend lots more?  You don’t have to.  One can get a fully private & protected domain, a secure multi-page website, SEO and marketing tools for $9.09 a month.    Anyone who is real will have a website and their office/mailing address will be on the contact page.

C – Are they on linkedin? 

If they aren’t, then just hang up/delete the email.

D – What is their online footprint like? 

While some people are private by nature, real finance people have larger footprints that come from inking deals, being on SEC filings, and press releases.  Plus, finance people like to network and be in ‘print’. 

E – They tend to have access to billions of dollars and are extremely interested in your project. 

Hey, maybe you will be approached by real financers who have billions, but that is not how they will approach you.  Real finance people are risk adverse, conservative and won’t tell you what they hold in their assets until you really get to know them and visa versa.

F – They can close a deal this week. 

Um. No one can.  Lawyers will eat up a couple of weeks.  Oh.  Make sure they have a lawyer.  Lawdepot.com doesn’t count.

G – They will ask for money up front.

 Unless the funds are put into escrow, releasing them in conjunction with the release of your funding, then walk away.  No real investment firm asks for money up front.    Maybe for a roadshow, but not for investment.  That is what commissions are for.  (caveat…make sure you can pay out commissions in your jurisdiction re security laws)

 If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck. 

Donald duck: Some fun facts about Disney's most popular character ...