Investment Seminar & Venture Capital Scams?

There are a lot of them out there and some of them are funded by taxpayers.  Know how to spot them and when to walk away.

Venture capital seminars try and convince you to follow their “tried and true” method, such as buying their books, paying for individual consulting or paying for attendance at “pitch competitions”. Others promote Incubators or “accelerators” that charge above market rents and fees for the privilege of being near their “industry experts”. While advice can be legitimate and beneficial, it is important to look carefully at what a “venture capital consultant” or seminar is offering. Attending an expensive seminar or investing time in the wrong kind of “expert” can be a costly mistake. Even a cursory look into the back grounds of staff and “in residence” experts can show a preponderance of academics and government staff with zero actual business or start-up experience.  Do your homework to make sure that the experts they put up are the right kinds of experts that can help you before committing your time and money away from building your business.

You could be invited to a venture capital seminar in a number of ways—signing up with your state “development” office, see an ad in a newspaper or magazine, hear about it through word of mouth or an online ad touting a business plan pitch competition. The seminar may promise that a motivational speaker, an investment expert or even an Internet start-up millionaire will give you advice on landing Angel or Seed capital.  Understand that there is no secret method to a pitch.  If you have a strong business case and can articulate that business position you will generate interest from investors.

The venture capital seminar schemes make money by charging you attendance fees, selling you over-priced reports and books and by selling their own consulting services. These seminars often make misleading or deceptive claims like “present your pitch after paying us fees and we will get you in front of investors.”

Keep in mind that many seminar organizers also claim a percentage of hotel, airfare and hospitality fees by booking you into the “best” hotel in the area. Most of these seminars offer very little content and use anecdotal and public information that is available in any of several hundred books on Amazon for a buck or two. Some of these seminars will try to pressure you into committing to the deal, not an investment, but a consulting contract to help you get an investment from others.

Finally, watch out for government funded programs that contain staffers and executives with long histories of political campaign contributions, a revolving door employment history of working on political campaigns and “development” staff for other government entities. You should do your research on these programs and try and find reports on the ROI of their activities.   If the program is not willing to give you list of people they have helped, you might want to keep shopping.

Warning signs

  • Promises made if there is Pay-to-Play involved or the requirement of agreements that have to be signed in order to present your idea.
  • The program is run by someone with little to no experience in starting up their own business or was never involved with an entrepreneurial team.
  • The content is all sunshine and rainbows.  No one is offering up the challenges and struggles or gives you a real picture of what to expect when starting a business.
  • Inability or reluctance of promoter to provide list of previous attendees and/or judges and mentors.
  • The first seminar you are invited to attend may be free, but there are very high fees to attend any further seminars.
  • Offers of loans or what is called in the industry a debt convertible note.  Many seminars and “seed / angel” funds are merely there to make a brokers commission for getting you a loan, usually with your home and business as collateral.
  • Investment seminars that offer to teach you ‘secret’ or ‘exclusive’ techniques for an investment worthy business plan.
  • Having to pay for a venture fund to do its due diligence on your business or they build that cost into their “investment” package

Protect yourself from venture capital seminars & loan broker scams

  • Use your common sense, go with your gut: the offer may be a scam.
  • Remember there are no easy funding schemes: the only people who make money are the seminar promoters and speakers.
  • Do not let anyone pressure you into making decisions about money, a consulting contract or lease in an incubator: always get independent advice from individuals who have already been there and left.
  • Remember that family, friends and former business associates may try to involve you in a scam without realizing that it is a scam: you should seek independent advice from individuals who attended before.
  • Be wary of “experts” promising easy applications for SBA loans.
  • Do not open suspicious or click links in unsolicited emails: delete them.
  • NEVER reply to a suspicious or unsolicited email (even to unsubscribe).
  • If it looks too good to be true, it probably is.

This article appears with the permission of Brett Bringardner, Founder of Corvus Ventures